California Wildfire Legislative Package: What’s Taking Shape in Sacramento

California lawmakers and the Governor’s office are actively working on a major wildfire legislative package—one that could have significant implications for utilities, businesses, ratepayers, insurers and, most importantly, wildfire survivors.

No final legislative language has been released, and the concepts remain very much in flux. The discussions underway, however, offer an important window into the priorities and tradeoffs shaping the package.

At the center of the debate is a difficult question: How should California distribute the enormous costs of wildfire while ensuring survivors are compensated, utilities remain financially viable, electric rates remain manageable, and communities become safer and more resilient?

The Balancing Act

Several objectives are competing for attention in Sacramento:

• Getting compensation to wildfire survivors more quickly
• Maintaining the financial stability of California utilities
• Limiting additional pressure on already-high electric rates
• Strengthening wildfire prevention, mitigation and accountability
• Stabilizing California’s insurance market and moving homeowners from the FAIR Plan back into standard coverage

How lawmakers balance those objectives will determine much of the final package.

Utility Accountability—and Who Ultimately Pays

A number of proposals focus on strengthening utility accountability.

Among the concepts under discussion are tying utility executive compensation and bonuses to safety and reliability metrics, increasing penalties and enforcement for safety violations, and potentially reducing the return on equity utilities receive for certain wildfire-mitigation investments.

The argument behind the latter is straightforward: wildfire mitigation is an essential responsibility of utilities and ultimately benefits the ratepayers who fund those investments.

The challenge is equally straightforward: even when policymakers reduce costs or returns on paper, ratepayers can ultimately bear much of the financial burden.

One ratepayer-relief concept being discussed is a climate-credit mechanism, similar to the existing cap-and-trade credit, that could help offset particularly high summer utility bills.

Getting Wildfire Survivors Paid Faster

Survivor compensation is another major focus.

One concept under consideration is a “fast pay” option that could allow utilities to compensate survivors more quickly without requiring them to accept the payment. Survivors who choose not to accept the offer would retain their ability to pursue litigation instead.

The emerging framework appears particularly focused on protecting individuals and households suffering the most direct consequences of wildfire—including death, physical injury, destruction of homes and other direct losses.

At the same time, lawmakers are examining whether some categories of non-economic damages should be modified and whether claims from large businesses and institutional interests should face different limitations.

The underlying policy question is significant: How do we preserve meaningful compensation for individual wildfire survivors while keeping the overall system financially sustainable?

Attorneys, Insurance Claims and Litigation Financing

The legal and financial machinery surrounding wildfire claims is also receiving scrutiny.

Attorney contingency fees—which can reach 30% to 40% of settlements—are part of the conversation. There is no clear solution, however, and policymakers face an obvious tension: reducing legal costs without restricting survivors’ ability to secure effective representation.

Insurance subrogation is another significant issue. Insurers seeking reimbursement for claims they have already paid have consumed a substantial portion of available wildfire funds, prompting discussion about whether those claims should be limited.

Lawmakers also appear likely to address third-party litigation financing, particularly the practice of investment and hedge funds purchasing interests in wildfire claims. The practice has attracted considerable criticism and could draw a legislative response.

The Insurance Problem Remains

One of the package’s broader ambitions is to help move Californians away from reliance on the FAIR Plan and back into the standard insurance market.

The challenge is availability.

In many fire-prone areas, insurers have substantially reduced or eliminated new coverage. Without sufficient private-market capacity, encouraging homeowners back into standard insurance remains an aspiration rather than a complete solution.

For wildfire-affected communities, the question is not simply what insurance costs. It is whether meaningful coverage will actually be available.

Paying for Wildfire Protection

Funding remains another major piece of the puzzle.

California’s Greenhouse Gas Reduction Fund, funded through cap-and-trade, was never intended to provide an indefinitely expanding source of revenue. As the emissions cap declines over time—and other demands on those revenues increase—the amount available for competing state priorities becomes increasingly constrained.

Near-term General Fund allocations have placed significant emphasis on wildfire, creating pressure on transportation, transit and other state priorities.

The broader takeaway: California's wildfire problem increasingly requires a durable funding strategy, rather than a series of temporary funding solutions.

Wildfire Will Dominate the Sacramento Agenda

The scale and complexity of the wildfire package means it is expected to consume considerable legislative attention in the coming weeks.

That has implications beyond wildfire policy. Other bills may receive less attention as lawmakers focus on the package—and, conversely, some measures could advance with less scrutiny than they otherwise might receive.

For chambers, businesses and community organizations, continued engagement in Sacramento will be important as the actual legislative language takes shape.

Chamber Advocacy Is Having an Impact

There have already been important signs that coordinated local advocacy can make a difference.

SB 1075 was held in Appropriations, following significant mobilization by local chambers.

Chambers also mobilized quickly for a recent call concerning Proposition 45, with ten chambers participating on short notice and only three voicing opposition.

These efforts underscore something we see repeatedly: Sacramento hears from organized interests every day. Local businesses and communities need to be organized, informed and present in those conversations as well.

The wildfire package is still being written. That makes now the time to understand what is being considered, identify the consequences for our communities and make sure our region has a voice in what comes next.

PaliBu will continue to follow these discussions closely and keep our members informed as specific legislative language emerges.