In the wake of the January 2025 wildfires that devastated Southern California, the State adopted Assembly Bill 254 (2025, Becker) aimed primarily at expanding the existing Wildfire Fund meant to facilitate payments for eligible claims related to wildfires caused by electric utility infrastructure. This expansive bill—introduced in the waning days of the 2025 legislative session and currently awaiting Governor Newsom's signature for approval—is expected to have significant impacts on the financial well-being of the Wildfire Fund program and major implications on wildfire-related claims moving forward.
Expansion of the Wildfire Fund
The Wildfire Fund was first established in Assembly Bill 1054 (2019, Holden) to functionally serve as an insurance backstop for participating electric utilities against wildfire-related claims. Assembly Bill 254 creates a $18 billion Continuation Account to supplement the existing Wildfire Fund Customer contributions.
Capitalization of $9 billion of the $18 billion amount would come from a 10-year extension of an existing non-bypassable charge on customer electric bills that would otherwise expire in 2035. Utility shareholders would be required to immediately commit to collectively contribute the remaining $9 billion to take part in the Continuation Account . The Continuation Account expansion of the existing Wildfire Fund is intended to infuse the program with greater liquidity to weather the current fiscal challenges for the program that have been caused by the January 2025 wildfires.
Right of First Refusal on Subrogation Claims Relating to Wildfire Damages
The bill incorporates a new right of first refusal mechanism concerning subrogation claims made by insurance companies relating to wildfire damages. The goal of this mechanism is to address the impacts of insurance subrogation claims being sold to third-parties (in particular hedge funds and private equity firms), which the authors argued increases costs of settled claims seeking reimbursement from the Wildfire Fund.
An earlier iteration of the bill proposed to introduce a cap on such subrogation claims, but Assembly Bill 254 instead requires insurers to offer the respective electrical corporation of the service territory affected by the claim with the opportunity to purchase the claim before it is sold to a third-party. The electrical corporations would be afforded 30 days to agree to settle on the terms offered to the third party. The goal is to encourage direct settlements with the electrical corporations and potentially reduce additional costs on the Wildfire Fund.
Public Financing and Ownership of Electrical Transmission Projects
Assembly Bill 254 also establishes a new Transmission Infrastructure Accelerator program within Go-Biz to develop a financing and development strategy for eligible transmission projects receiving financing under a new California Transmission Accelerator Revolving Fund Program. The program is intended to cut the costs for building high-voltage electric transmission lines in California need to serve the State's anticipated future electricity load. Specifically, the bill authorizes I-Bank to make available public financing programs and funds to public entities, including public-private partnerships, in combination with tax credits of 20% annually (capped at $20 million) to reduce costs from these projects.
Other Provisions of Assembly Bill 254
In addition, Assembly Bill 254 also addresses a number of wildfire-related issues for California, including limiting the ability of investor-owned electric utilities from earning the authorized rate of return on the first $6 billion in fire risk mitigation capital expenditures approved after January 1, 2026. The bill also creates an interim financing mechanism to allow investor-owned electric utilities to securitize costs arising from any settled claims from a catastrophic wildfire from January 1, 2025, which is intended to facilitate quicker payments from the January 2025 wildfires in Southern California. This broad-ranging legislation also contains various provisions relating to permit streamlining for clean energy projects, wildfire risk mitigation efficiencies, and underground infrastructure planning as well.
Check back for further updates as we await the Governor's anticipated approval of this bill and to see how California implements these ambitious initiatives.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
