SACRAMENTO, CALIF. — California Gov. Gavin Newsom is attempting to broker a deal with lawmakers to shield utilities from financial liability for wildfire damages caused by their equipment. The governor is pushing to pass new wildfire liability reforms by August 31, 2026, to limit utility payouts to victims and shift more costs to insurers while forfeiting executive bonuses and fining shareholders of utilities that ignite major wildfires.

Newsom’s plan could limit the amount electric and gas companies have to pay victims and attorneys. The proposal would also require survivors to get paid by utilities sooner, addressing concerns that the current system leaves victims waiting for compensation.

"Status quo is not going to work," Newsom recently told reporters. "It’s not going to work for victims, who consistently are last in line. And that’s at the core of this reform."

The plan includes specific penalties for utility leadership and investors. The proposal would require utility CEOs to forfeit bonuses if their company ignites a wildfire resulting in more than $1 billion worth of damage. Utility shareholders could be fined up to $10 million for violating wildfire prevention requirements, according to the governor’s office.

Newsom’s plan could change current law by making insurance companies cover more of the cost of property damage. Under current California law, utilities have to pay damages for fires ignited by their equipment, even if a judge doesn’t find them negligent. Home insurers that pay for policyholders’ rebuilding expenses can try to get reimbursed by utilities, but the new framework would alter this dynamic.

Insurance companies are concerned they would foot more of the bill for property damage under Newsom’s plan. The Personal Insurance Federation of California said insurance rates will increase if Newsom’s plan is implemented. "Being responsible for your actions is something that parents tell children," Rex Frazier, president of the Personal Insurance Federation of California, said in a statement. "Hopefully the Legislature will tell this to the utilities."

One goal of Newsom’s plan is to stabilize the state’s electricity rates. California electricity rates are among the highest in the nation and have continued to climb in recent years. Utilities have raised rates to pay for wildfire prevention and recovery, contributing to the financial pressure on consumers.

Newsom expects the wildfire fund to run out soon. Newsom signed a law creating a $21 billion fund paid for by utility shareholders and ratepayers to help utilities pay for wildfire damages if they take certain safety measures. Last year, Newsom proposed another $18 billion to supplement the wildfire fund, which the Legislature approved.

The urgency of the legislation follows recent determinations regarding fire causes. Investigators ruled this month that the 2025 Los Angeles-area fire was ignited by one of Southern California Edison’s transmission towers. Southern California Edison faces claims from a 2025 fire that killed 19 people outside of Los Angeles. Six of California’s 10 most destructive wildfires have been caused by utility equipment.

A coalition including PG&E, Southern California Edison, and San Diego Gas & Electric has been urging lawmakers to pass Newsom’s plan. Democratic legislative leaders say the state needs to address the issue but haven’t specified what a deal could include. The governor’s office has not released the full details of the plan.

"I’m not going to walk away and hand a real mess to the next governor," Newsom said last week. The California Legislature has until Aug. 31 to pass a plan.

If the Legislature does not pass a plan by Aug. 31, Newsom could call them back for a special session.

Why It Matters

The proposed reforms represent a notable shift in how wildfire costs are allocated among utilities, insurers, and consumers in California. With the existing $21 billion wildfire fund expected to run out soon, the state faces potential instability in electricity rates and compensation mechanisms for future disasters. The plan seeks to balance the financial viability of utilities with the need for timely victim compensation and rate stabilization.

Historical precedents highlight the scale of the challenge. The Camp Fire in 2018 killed 85 people and destroyed more than 18,000 buildings, leading to Pacific Gas & Electric filing for bankruptcy in 2019. These events established the current liability framework, which Newsom argues is no longer sustainable. The outcome of the legislative debate by August 31 will determine whether the state adopts a model that places greater financial responsibility on insurers and utility shareholders rather than solely on the utilities themselves.

Timeline

On November 8, 2018, the Camp Fire, which killed 85 people and destroyed more than 18,000 buildings in Northern California, began two days after Newsom won the governorship in 2018. On January 29, 2019, Pacific Gas & Electric filed for bankruptcy weeks after Newsom’s inauguration in 2019. Also on January 1, 2025, Newsom proposed another $18 billion last year to supplement the wildfire fund, which the Legislature approved.

Also on August 1, 2026, "This is overall a massive transfer of liability for the three for-profit utility monopolies that have continued to burn down communities across California," Joy Chen, executive director of Every Fire Survivor’s Network, said at a virtual town hall this month.

What's New

Additional reporting confirms that Southern California Edison is electrical utility in Southern California, United States. Further context identifies that California Gov is head of the state and government of California.