California needs to change its approach to regulation and utilities in order to more effectively address increased threats from wildfires in the years ahead, according to a strike team appointed by Gov. Gavin Newsom.

"Under the status quo, all parties lose," Newsom said in response to the team’s report, which was released Friday.

The report, which Newsom ordered in February, follows the grim news that 10 of the state's most destructive wildfires have occurred since 2015, and 15 of the top 20 have struck since 2000.

The report urges California to remain an active participant in Pacific Gas and Electric Co. (PG&E) and its parent company's ongoing Chapter 11 bankruptcy filing, along with seeking a revision of the California Public Utilities Commission (CPUC) and the rules of engagement for the state's major private sector utilities.

"It is imperative that utilities not put profits ahead of safety and service," the strike team said.

The strike team urged the federal government to improve its management of U.S. forest land, which comprises 57% of the state's forests. It also called for expanded prevention activity, making local communities more resilient, and bigger investments in fire suppression/response programs and equipment.

The state's major utilities welcomed the governor's report and indicated they will continue to make changes to meet the fire challenges.

PG&E's James Noonan called the report "important and timely works" in which the Chapter 11-bound combination utility has "shared concerns" with the governor and state lawmakers. "We heard and are embracing the calls for change," he said.

Southern California Edison Co. (SCE) spokesperson David Song said his electric-only utility is encouraged by the broad scope of the strike force's work, which adds to SCE's own Wildfire Mitigation Plan.

"The report also appropriately reflects the need to address wildfire liability and regulatory reform in order to restore confidence in the state's regulatory compact," Song said.

David Wright, general manager of the nation's largest city-run utility, the Los Angeles Department of Water and Power (LADWP), echoed the private sector utilities support for the governor's report. While stepping up vegetation management and other fire mitigation programs, LADWP will work closely with the governor and legislature, Wright said.

Strike force members advocated both replacing the state's reliance on a strict liability standard called inverse condemnation (IC) and policies that hold PG&E, in particular, accountable for safety.

The 52-page report listed seven principles for allocating the responsibility for various wildfire costs, such as maintaining safe, affordable energy, and holding utilities accountable for making safety top priority. It also listed three concepts for evaluation against the principles:

  • Creating a liquidity-only fund that provides liquidity for utilities to pay wildfire damage claims, pending CPUC cost recovery determinations;
  • Establishing a fault-based standard to modify the state's reliance on IC as its strict liability litmus test; and
  • Creating a catastrophic wildfire fund along with revising utility cost recovery standards.

In addressing the PG&E issues, the strike force report accepted the notion that the utility and its parent company were using Chapter 11 to promote "interests of investors over fire victims and other stakeholders."

The report calls for the state to closely monitor and intervene in the PG&E bankruptcy, creation of options to satisfy wildfire claims from the series of horrific fires the past two years that the utility estimates equate to $30 billion in liabilities, and "demand" that  the utility reorganize to better serve the public interest, including consideration for municipalizing parts of the giant utility.