California Gov. Gavin Newsom (D) is negotiating a proposal with state lawmakers to limit the financial liability of utility companies when their equipment causes wildfires. The plan aims to stabilize electricity rates and prevent utilities from entering bankruptcy by placing more of the cost of property damage on insurance companies and capping payouts for victims and attorneys.
The proposal follows years of destructive blazes in California, including a 2018 fire caused by Pacific Gas & Electric (PG&E) equipment that killed 85 people and a 2025 fire linked to Southern California Edison equipment that killed 19 people. In 2019, Newsom signed a law creating a $21 billion wildfire fund to assist utilities that meet safety standards, but the governor recently stated that this fund is expected to run out soon.
Under the new plan, utility executives would lose bonuses if their equipment causes a fire resulting in more than $1 billion in damage, and shareholders could face fines of up to $10 million for safety violations. While the governor's office has not released full details, the plan is supported by major utilities including PG&E, Southern California Edison, and San Diego Gas & Electric.
The scale of the financial impact is significant, involving billions of dollars in liability. The existing $21 billion wildfire fund, supported by a mix of shareholder contributions and ratepayer fees, is nearing exhaustion according to the governor. The 2025 Eaton fire alone, linked to Southern California Edison, resulted in 19 deaths and extensive property damage, highlighting the recurring nature of these multi-billion dollar liabilities. A representative for the Every Fire Survivor's Network described the plan as a "massive transfer of liability" from for-profit utilities to other parties.
If the legislature approves the plan, residents will likely notice changes in how wildfire claims are processed and potential adjustments to their monthly utility and insurance bills. The shift would set a precedent for how California balances the solvency of essential utilities against the rights of fire victims to seek full damages. The California State Legislature has until August 31 to pass a deal during its current session. If no agreement is reached by that deadline, Gov. Newsom has indicated he may call a special session to address the issue.