Good morning, California.
“California should embrace risk-based pricing of insurance, particularly for climate-related risk. Presently, California ignores climate risk in pricing.”—Personal Insurance Federation of California, arguing for an overhaul of home insurance pricing to account for global warming, in a state that builds much of its policy around the science of climate change.
Legislature feels the heat
The 2017 Thomas Fire in Ventura
Legislators face a Saturday deadline for adopting a $213 billion budget for 2019-20. That’ll be a snap compared with the daunting task of resolving wildfire liability issues by the July 12 deadline imposed by Gov. Gavin Newsom.
The outcome will affect your pocketbook, housing development and the economy. For a backgrounder, please see this report by CALmatters’ July Lin.
Lest anyone doubt the stakes:
- The 2019 wildfire season opened this weekend.
- Upon order of U.S. District Judge William Alsup, Pacific Gas & Electric Co.’s new corporate directors on Friday toured Paradise, the scene of 85 deaths caused by the 2018 Camp Fire sparked by PG&E’s equipment.
Options awaiting legislators are detailed in a report by Newsom’s task force in April and by the California Commission on Catastrophic Wildfire and Recovery.
Among the suggestions:
- Create a fund to pay for wildfires.
- Alter California’s inverse condemnation rule. That rule leaves utilities liable for the cost of wildfires if their equipment is even slightly responsible for causing the fires.
- That step would shift costs to utility customers, fire victims and insurance companies, and away from utilities’ shareholders.
Insurance companies oppose that change. They’re seeking authority to raise homeowner insurance rates by taking into account the impact of climate change on wildfire risk.
- Nationally, homeowners insurance rates have gone up by 45% since 2009. In California, they increased 8.1%. One reason, insurance companies say, is California’s insurance commissioner does not permit them to consider climate change when calculating risk.
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Seeking SCOTUS' intervention
Utilities have taken the wildfire liability crisis to the U.S. Supreme Court.
After initially declining to step in, the California Public Utilities Commission moved Friday to defend its decision before the U.S. Supreme Court that, utilities say, pushed Pacific Gas & Electric Co. into bankruptcy and threatens them all.
- California’s wildfire liability crisis can be traced to decisions stemming from fires that destroyed 1,340 homes in San Diego County in October 2007.
- San Diego Gas & Electric Co. asked the California Public Utilities Commission for permission to pass $379 million in costs related to the 2007 fires to its 3.4 million customers in Orange and San Diego counties.
- The commission refused, leaving SDG&E’s stockholders to shoulder the cost.
- San Diego Gas & Electric appealed and lost before a state appellate court. Now, SDG&E has turned to the U.S. Supreme Court, writing:
“California’s privately owned utilities face crippling liability for damage to private property from wildfires that have become the ‘new normal’ in California.”
The utility contends that California’s style of inverse condemnation violates its 5th Amendment rights by taking the utility’s property without compensating it, and warns:
“These problems will only get worse as wildfires (and wildfire litigation) increase exponentially with climate change.”
Siding with SDG&E:
The Public Utilities Commission last month waived its right to respond by the court’s May 30 deadline. On Friday, however, a commission lawyer asked that the Supreme Court give it until July 31 to file an answer.
- Note: The Supreme Court agrees to hear a fraction of the appeals filed.
Outlines of a budget deal
Gov. Gavin Newsom
California will provide health care for undocumented immigrants up to age 26, and spend $130 million supposedly earmarked to combat climate change to provide clean water for a million people who do not have safe drinking water, under a budget deal struck Sunday by Gov. Gavin Newsom and Democratic legislators.
CALmatters’ Judy Lin notes that the $213 billion budget will include a $21 billion reserve, thanks to a strong economy, low unemployment and income taxes paid largely by high-income Californians.
The San Francisco Chronicle: Cap-and-trade revenue is meant to support programs that reduce greenhouse gas emissions, prompting some legislators to question whether it can be spent on local water systems.
However, 2017 legislation permits cap-and-trade revenue to be diverted for other uses.
California will be the first state to provide health care for undocumented immigrants up to age 26. Children already are covered. The expansion comes at an initial annual cost of $98 million.
People who don’t buy health insurance will face a $695 fine. Revenue will fund insurance premium subsidies for middle income people.
The budget also will:
- End sales taxes on menstrual products and diapers.
- Expand the earned income tax credit for low-wage workers.
The L.A. Times: Left unresolved Sunday was whether legislators will accept Gov. Gavin Newsom’s $1.7-billion plan to align state tax law with federal tax changes enacted by the Trump administration in 2017.
Lawmakers face a June 15 deadline to pass the 2019-20 budget. It will take effect on July 1.
Dead cows and a living wage
California PUC President Michael Picker answers questions from lawmakers.
Gov. Gavin Newsom has not announced a replacement for retiring California Public Utilities Commission President Michael Picker. But the governor has proposed a salary for that mystery president: $252,100 a year.
- That’s a $110,000 raise from what Picker earns.
Pending budget-related legislation provides that the new president and other commissioners would be paid 125% of the governor’s salary.
- The math: Newsom is paid $201,680. Multiply that by 125%, and you get $252,100.
- When I mentioned to Picker what his successor could make, he responded: “Oh my God. … That is a living wage-plus.”
Picker, an appointee of tight-fisted Gov. Jerry Brown, announced last month that he was stepping down after serving five-plus years as president of the five-member commission.
- In announcing his departure, Picker dryly noted that being CPUC president wasn’t the worst job he ever had. In his younger day, he told the San Francisco Chronicle, he worked for a meat packer and was responsible for clearing away cows that died on their way to slaughter.
Picker: “For that kind of money, I would go back to hauling dead cows.”
What’s next: The Legislature must approve the so-called trailer bill language that provides for the $252,100 salary.
Colliding on emission standards
Gov. Gavin Newsom wants a single set of national vehicle standards.
Rebuffing automakers’ requests, President Donald Trump’s administration stood by his effort to roll back Obama-era vehicle standards, setting the stage for a fight over California’s right to clean its polluted air.
CALmatters’ Rachel Becker reports that Gov. Gavin Newsom responded that the state would stand with carmakers, other states and environmentalists.
- The governor promises to push for a single set of national vehicle standards that “doesn’t backtrack on the progress states like California have made in protecting the climate and our kids’ health.”
- Virtually all automakers signed letters to Trump and Newsom urging a compromise. One exception: Fiat Chrysler Automobiles.
Electrifying freight movement
The path to zero, as in zero-emission vehicles, extends beyond the 5 million electric cars the state hopes will be on its roads by 2030, CALmatters’ Julie Cart writes.
High-tech changes are coming as California implements its planned electrification of transportation to radically reduce greenhouse-gas emissions.
- Everything will be replaced with an electric analog: from boats, planes and trains to delivery vans to farm tractors.
- The to-do list stretches as long as California’s seemingly endless blacktop, with freight—responsible for one-third of the state’s gross domestic product—as the next major challenge.
One challenge is how to shift to next-generation trucks, which are still in prototype mode. And how to charge massive trucks with massive batteries?
- The state’s transportation gurus envision “smart” road technology that will charge electric vehicles as they pass and an electrified Interstate 5, the West Coast’s main freight corridor.
Legislators like you?
CALmatters has updated its California Legislators: Just like you? data interactive.
- Sen.-elect Lena Gonzalez, a Long Beach city councilwoman, joins Assemblyman Todd Gloria, a San Diego Democrat, on the short list of lawmakers who don’t own homes. Her addition to the Senate marks a milestone for the representation of women.
- Assemblyman Brian Dahle, a Bieber Republican, succeeds another Republican after a competitive race for a state Senate seat in Northern California.
Commentary at CALmatters
Sydney Kamlager-Dove and David A. Lehrer, in a point-counter point: Assembly Bills 241, 242 and 243 would mandate that lawyers and judges, physicians, nurses and physicians’ assistants, and virtually all peace officers in California undergo periodic training regarding “implicit bias.”
Dan Walters, CALmatters: California is a 21st century slave state. Hundreds, if not thousands, of human beings are being kept in slavery.
See you tomorrow.