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California needs a lot of money to fight fires. But how much?

Taryn Luna, Los Angeles Times on

Published in News & Features

A wildfire commission created by the state Legislature suggested two models for funds to help reduce wildfire liability risk, although details of how they would work remain under debate.

The governor's office favors an idea, referred to as a "liquidity fund," that would require at least $10 billion. In April, the administration proposed continuing a state Department of Water Resources charge on ratepayers that was implemented during the last energy crisis to provide the funding. The charge, which adds a few dollars to monthly electricity bills, is set to sunset in 2020.

The money could be lent to investor-owned utilities to pay off victims after a wildfire. The companies could be expected to return the money to the fund after the California Public Utilities Commission determines who should pay damages from the blaze.

"The goal of a liquidity fund is to prevent investor panic from getting out of control and leading to a bankruptcy," Michael Wara, director of Stanford University's climate and energy policy program, told state senators last week.

The governor's office late last month said that it would also seek changes to the state's standards for utilities to prevent wildfires, which might shift more financial burden to ratepayers.

But a liquidity fund poses significant risk. If a utility declared bankruptcy after receiving a loan from the fund, the ratepayer money might not be fully repaid.

 

Mark Toney, executive director of the Utility Reform Network, a ratepayer advocacy group, supports the idea of continuing the Department of Water Resources charge and said the state should use the money for wildfire prevention. He sharply criticized the liquidity fund as a "slush fund" for the utilities.

"To me, there's too much focus on who's going to pay for the damage for future wildfires and not enough on how the hell we are going to prevent utilities from starting them in the first place," Toney said.

A second fund model, sometimes referred to as a wildfire victims fund, would require $40 billion by some estimates and serve as a second insurance policy for the utilities over the next decade.

The goal is to have a pot of money large enough to protect ratepayers from additional bill increases, provide stability to the financial markets and make utilities less likely to file for bankruptcy. Utilities, ratepayers, property owners and taxpayers could be required to pay into the fund, according to the wildfire commission.

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