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AB-740 Wildfires: Wildfire Victim Restitution Fund.(2019-2020)

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Date Published: 02/19/2019 09:00 PM
AB740:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill No. 740


Introduced by Assembly Member Burke
(Coauthors: Assembly Members Flora, Gallagher, Low, and Quirk)

February 19, 2019


An act relating to wildfires.


LEGISLATIVE COUNSEL'S DIGEST


AB 740, as introduced, Burke. Wildfires: Wildfire Victim Restitution Fund.
Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations, while local publicly owned electric utilities are under the direction of their governing boards. Existing law authorizes the commission to fix just and reasonable rates and charges for electrical corporations.
Existing law provides for the issuance of rate reduction bonds by the California Infrastructure and Economic Development Bank for the recovery of electrical industry restructuring transition costs by electrical corporations. Existing law authorizes the commission to issue financing orders to support the issuance of bonds secured by a dedicated rate component to finance a specified sum awarded to the Pacific Gas and Electric Company.
Existing law, under specific circumstances, authorizes the commission, upon application by an electrical corporation, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, that are incurred or expected to be incurred by an electrical corporation, excluding fines and penalties, related to wildfires, as provided.
This bill provides that it is the intent of the legislature to enact future legislation to establish the Wildfire Victim Restitution Fund, the purpose of which will be to ensure that victims of wildfires are compensated in a timely manner, to provide reimbursements to insurers for a portion of their wildfire losses, and to avoid lengthy legal proceedings.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) As a result of Hurricane Andrew, which caused insured and uninsured losses in excess of $20,000,000,000, the Florida Legislature acted to implement the Florida Hurricane Catastrophe Fund. The Florida Legislature recognized that Hurricane Andrew would not be the last major windstorm to strike Florida, and that a future wind catastrophe could cause damages in excess of $60,000,000,000, especially if a major urban area or series of urban areas were hit. It was the intent of the Florida Legislature to equitably balance its concerns about mitigating the impacts of hurricanes, increasing insurance affordability and availability, and decreasing the risk of insurer and joint underwriting association insolvency, as well as overcoming assessment and bonding limitations.
(b) In California, as a result of the increased likelihood and severity of wildfires caused by climate change and drought in California, it is the intent of the California Legislature to address and mitigate the economic impacts of wildfires.
(c) It is the intent of the legislature to enact future legislation to establish the Wildfire Victim Restitution Fund. The purpose of the fund will be to ensure that victims of wildfires are compensated in a timely manner, to provide reimbursements to insurers for a portion of their wildfire losses, and to avoid lengthy legal proceedings.
(d) There is a compelling state interest in ensuring that victims affected by wildfires are able to pay the costs of construction, reconstruction, repair, restoration, and other costs associated with damage to property, which in turn ensures communities are rebuilt after a wildfire.
(e) There is a compelling state interest in maintaining a viable private sector market for property insurance in this state. Most mortgages require reliable property insurance, and the unavailability of reliable property insurance would therefore make most real estate transactions impossible. In addition, the public health, safety, and welfare demand that structures damaged or destroyed in a wildfire be repaired or reconstructed as soon as possible.
(f) Therefore, the inability of insurance and reinsurance markets to maintain sufficient capacity to enable residents of this state to obtain property insurance coverage in the private sector endangers the economy of the state and endangers the public health, safety, and welfare.
(g) There is a compelling state interest in maintaining a safe, reliable, and affordable electrical grid. The overall financial health of electrical corporations is critical to ensuring they have access to capital markets to borrow at a rate that does not negatively impact their customers.
(h) Electrical corporations and local publicly owned electric utilities are challenged by the significant liabilities that arise as a result of wildfires.
(i) Therefore, in order to minimize the potential costs of those liabilities, there is a compelling state interest in establishing the Wildfire Victim Restitution Fund to ensure victims and insurers are compensated for their losses.
(j) There is a compelling state interest in ensuring that the capital market have confidence in the financial health of California utilities.
(k) There is a compelling state interest in socializing the costs of wildfires to ensure victims are compensated, the private insurance markets are stable, and private and public utilities are financially healthy and available to provide safe, reliable, and affordable electricity.
(l) Therefore, it is the intent of the Legislature that the Wildfire Victim Restitution Fund should be funded by multiple entities, including, but not limited to, the State of California, electrical corporation shareholders, ratepayers, and insurance company shareholders, to ensure that the fund is large enough to cover the costs of future wildfires in California. It is the further intent of the Legislature that the fund should have the ability to issue bonds and to obtain reinsurance and financing.