A contentious portion of Newsom’s wildfire proposal would have reduced utility companies’ financial liability when their equipment causes wildfires, but the California Senate and Assembly rejected the provision during a last-minute deal Friday night.

The agreement came after weeks of closed-door negotiations over who should bear the enormous costs when utility equipment sparks a wildfire, with those liabilities reaching tens of billions of dollars in recent disasters, as KQED reports. California Governor Gavin Newsom had argued that the existing system could eventually push utilities into bankruptcy, leaving wildfire survivors and ratepayers to absorb the fallout.

But the proposal reportedly drew fierce opposition from wildfire survivors, insurers, local governments, and trial attorneys, particularly over provisions that would have limited compensation for some victims and shifted more costs away from utilities. According to the Los Angeles Times, more than 50 Eaton Fire survivors traveled to Sacramento last week to protest outside the governor’s mansion, chanting, “Who should pay?” and “Shareholders should pay!”

The contentious provisions were part of a broader package Newsom had been negotiating during the final days of his last legislative session as governor. Primarily, he wanted to restrict insurance companies from suing utilities to recover money they had paid homeowners after utility-caused fires, a process known as subrogation.

As CalMatters reports, the proposal also would have limited noneconomic damages for some wildfire survivors. Under Newsom’s plan, pain-and-suffering damages would generally have been limited to people who lost a family member or suffered an injury, while other survivors who fled a fire within the burn perimeter would have faced a $150,000 cap. 

Survivor groups opposed Newsom’s effort to distinguish between victims based on the type of loss they experienced, and both the Assembly and Senate rejected those restrictions in the final compromise. The new proposal does not cap survivors’ economic or noneconomic damages, and it doesn’t limit their ability to seek compensation based on where they were when a fire occurred. 

CalMatters reports that the negotiations unfolded as investigators determined that Southern California Edison was responsible for the January 2025 Eaton Fire, which killed 19 people and destroyed about 9,400 structures. More than 11,000 households have sued Edison, alleging negligence, which the utility denies.

California’s strict wildfire liability rules reportedly hold investor-owned utilities responsible for damage caused by their equipment even when there is no finding of negligence. The system contributed to PG&E’s bankruptcy after its equipment sparked the 2018 Camp Fire and other destructive fires.

As the LA Times reports, Newsom and lawmakers created a $21 billion wildfire fund in 2019 in response, financed equally by utility shareholders and ratepayers, to compensate victims of utility-caused fires. The Legislature reportedly added another $18 billion last year after the 2025 Los Angeles-area fires threatened to drain the original fund.

The cost of the system has also been passed on to electricity customers. Wildfire-related charges now add about $41 per month to the average PG&E bill and $27 per month for Southern California Edison customers, according to a state report released this spring.

Newsom had also proposed shifting more wildfire costs to property insurers, a move that could have increased premiums, but he ultimately abandoned that effort, according to KQED. He also backed away from provisions that would have transferred more costs for destroyed public infrastructure to local governments.

Instead, the final legislation focuses on several narrower changes. It would prevent hedge funds and private equity firms from profiting by purchasing insurers’ rights to pursue wildfire claims, restrict utility CEOs from receiving bonuses after destructive fires, increase fines for utilities with safety violations, and create a program intended to get compensation to wildfire survivors more quickly.

The bill also includes a 30-day prohibition on unsolicited communications from law firms to wildfire survivors following a disaster and caps attorney fees in insurance subrogation cases at 10% of the final settlement.

“This is one of the most consequential pieces of legislation for victims and survivors of wildfires that we’ve ever done,” said state Senator Josh Becker, D–Menlo Park, speaking to KQED of the compromise, citing its provisions to get survivors paid more quickly, limit Wall Street’s role, and hold utilities accountable.

According to Politico, parts of the negotiations extended past the midnight deadline Friday, requiring lawmakers to use an urgency measure that can still be introduced but requires a two-thirds vote in both chambers.

The sweeping proposal proved difficult for lawmakers to sell to their constituents, particularly those who had lived through devastating wildfires.

“My job is not to ensure that we’re increasing profits for shareholders for these companies,” said state Senator Sasha Renee Perez of Altadena, which was hit by the Eaton Fire, last week, per CalMatters. “And we certainly, as a Legislature, are not going to negotiate with companies that want to act like terrorists.”

With the legislation coming together behind closed doors in the final days of session, lawmakers faced pressure to explain complicated changes to a system that directly affects their fire-scarred communities.

“Many of us were up until three in the morning, and then staff had to go write the actual bill language,” Assemblymember Cottie Petrie-Norris said.

The 96-page bill was published Saturday morning, leaving lawmakers only a short window to review the final language before a vote expected Tuesday, as the LA Times reports. Republican Senator Roger Niello, R–Fair Oaks, questioned whether three days was enough time to evaluate such significant changes to California’s wildfire liability system.

PG&E criticized the final measure, saying it failed to address the long-term financial risks created by California’s wildfire liability framework and would not provide the certainty needed to attract affordable investment.

Wildfire survivors who had opposed Newsom’s original proposal, meanwhile, celebrated the concessions from the governor and legislative leaders.

“This is all real progress for future fire survivors,” Newsom said in a statement Saturday, while adding that California’s wildfire liability system still needs “full structural reform — not a partial one.”

Related: Bay Area Firefighters In LA as Eaton Fire In Altadena Threatens Thousands of Homes