California’s top Democrats struggle but can’t resolve the question of wildfire liability

One might assume that with Democrats controlling every lever of political power in California, they could easily resolve issues that emerge from the state’s ultra-complex socioeconomic matrix.

Nope.

Lacking an effective partisan rival and a need for unity, Democrats are free to fragment into factions defined by ideology, geography, gender, ethnicity and, most of all, economic interest.

Fundamentally the Capitol remains a “commodity market,” where interest groups bargain over laws that affect their financial status. Carey McWillians, one of the state’s keenest analysts, described it that way in his 1949 book “California: The Great Exception.”

California has since undergone massive population growth, economic evolution and political reorientation, from Republican dominance to Democratic hegemony. But McWilliams’ description remains true, even though the specific interests vying for advantage have evolved.

The issue that dominated the final days of the Legislature’s biennial session — and wound up in a stalemate — is a perfect example: the multibillion-dollar question of who bears the financial burden of wildfires that have become a fact of California life.

Some of the state’s most horrendous fires originate in electric power lines that fail in high winds, including one of the blazes that struck Los Angeles County last year.

The investor-owned, state-regulated utilities that own those lines, such as Pacific Gas and Electric and Southern California Edison, are more or less willing to bear some of the financial impact. But their status as regulated monopolies complicates their liability.

The power they deliver to homes and businesses is vital, and the state has an obligation to ensure that they are profitable enough to attract capital and borrow money they need to operate.

Therefore, payments to wildfire victims must not unduly interfere with those financial needs, meaning ratepayers ultimately bear some wildfire-related costs, driving up utility rates that already are among the nation’s highest.

The issue has been kicking around the Capitol for years. Gov. Gavin Newsom, who’s in the last year of his governorship and contemplating a run for the White House, decided he wanted to resolve it.

As the legislative session was winding down, Newsom proposed limits on the liability of utilities, thus protecting their financial underpinnings and, in effect, increasing the burden on wildfire victims and their insurers.

Understandably, Newsom’s approach drew sharp criticism from the latter two groups and brought on another unsettled issue: the increasing unwillingness of insurers to write policies in fire-prone California. Insurance rates are also regulated by the state, and it has an implied obligation — much like its duty to utilities — to make insurance profitable enough to keep insurers doing business in California.

Insurers and groups representing fire victims ramped up pressure on the Legislature to oppose Newsom’s proposal as a giveaway to utilities. He was forced to back down.

State Senate leaders then hammered out an alternative that Newsom appeared to reluctantly accept. However utility executives, backed by their unions, denounced the deal as undercutting their financial stability, pointing to sharp declines in the value of their shares when Newsom’s plan faltered.

It was a stalemate, and the Legislature adjourned Tuesday with the issue unresolved.

Newsom implied in remarks to reporters that he hasn’t given up. He could call a special legislative session.

But without a deal acceptable to all interests, that would be pointless.

He’ll still be governor in December, when the Legislature reconvenes with new members elected in November, but he will be a lame duck. A successor, almost certainly Xavier Becerra, will have been chosen.

Wildfire liability is a Gordian political knot, one of many arising from California’s unique complexity. The state’s dominance by a single party doesn’t change that.