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California Establishes Fund to Combat Wildfire Threats

On July 11, 2019, the California Legislature passed, and Governor Gavin Newsome quickly signed into law, Assembly Bill 1054, which creates the potential for a $21 billion fund to assist Californian utilities with their liability burdens in the wake of the devastating wildfires of 2017 and 2018. For example, PG&E, which is California’s largest power company, declared bankruptcy in January as a result of its estimated liability from the fires.

In order to access the funds, there are several requirements that the utilities must meet. The bill calls for $5 billion in safety investments, including those related to infrastructure as part of a wildfire mitigation plan. The bill also calls for a new annual safety certification process.

The fund will ultimately come from several sources. The participating investor-owned utilities will be required to pay a portion of the fund before they can access the rest of the $21 billion. Some regional electric companies will be required to pay less than the investor owned utilities for access to the fund. Utility customers will also pay $10.5 billion into the fund through a small fee which was placed on their statements after the 2001 energy crisis. That fee was set to expire in 2020, but as a result of the AB-1054, it will be extended for 15 years.

“The rise in catastrophic wildfires fueled by climate change is a direct threat to Californians," a statement issued by Governor Newsom’s office upon the passage of the bill said. "Strengthening our state’s wildfire prevention, preparedness and mitigation efforts will continue to be a top priority for my administration and our work with the Legislature.”

The legislation comes at the perfect time for at least one utility, as S&P Global Ratings had previously indicated that it might downgrade the Southern California Edison bond rating in the absence of state action before lawmakers adjourned for recess on July 12. Read AB -1054 here

© 2019 Foley & Lardner LLP

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Jocelyn Lavallo Energy Business Attorney
Partner

Jocelyn E. Lavallo is a partner and a business lawyer at Foley & Lardner LLP. Ms. Lavallo’s practice focuses on the financing, development, purchase, and sale of energy and infrastructure projects, with a primary concentration on solar and wind transactions in the United States. She regularly represents financial institutions and developers in a variety of complex project financings, including partnership flips, sale/leasebacks, asset acquisitions, and sales, and construction and term debt financings.

Ms. Lavallo has led numerous financing transactions involving utility solar...

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Ann A. McAdam Energy Lawyer Foley & Larnder Law Firm
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Ann McAdam is an associate at Foley & Lardner LLP, where she is a member of the firm’s Finance Practice and Energy Industry Team.

Ann worked as both a public and private accountant before pursuing her law degree.

Education

Ann earned her law degree from the University of Southern California Gould School of Law (J.D., 2018), where she graduated with high honors in property, ethics, legal research, writing and advocacy, US foreign policy and international law, contracts drafting and negotiation, and constitutional law. During this time, she served as a writing fellow for the law school’s legal writing program, the editor-in-chief for the Southern California Interdisciplinary Law Journal Volume 27, and a certified law student for the Post-Conviction Justice Project. She was also the director of outreach of the Environmental and Energy Law Society and co-chaired the alumni relations efforts for the Women’s Law Association.

 

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Justus Britt, Solar Energy Project Attorney, Foley Lardner Law Firm
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Justus Britt is a business lawyer and special counsel with Foley & Lardner LLP. Mr. Britt focuses on the development and acquisition of solar energy projects. His project development experience includes advising clients on real estate, permitting, and construction matters, including negotiating supply, EPC, and O&M agreements. Mr. Britt’s acquisition experience includes leading due diligence efforts and assisting on stock and asset purchase agreements, as well as joint venture agreements. He is a member of the firm’s Energy Industry Team and the Transactional...

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