utility

As a criminal investigation into Southern California Edison’s actions before last year’s deadly Eaton fire continues, the state’s for-profit utilities are lobbying for legislation that would protect their shareholders from paying for future catastrophic fires they cause.

According to slides recently presented by a Pacific Gas & Electric executive to a group of state senators, the utilities are asking for a permanent cap to limit their corporate liability for a fire where they are found to have acted negligently or imprudently. The slides were reviewed by The Times.

“If ratepayers are forced to pay the lion share for fires utilities cause, there is no imperative for the for-profit utilities to take safety and fire mitigation seriously,” said Jamie Court, president of Consumer Watchdog.

The utilities say their shareholders must be shielded from wildfire costs because the risk of future fires has damaged their credit ratings. Lower credit ratings mean the companies must pay higher interest rates on borrowing, an increased cost that gets passed on to electricity customers.

“It is in our customers’ interest to have action in 2026,” Pedro Pizarro, chief executive of Edison International, told Wall Street analysts last week when asked about the utilities’ push in Sacramento for a liability cap.

Caroline Choi, Edison’s executive vice president of public policy and corporate affairs, told The Times that the proposal would not change the utilities’ focus on preventing fires. “Safety is our number one priority,” she said.

Executives at Edison and PG&E also recently told their investors that without the liability protection they may cut what they are spending on capital improvements, including to connect new housing developments and green energy projects.

PG&E recently sent letters to thousands of its customers, saying their projects could be delayed next year as it defers $2 billion in spending.

Those comments and PG&E’s letter have angered consumer advocates, wildfire survivors and some lawmakers.

On Sunday, state Sen. Sasha Renée Pérez (D-Pasadena), whose district includes Altadena, sent a letter to the California Public Utilities Commission, pointing out that both companies continue to pay millions of dollars in dividends to their shareholders, while complaining that the wildfire risk had financially weakened them.

“Their decisions to delay or reduce investments in critical projects are particularly troubling given the billions of dollars in profits reported by their parent companies in recent years,” Perez wrote. “The Legislature must not be pressured to roll back utilities’ financial accountability for wildfires through threats to withhold the investments needed to serve our communities.”

The state’s three biggest for-profit utilities, which also include San Diego Gas & Electric, have been lobbying for protection from wildfire costs since early 2025. That’s when videos emerged showing two bright flashes coming from Edison’s transmission lines, just before the Eaton fire ignited.

A government investigation released in August concluded that the devastating fire ignited when an out-of-service transmission line that Edison had not used since 1971 was briefly reenergized in the high winds, causing sparks that landed in dried brush below.

The fire killed 19 people and destroyed a wide swath of Altadena, leaving thousands of families homeless.

Last week, Pizarro told investors that executives believed the utility acted prudently before the fire. If the utilities commission agrees that the company acted prudently, Edison’s liabilities for the fire would be fully covered by a $21-billion state wildfire fund.

If the commission instead determines that Edison acted imprudently — a California regulatory standard that is similar to negligence — the company’s shareholders would still pay no more than $4.3 billion for the Eaton fire under a 2019 law known as Assembly Bill 1054.

The law was passed by Gov. Gavin Newsom and lawmakers to protect utilities from bankruptcy if their power lines spark a catastrophic fire. Since then, utility equipment has continued to spark major wildfires, even though the companies have charged customers tens of billions of dollars to prevent them.

The slides presented to state senators propose that the cap on damages — when a utility is found to have acted imprudently — be made permanent. Under current law, the cap will end when the state wildfire fund, as well as an additional $18-billion reserve created last year, are depleted, leaving shareholders exposed to greater costs of future fires.

The proposed limit on shareholder liability would be equal to 20% of each utility’s transmission and distribution equity rate base, which differs based on the size of the grid maintained by each company. This number for Edison is now $4.3 billion. For PG&E, it is $5.1 billion, according to the slides, while it is $1.5 billion for SDG&E.

The companies’ customers would have to shoulder the rest of a fire’s costs, which would be added to monthly electricity bills.

Mark Toney, executive director of the Utilities Reform Network, called the idea of permanently capping shareholders’ liabilities for fires “completely unacceptable.”

“There needs to be a cap on ratepayers’ liability,” he said.

Earlier this year, the utilities’ stock prices began to rise as executives told investors that Newsom was working on legislation to reduce the companies’ financial risks from fires.

But wildfire survivors were angered when details emerged that Newsom’s proposal would limit payments to victims for pain and suffering and cap attorney fees. Another proposed measure would have increased property insurance premiums across the state by reducing the amounts that insurers could collect after a utility-caused fire.

The utilities’ stock prices then fell when legislators agreed to a much smaller legislative package that did not have the protections the companies wanted. That bill died after the Assembly declined to vote on it.

The utilities are now asking Newsom to call a special session in which lawmakers would debate how to reduce the utilities’ fire risks, including the possible limit on what shareholders would pay.

“A predictable limitation would enable utilities to maintain investment grade credit ratings to better access capital at lower borrowing costs for customers,” Lynsey Paulo, a PG&E spokesperson, said in an e-mail.

In February, Edison disclosed that the Los Angeles County district attorney was investigating whether Edison should be criminally charged for its actions leading to the Eaton fire. And last month, an investment firm published a report claiming that there was evidence that Edison “acted with conscious and willful disregard for the rights and safety of others,” which would make its shareholders liable for all Eaton fire costs. The costs have been estimated to be tens of billions of dollars.

Pizarro told investors last week that he believed there was no evidence that Edison acted criminally before the fire. And he similarly dismissed the investment firm’s report.

“Just to be very crystal clear on this, not only do we not see any basis for felony liability, we certainly don’t see any basis for allegations of conscious or willful disregard,” Pizarro said on the conference call. “I think I said this to all of you before — that is not something I lose sleep over.”

For all their dominance, California Democrats will emerge from Tuesday’s election facing considerable challenges.

As polls show nearly 6 out of 10 Californians believe the state is going in the wrong direction and even more anticipate bad financial times ahead, the state’s new governor and legislators will have to confront some chronic problems, including a severe budget deficit, housing unaffordability, homelessness, and rising energy and insurance costs.

They will also have to grapple with difficult decisions on whether the state can provide Medi-Cal healthcare to low-income residents, how to make the state more resilient to climate change, and who pays for wildfire damage.

“There’s not going to be a long honeymoon period,” said Mark Baldassare, the survey director at the nonpartisan Public Policy Institute of California.

Californians are in a “pretty grumpy mood,” Baldassare said. Although their dissatisfaction is mostly hyperpartisan, with Democrats pointing the finger at President Trump and Congress as Republicans blame Gov. Gavin Newsom and Sacramento legislators, he said, a majority of Californians are worried about the state of the economy and want to see better government performance.

A construction worker on a new home under construction at the Taylor Morrison Avalon at Cypress.

(Bloomberg via Getty Images)

Affordability and housing

For voters, a key concern is unaffordability. More than half of Californians rank cost of living, inflation and the economy — along with housing cost and availability — as the most important issues facing California today.

The state has long suffered from a housing shortage, driven largely by local zoning restrictions, high construction costs and lengthy permitting bureaucracy. Newsom made housing a centerpiece of his 2018 gubernatorial campaign, initially pledging to build 3.5 million homes by 2025. He has largely fallen short of that goal.

Since Newsom took office in 2019, about 692,000 homes have been built across the state.

“I don’t know if anyone sees a new direction to go,” said Thad Kousser, a professor of political science at UC San Diego. California Democrats have passed a slew of laws designed to solve the housing crisis and spur home building, he said, but although they have helped at the margins, prices keep creeping up.

The median price of a California home has risen from about $570,000 in 2018 to $900,000 in 2026.

Even if California’s housing woes are partly a product of its successful economy, Kousser said, “that’s no solace for anyone trying to make the rent or have a place to live, so these will remain defining problems for the next governor.”

Before the governor can do anything, voters will decide whether to pass a series of consequential propositions on housing and taxes.

Proposition 1 would allow the state to borrow $11.25 billion for low-income and veteran housing, and Proposition 37 would allow the state to amass a $25-billion down payment assistance program for middle-class households. Proposition 45 would enable the state to overhaul the California Environmental Quality Act to speed up reviews for housing, roads and water projects — a proposal that leaves many torn between protecting the environment and wanting more affordable housing.

“There are going to be a series of difficult choices that Californians will have to make,” Baldassare said.

Budget woes

One of the governor’s first challenges out of the gate will be submitting a state budget in January to legislators.

This fiscal year, California has an estimated $18.5-billion operating deficit, according to the state’s nonpartisan Legislative Analyst’s Office. By the end of the year, the office predicts the state’s “wall of debt” to balloon to about $29 billion — even as the state’s economy and revenue have grown.

Lee Ohanian, a professor of economics at UCLA, said the major issue California faces is that the state budget has expanded about 75% in the last eight years. This translates to a 40% increase when adjusted for inflation.

California’s budget growth is particularly alarming, Ohanian said, considering politicians have had limited success in addressing major challenges such as homelessness and had delayed maintenance of public road and water infrastructure.

“It would have been one thing if that 75% increase had fixed all those issues,” Ohanian said. “But the next governor and state Legislature are going to be faced with some of the same exigencies that we’ve had for a very long time and they may struggle to pay for those repairs and that deferred maintenance. The question is: Where is the money going to come from?”

In many cases, Ohanian said, California’s ballooning budget has not resulted in higher quality of public services. The state’s school budget per classroom is over $500,000 a year, he noted, well above the national average. But only about 38% of California students met or exceeded state standards in mathematics.

“The Democratic Party just needs to at some point have a come to-Jesus moment,” Ohanian said. “With the amount of money we’re spending, we can do better.”

Leisure Picon, 35, with her 3-year-old daughter, Ivanka Mendoza, for a doctor’s appointment in Lynwood

(Irfan Khan / Los Angeles Times)

Healthcare for the masses?

After pledging in 2018 to bring universal healthcare to California, Newsom set about expanding the state’s Medi-Cal program that began under his predecessor, Gov. Jerry Brown.

In 2024, California expanded Medi-Cal to cover all income-eligible adults, regardless of immigration status.

Spending on Medi-Cal now accounts for 40% of the state’s total spending and is expected to reach $219 billion this fiscal year — more than double what it was a decade ago. But as the state faces massive cuts in federal Medicaid funding, rising healthcare costs and budget shortfalls, it has begun to roll back that commitment.

Last year, Newsom and state legislators agreed to freeze new enrollment for Medi-Cal benefits for adult immigrants without legal status. Next year, many adults under 60 enrolled in the program will also face a $30 monthly premium.

Democrat Xavier Becerra, who polls predict will beat Republican Steve Hilton by a wide margin, has promised to protect Californians’ health by “cracking down on fraud” and “cutting waste.” Becerra has significant healthcare experience after serving as secretary of Health and Human Services under President Biden, but he has yet to provide specific policy details.

More or less taxes? And who pays?

As Californians become more concerned about affordability, Baldassare said, they are becoming increasingly fiscally conservative. Polls now show a majority of Californians now say that they’d rather pay lower taxes and have fewer services.

But at the same time, about 6 in 10 likely voters also say the wealthiest Californians should pay more taxes.

“There’s a more liberal orientation, but that doesn’t translate into people saying ‘I want to pay higher taxes and have more services,’” Baldassare said. “It just is ‘I want to have more services. I want to be sure that we’re going to have healthcare’… but looking to others to take that fiscal responsibility.”

The midterms offered Californians a chance to weigh in on who should pay. The measure that grabbed the most headlines was Proposition 40, the so-called billionaire tax that would authorize the state to impose a new one-time tax on residents with assets over $1 billion.

But Californians also got to vote on a string of other tax measures that could affect the state’s budget. Propositions 41 and 42 would constrain state government’s ability to raise potential taxes on assets in the future, and Proposition 43 would make it more difficult for special taxes to be increased by local governments.

Proposition 3 would make permanent a temporary tax increase enacted in 2012 on individuals who earn at least $371,000 a year to fund schools and healthcare. Kousser described the original 2012 tax increase as a game-changer that allowed the state to redistribute wealth from rich to poor regions.

“If that political deal falls apart,” he said, “the state will face much more strain.”

Embers blow down a street as the Palisades fire ravages a neighborhood amid high winds in the Pacific Palisades neighborhood.

(Ethan Swope / Associated Press)

Who pays for wildfires?

As California contends with ever more catastrophic wildfires, Democratic politicians have so far failed to agree on who should be financially liable when a fire is sparked by electrical equipment: Wildfire victims? Insurers? Utility company investors? Ratepayers?

Earlier this year, Newsom pushed a controversial plan to limit utility companies’ liability, arguing that holding them fully financially responsible would raise the state’s already high power bills and thwart utilities’ ability to modernize and meet state clean-energy mandates.

But Newsom’s deal would have shifted more of the cost to property insurers, risking the prospect of rising insurance premiums. After wildfire victims dubbed the plan a corporate bailout, Newsom abandoned most of it and tried to push a compromise that would help fire victims receive quicker compensation. That deal also fell through, however, when the Assembly declined to vote on it

Political experts agree it will be a tricky issue to resolve.

The utility companies are not popular, said Rob Stutzman, a GOP strategist. Yet to shore up utilities’ risk profile and prevent upward pressure on utility rates, he said, the state will probably have to grant some liability caps.

“We’re going to pay for it through utility rates, or insurance rates, or subsidies from the government,” Stutzman said. “Those are basically the three options — and none of those are going to be that pleasant for the governor or for the Legislature.”

Artificial intelligence

With momentum building for regulating AI, California is in a unique position as the hub of the technology boom.

Politicians in Sacramento face intense lobbying from major tech companies and venture capitalists as they seek to limit AI’s potential for disruption and misinformation without stifling an industry that’s fueling the state’s economic growth — and has provided a critical stream of tax revenue to the state.

But some political experts say the issue may not prove as thorny for California as issues like housing or wildfires.

Most voters oppose data centers in their areas and support AI safeguards. Even some AI pioneers are calling out for more regulation. In recent weeks, Anthropic and OpenAI have written open letters to Newsom urging stronger safety requirements.

“That creates an unparalleled political opportunity for a governor and the state to lead the nation in addressing the issues,” Kousser said.