California lawmakers failed to shield utilities from wildfire liability, complicating grid upgrades needed for new data centers.
During the legislative session that concluded Monday, California lawmakers advanced several notable energy measures, including legislation legalizing balcony solar and permitting remote inspections for certain residential energy projects. However, they rejected Governor Gavin Newsom’s (D) bid to cap utility wildfire liability and are expected to advance a measure in a special session Tuesday that would explicitly allow insurers to pursue utilities for wildfire-related losses. Additional legislation awaiting the governor’s signature requires the California Public Utilities Commission to evaluate new rate structures for data centers and allows customer-owned clean energy systems to count toward official grid resource capacity.
Governor Newsom had sought to amend Senate Bill 492 to shift wildfire liability costs away from utilities. Under the current draft, however, the bill preserves the right of wildfire survivors, local governments, and insurers to file claims against utilities without imposing a cap on damages. Following the rejection, California utility stocks fell sharply on Monday. PG&E Corp. dropped 20%, while Edison International plummeted 23%—marking its largest single-day decline in over 25 years, according to 24/7 Wall Street. PG&E owns Pacific Gas and Electric Co., and Edison International owns Southern California Edison. As of Tuesday morning, neither stock had recovered. In a joint letter to the Legislature on Monday, the two utilities warned that SB 492 places California “at risk of constrained investment, higher utility bills, less spending, and fewer jobs.”
Among other key measures, AB 1813 received praise from Californians for Local Affordable Solar and Storage, which urged the governor to sign it. The group criticized California’s 2022 community solar law, AB 2316, stating it produced “a program built to fail, and not a single community solar project has come online under it.” They added, “Governor Newsom now has an opportunity to sign AB 1813, positioning California to build the nation’s largest community solar and storage program.” Earthjustice also endorsed AB 2313, noting in a Friday statement that “the legislation will reduce bills for all customers because the money that a homeowner receives through the program will be less than what their gas utility would spend replacing the gas service line to their home.”
Regan George, CEO and founder of SOLRITE—a solar company that operates in California but is not headquartered there—told Utility Dive via email that SB 905 and SB 913 can “help create an environment where virtual power plants can scale to optimize the California power grid and help alleviate the state's incredibly high electricity costs.” He noted, “What these bills have already accomplished is opening the door for more strategic conversations about the true value of the distributed energy resources that are already in place at homes across California, and what could be possible if we begin treating them as aggregated grid resources rather than as individual assets sitting behind the meter.”
Brandon Garcia, California director at Advanced Energy United, told Utility Dive that SB 905 “has a number of just general good governance utility reforms.” He highlighted provisions requiring utilities to publicly report grid utilization data to the commission. “We're particularly excited about there being some language about publicizing grid utilization information, having the utilities report that to the commission and identifying, where is our grid constrained?” Garcia said. “Where do we have more capacity? Because we would argue that there is a lot of capacity on the grid that is being underutilized.”
Advanced Energy United also backed AB 2493, as “we're really interested in reducing the interconnection delays for different kinds of large scale projects.” However, the group expressed disappointment that the state declined to fund its Demand Side Grid Support (DSGS) program, which saw its 2027 allocation zeroed out during a May biennial budget revision. Advocates have described DSGS as one of the country’s largest virtual power plants; last summer, its aggregated distributed energy resources delivered an average output exceeding 500 MW over a two-hour period. “We're excited that the legislature rejected the proposal to gut the program, so we're kind of in this middle place,” Garcia said. “We think that there's going to be a super El Niño coming next year and the end of this year, and I certainly would rather have DSGS online with this very large extreme weather event than not,” he added. “I’m hoping nothing bad happens, but it just made sense to have this extra reliability on the grid.”
Market reaction followed swiftly. In a Tuesday research note, Bank of America downgraded Edison International from “buy” to “neutral,” lowering its price target to $51 from $81. “With wildfire risk elevated and no policy clarity likely for another year, uncertainty should continue to weigh on EIX,” analysts wrote. Reiterating their concerns in the joint letter, PG&E and Edison International emphasized that they must secure tens of billions of dollars in annual private investment to mitigate wildfire risk, harden the grid, ensure reliability, drive economic growth, and meet clean energy targets. “Today, those investors face risks in California unlike in any other state,” the utilities wrote, meaning they “demand a higher return or invest elsewhere.” “Either outcome makes essential infrastructure more expensive and places additional pressure on electricity rates. These financial risks will have cascading impacts on the State’s economy and its climate ambitions.”