California Governor Gavin Newsom's push to shield publicly traded utilities from wildfire liabilities has been blocked by state lawmakers, according to multiple reports. The legislative stalemate stems from Newsom's proposal to end subrogation, a legal process allowing insurance companies to recover financial losses from utilities when power equipment sparks a wildfire. Legislative leaders in both the Assembly and Senate formally rejected the proposal after insurance executives warned that shifting liability to insurers would cause property insurance premiums to surge statewide. The rejection preserves the status quo, leaving utility balance sheets and the state's ratepayer-funded $21 billion Wildfire Fund exposed to future subrogation suits. The legislative blockade sent utility stocks tumbling on Friday afternoon, with PG&E Corp. shares falling as much as 11.75%, marking the sharpest drop since March 2020 for the state's largest utility, while Edison International sagged by as much as 6.4%. As reported by Bloomberg, the sharp decline reflects investor concerns about the blocked liability protection measures.
California Governor Gavin Newsom is pushing for an eleventh-hour legislative proposal that would give an environmental carveout to a Santa Monica developer, creating a precedent for overriding coastal environment protections. The draft proposal, obtained by CalMatters, would exempt a mixed-use project on Santa Monica's oceanfront, designed by the late architect Frank Gehry, from the state's environmental regulations of coastal developments, unless the city adopts its own land use policies by January 1, 2028. The project belongs to Jeff Worthe, who along with his wife Kristin Worthe has donated more than $274,000 to Newsom's campaigns and inaugural fund between 2018 and 2022, according to state campaign finance records. Newsom appointed Worthe to the California Privacy Protection Agency Board in 2023 and then to the California High-Speed Rail Authority last year. The proposal has shocked and angered environmental advocates, who for months have urged state leaders to reject any backdoor deal to exempt any project from the California Coastal Act, a 50-year-old law that set the environmental standard for coastal development. Marce Gutiérrez-Graudiņš, founder of the climate justice advocacy group Azul, said it would be dangerous to "weaken our law instead of strengthening it" now. Susan Jordan, executive director of the California Coastal Protection Network, said Newsom is following Trump's playbook. "He's carving up the Coastal Act. He's selling it to the highest bidder. And we don't need a governor to be doing that, and we certainly don't need our next president to do that," she said.
The proposal faces significant opposition from local legislators who view it as undermining recent environmental progress. Assemblymember Rick Zbur, a Democrat representing Santa Monica, said he received the proposal Monday night and opposes it because it would undermine Assembly Bill 1740, which he authored this year to set a deadline for Santa Monica to develop its land use plan by January 1, 2029. The bill passed 76-0 in the Assembly Tuesday and is headed to the governor's desk. Zbur told CalMatters that "This isn't about the project. It's about the precedent of exempting a project and about doing something that is in conflict [with] and undermines a bill that I just worked so hard to bring all the parties together on." Sen. Ben Allen, an El Segundo Democrat who also represents the area, similarly opposed the proposal, arguing it would incentivize developers to delay the city from creating a local coastal plan. Allen said he supports Zbur's legislation instead, stating "I ... am not interested in unwinding that work." The last-minute proposal comes after a Worthe-linked company spent $270,000 between January and June lobbying the Legislature and the governor's office on Zbur's legislation and other budget issues, according to state lobbying records.
The $350 million project was previously approved by the Santa Monica City Council and the California Coastal Commission several years ago after Worthe agreed to pay millions of dollars toward low-cost housing and city infrastructure. However, the approvals lapsed and the project never broke ground despite Worthe's promise to start building in early 2025. Under Newsom's proposal, the coastal commission must publicly hear the project application within 90 days and make a decision within 30 days. The proposal assumes the project complies with environmental regulations unless the commission proves the development would "result in a specific, adverse and unavoidable impact" to the environment. The project includes a 120-room hotel, 100 apartments with affordable units, 70,000+ square feet for commercial and cultural use, a 5,000-square-foot rooftop observation deck, and nearly 300 parking spaces. In an agreement with the city council, Worthe agreed to pay $6 million toward city transportation, parks and recreation, affordable housing, early childhood programs and economic development initiatives in exchange for building the project. In 2023, at the coastal commission staff's suggestion, he also agreed to contribute another $6.5 million to a youth hostel next to the project site to provide lower-cost housing in the area.
The proposal comes amid broader concerns about environmental regulation weakening, as President Donald Trump has sought to weaken California's environmental regulations and push for offshore oil drilling. The Trump administration has launched an investigation into the Coastal Commission's authority, which environmental activists, the commission and Newsom himself see as a power grab intended to undermine the state's environmental protections. Environmental advocates have called Newsom hypocritical for criticizing Trump while pushing a regulatory carveout for the Santa Monica project. When asked about his link to Worthe and why he's pushing for the proposal late in the session, Newsom declined to comment but said he spoke with one state lawmaker who represents the area two days ago and received "healthy feedback." "It's a work in progress," Newsom said at a Wednesday press conference in Vallejo. "We are in the process of negotiating and discussing it with them." The proposal would only kick in if the city fails to certify its local coastal plan by 2028, creating a potential conflict with Zbur's legislation that sets a different deadline.
