DEPARTMENT OF FINANCE BILL ANALYSIS

AMENDMENT DATE: 07/05/2019 BILL NUMBER: AB 1054

POSITION: Support AUTHOR: Holden, Chris

BILL SUMMARY: Public utilities: wildfires.

This bill establishes the California Wildfire Safety Advisory Board to provide guidance to the Public Utilities
Commission's (PUC) Wildfire Safety Division and its successor, the Office of Energy Infrastructure Safety
(Office) regarding wildfire safety.

This bill revises the definition of control of a utility and extends work protection provisions from two years to
three years following the change in control.

This bill also provides funding to cover specified utility costs associated with catastrophic wildfires,
including an estimated $10.5 billion in initial contributions from utilities, a $2 billion loan from the Surplus
Money Investment Fund (SMIF), authority for up to $8.5 billion in additional SMIF loans if there is no
ratepayer charge, ongoing funding of $300 million per year from large utilities, up to $120 million per year
from regional utilities that choose to participate, ongoing funding from an extension of an existing half cent
per kilowatt hour surcharge paid by ratepayers, and bonding authority for up to $10.5 billion in revenue
bonds. This bill also appropriates $9 million to cover the Department of Water Resources (DWR) initial
costs associated with these bonds.

This bill is an urgency statute which will become operative only if AB 111 (Committee on Budget) or SB 111
(Committee on Budget and Fiscal Review) is enacted in the 2019-20 Regular Session and becomes
effective before January 1, 2020.

FISCAL SUMMARY

This bill provides funding towards eligible wildfire costs through approximately $10.5 billion in initial
contributions from utilities, annual large utility contributions of $300 million, voluntary regional utility
contributions of up to $120 million, annual ratepayer surcharge revenues, and if there is no ratepayer
charge, up to $10.5 billion in SMIF loans to be repaid with up to $10.5 billion in bonding authority. This bill
provides for an initial SMIF loan of $2 billion to the Wildfire Fund.

To fulfill the additional safety certification requirements of this bill, PUC estimates it will require between
$5 million and $10 million per year starting in 2019-20. We note that $50.1 million is appropriated to
PUC through budget trailer bills (AB 111/SB 111) for establishing the Wildfire Safety Division and reviewing
and enforcing the wildfire mitigation plans utilities are now required to submit annually.

DWR estimates that approximately $9 million will be needed in 2019-20 to administer the new revenue
bond program. This bill transfers $9 million from the General Fund to the DWR Charge Fund for this
purpose.

Any request for additional resources will be evaluated as part of the annual budget development process.

Analyst/Principal Date Program Budget Manager Date

S.Wells Erika Li

Department Deputy Director Date

Governor's Office: By: Date: Position Approved

Position Disapproved
BILL ANALYSIS Form DF-43 (Rev 03/95 Buff)
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BILL ANALYSIS--(CONTINUED) Form DF-43
AUTHOR AMENDMENT DATE BILL NUMBER

Holden, Chris 07/05/2019 AB 1054

COMMENTS

Finance supports this Administration sponsored bill, which improves utility safety while providing funding to
cover the cost of catastrophic wildfires. Specifically, this bill:

• Establishes the Wildfire Safety Advisory Board and requires the Board to advise the PUC's Wildfire
Safety Division, and on or after July 1, 2021, to advise its successor entity, the Office, as established in
the Resources Agency by AB 111/SB 111, the associated trailer bills, regarding wildfire safety. This bill
would require the PUC and the Office to enter into a memorandum of understanding (MOU) to develop
consistent approaches to electric infrastructure safety.
• This bill revises the definition of control of a utility and extends work protection provisions from two
years to three years following the change in control.
• Establishes the Wildfire Fund to pay wildfire liability claims against electrical corporations for wildfires
caused by utility infrastructure. The Fund would receive initial contributions from electric
corporations that are estimated to total $10.5 billion in non-ratepayer funding, including $300 million in
annual contributions from large utilities, and an additional up to $120 million annually from regional
utilities that choose to participate (also from non-ratepayer funding), and ongoing funding from an
extension of an existing half cent per kilowatt hour ratepayer charge. The bill authorizes a liquidity
fund as an alternative to the Wildfire Fund to function as a credit line in the event that large electrical
corporations do not elect to contribute to the Wildfire Fund. If the Wildfire Fund is created, the
provisions of the bill that create the liquidity fund will become inoperative. This bill provides for an initial
loan of $2 billion from the SMIF to the Wildfire Fund, and if there is no ratepayer charge, permits the
Director of Finance, in consultation with the Treasurer and the administrator, to request additional
loans for a total of up to $10.5 billion from the Controller to the Fund from the SMIF and other funds
that accrue interest to the General Fund. Any additional SMIF loans above the initial $2 billion loan
would not be permitted if the Director of Finance were to determine that the transfer would result in the
General Fund’s estimated cash and unused borrowable resources declining below $3 billion dollars at
any point in time over the next twenty four months.
• This bill also establishes the DWR Charge Fund to provide bond financing of eligible wildfire related
costs. If bonds are sold, the DWR Charge Fund would issue revenue bonds that would then be paid
by a surcharge paid by ratepayers. The DWR Charge Fund is continuously appropriated for debt
service costs. This bill also transfers $9 million from the General Fund to the DWR Charge Fund to
cover DWR's initial cost of issuing and administering the bonds.
• This bill is an urgency statute which will become operative only if AB 111 (Committee on Budget) or
SB 111 (Committee on Budget and Fiscal Review) is enacted in the 2019-20 Regular Session and
becomes effective before January 1, 2020.

DWR estimates that approximately $9 million will be needed in 2019-20 to administer the new revenue
bond program. This bill transfers $9 million from the General Fund to the DWR Charge Fund for this
purpose. Finance notes that this estimate assumes revenue bonds will be issued by September 2020.
However, it is unclear specifically when DWR will issue revenue bonds, and at what level, for this program.
To the extent revenue bonds are issued by September 2020, it is anticipated ongoing administrative costs
beyond 2019-20 will be covered by bond proceeds. However, if revenue bonds are not issued by
September 2020, DWR may require additional General Fund resources to support ongoing administrative
costs.
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BILL ANALYSIS--(CONTINUED) Form DF-43
AUTHOR AMENDMENT DATE BILL NUMBER

Holden, Chris 07/05/2019 AB 1054

SO (Fiscal Impact by Fiscal Year)

Code/Department LA (Dollars in Thousands)
Agency or Revenue CO PROP Fund
Type RV 98 FC 2019-2020 FC 2020-2021 FC 2021-2022 Code
8660/PUC SO No B 5,000-10,000 B 5,000-10,000 B 5,000-10,000 0462
3860/Water Res SO No A 9,000 A -- A -- 0001
Fund Code Title
0001 General Fund
0462 Publ Utilities Comm Utilities Reimb Acct