Gavin Newsom’s Unfinished Wildfire Business

SACRAMENTO, California — With just months left in office, Gavin Newsom is reopening one of California’s most bitter political fights.

At the center of it is a question the state has struggled with for years: When a power company sparks a catastrophic wildfire, who ultimately shoulders the cost?

Newsom took office in the aftermath of the deadly 2018 Camp Fire, which sent Pacific Gas and Electric into bankruptcy and threatened to destabilize the state’s electricity system. Now, as he prepares to leave office and embark on a likely presidential run, he is pushing eleventh-hour legislation that would sharply limit how much utilities can be forced to pay when their equipment sparks a wildfire, in an effort to avoid another financial collapse.

It is an extraordinarily complex — and risky — undertaking, and almost everyone with a stake in California’s wildfire fights has something to lose.

If Newsom gets his way, he’ll anger insurance firms, which argue his proposed changes would upend their marketplace. Local officials worry they won’t be able to secure enough money to rebuild after future fires. And wildfire victims, fearing that future survivors could be shortchanged, staged a recent protest on the steps of the governor’s mansion.

Utilities are making the opposite case, warning that without changes, the system could deliver a severe blow to their finances.

The fight has spurred millions of dollars in advertising blitzes from outside groups looking to sway voters and lawmakers. Opponents are already calling the proposal a corporate and utility “bailout.”

But Newsom argues that doing nothing also carries enormous risks. It may be his last chance to resolve an issue that has haunted his entire time in office, and that could disrupt the state’s power system in the years to come. California’s electricity costs are already among the highest in the nation, fueled in part by the costs of making the grid more fire-resistant.

“Here’s my response to those that don’t want change: It’s untenable,” the governor said on Wednesday. “The status quo is not going to work.”

If Newsom runs for president, his opponents will be eager to highlight the state’s most intractable issues, from homeless encampments sprawled across city sidewalks to homeowners struggling to rebuild incinerated properties — and, of course, costly electricity. Newsom now has less than five months left as governor to do something about that problem.

The controversy points to the difficulty of retaining California’s status as a pioneer in renewable energy and climate policy while also shoring up a power system increasingly strained by wildfire costs. There’s just over a week left in the legislative session, and Newsom has shared his proposal with lawmakers, but there’s still no bill in print. That’s intensified criticism, with wildfire survivors accusing the governor of negotiating an opaque, utility-friendly deal.

“There is literally nothing about this situation that does not include tradeoffs,” said Kate Gordon, who headed the state’s catastrophic wildfire commission when she led the Governor’s Office of Planning and Research under Newsom. “There is not a political win-win-win where everyone walks away with what they want.”

Baptism by fire

Newsom was elected governor just two days before Pacific Gas & Electric equipment sparked the Camp Fire, which burned the town of Paradise, then the deadliest and most destructive wildfire in California history. Weeks after he took office, PG&E filed for bankruptcy, setting off a scramble among the scores of people and entities the distressed company owed money. Insurance companies, financial firms, local governments and wildfire survivors all had to duke it out in court.

In the end, the heavyweight institutions secured multibillion-dollar settlements, but survivors weren’t compensated enough to cover the full cost of rebuilding, according to Newsom’s office.

That fact, they say, is animating the governor now.

Back in 2019, Newsom ultimately oversaw the creation of a ratepayer- and shareholder-funded wildfire fund, a behemoth back-up pot of money that power companies can tap to cover claims from fires they spark.

Newsom acknowledged to reporters this month that critics called that first effort a “bailout,” too. He faced similar criticism last year, when he successfully pushed state lawmakers to reup the fund to make sure it had enough money to cover the tens of billions of dollars in claims against Southern California Edison for starting the Eaton Fire in Pasadena in January 2025.

Michael Wara, a Stanford scholar who served as a consultant to the state Senate during the PG&E bankruptcy, called the episode eight years ago a “baptism by fire” for Newsom and his closest energy aides. It left such a lasting impact, he said, that it continues to shadow them as they look to the next big chapter.

“This is not easy politics,” Wara said. “But having a second utility bankruptcy while Governor Newsom is running for president would not be easy politics either.”

One last attempt at a fix

Thorny questions of who pays for what have only grown more challenging over Newsom’s tenure, as climate change’s impacts intensify and mounting costs increase the strain on utilities, homeowners, and insurers.

Power companies across the fire-prone West are increasingly shaping legislation aimed at lowering their costs and remaining solvent, while insurance companies are hiking their premiums or pulling out of fire-prone regions altogether. California Assemblymember Cottie Petrie-Norris, a Democrat who chairs the energy committee, has warned that tinkering with wildfire costs does little to solve the larger crisis.

“If we make a bunch of changes, but we’re just shuffling the deck chairs on the Titanic, that doesn’t feel like a very productive use of our time or energy,” Petrie-Norris said.

But the scale of the Eaton Fire last year, which raised the specter of a Southern California Edison bankruptcy, made clear the system is more fragile than even Newsom or lawmakers expected.

To prevent power companies from collapsing financially when they spark big wildfires, Newsom wants to stop insurers from suing them to recoup what they paid policyholders.

He also wants to bar financial firms from purchasing those claims from insurance companies, which can bring deep-pocketed competitors into a utility bankruptcy proceeding.

And he wants to create a state-run fast-pay program to get cash to wildfire survivors quickly.

Unsurprisingly, that’s drawn the ire of the insurance industry, which argues that it would have to raise rates to compensate for the loss of income.

Local governments have taken issue with a provision that would prevent them from recouping the full replacement cost of damaged infrastructure from power companies.

And prominent wildfire victim groups are against the plan because Newsom wants to limit how much survivors can recover from utilities that spark blazes.

Newsom’s proposal would bar anyone who wasn’t within the perimeter of a fire from getting compensation for emotional distress, and it would cap claims at $150,000 for anyone who fled the “zone of danger.” (People who were injured or witnessed a family member get injured could still bring an unlimited claim for emotional distress.)

“The proposal would cripple fire survivors,” said Joy Chen, executive director of the Every Fire Survivor’s Network.

Altogether, the chorus of opponents is arguing that rather than fix California’s wildfire problems, the proposal could simply shift more of the bill from now-profitable power companies onto everyday people.

“If the utilities are concerned about the cost of wildfires, and it’s untenable, they have to ask themselves, ‘What can we do to stop wildfires?’” said Chris Holden, a former California Democratic lawmaker who chaired the Assembly energy committee and wrote the 2019 bill that created the first wildfire fund. He now leads LA Fire Justice, a group of lawyers who represent wildfire survivors.

“If you do something wrong, you have to be held responsible,” Holden said.

The Newsom administration has been fending off that characterization of its proposal, arguing that it would maintain utility accountability while easing upward pressure on electricity rates.

“California is the only state in the nation that holds investor-owned electric utilities strictly liable for damages caused by their equipment, even if the company was not negligent,” Cynthia Stein, Newsom’s senior counselor for the LA recovery, wrote in a letter last week. “This would not change under this proposal.”

Looking ahead to 2028

The dicey politics of the issue haven’t factored into Newsom’s decision to elevate it in his final months in office, spokesperson Bob Salladay said. He noted Newsom has been steeped in wildfire recovery issues since the opening weeks of his term.

“This is so outside of any political calculation because of the deep damage from these wildfires,” Salladay said. “It doesn’t matter if someone is running TV ads against you or someone is mad at you. It’s too big of an issue.”

Gordon said Newsom had little choice but to tackle an issue that touches on core concerns for voters both in California and nationally as he prepares to leave office and looks ahead to a potential presidential run.

Just this month, California’s chief energy regulator called wildfire “the enemy” of energy affordability. The credit downgrades now looming over California’s utilities could drive those costs even higher. Meanwhile, high electricity rates have become a top issue for voters, driving both of the candidates to replace Newsom to make energy costs a focal point of their campaigns.

“It's such a top-of-mind issue for people really viscerally — (energy costs) are where affordability is hitting people in a real way,” Gordon said. “That’s an issue for him as head of state now, but this is going to be an issue for him in whatever he chooses to do next, so I think he has to address it.”