California's Wildfire Liability Deal Dies Without a Vote and an Antitrust Bill Reaches Newsom; Colorado's Graduated Tax Makes the Ballot

The bottom line today

California’s Legislature went home without settling the biggest cost question in its energy market. SB 492, the narrowed wildfire liability deal Gov. Newsom struck with legislative leaders on August 29, never came to a vote in the Assembly [2, 3]. Utilities wanted more; fire survivors, consumer groups and insurers had backed it [2, 3]. Pratt’s read: no bill is better than a bad bill, but it is not a fix, and every employer that pays a power bill or a property premium is still carrying the risk. The same weekend, lawmakers sent the governor AB 1776, which gives prosecutors a new monopoly claim under state law [5, 6]. And in Colorado, the graduated income tax that was waiting on a signature count in our August 24 release qualified for the ballot [8].

CA California SB 492: the wildfire liability package that never got a vote

What it does. As amended August 29, SB 492 would have created the California Wildfire Relief Fast-Pay Program, run by an administrator the California Catastrophe Response Council appoints, to review and pay individual claims after a utility-caused fire [1]. CalMatters reported a 60-day deadline to decide whether a claim is valid and settlement offers within 30 days after that, with survivors free to sue instead [2]. The bill would have barred the sale of wildfire claims to private equity groups, capped an insurer’s attorney fees on a subrogated inverse condemnation claim against a utility at 10% of the settlement or judgment, and required a large utility’s executive pay plan to deny all short-term incentive pay to the CEO in a year the company causes a fatal catastrophic fire [1]. It would also have let the state issue bonds for the Wildfire Fund’s Continuation Account, secured by ratepayer contributions [1].

Where it stands. Dead for the session. The Assembly suspended its rules to move the bill on August 30 and ordered it to third reading, but did not take it up [1, 3]. “The proposal before us does not yet deliver the relief, accountability or meaningful reform that Californians deserve,” Speaker Robert Rivas said [3].

Pratt’s read. This one has business on both sides. Newsom wanted utilities to pay less to insurers, survivors and local governments after fires their equipment starts, and argued that rising liability costs threaten investor confidence, raise utility borrowing costs and end up on electricity bills [2]. Insurers fought him over subrogation, their right to sue utilities to recover what they pay out, and lawmakers sided with them out of concern that losing it would raise premiums [2]. “This outcome keeps costs with the parties responsible for wildfires,” the American Property Casualty Insurance Association said when the deal was announced [2].

Both arguments are about the same customer. A manufacturer pays the utility’s cost of capital through its rates and the insurer’s catastrophe load through its premium. The $18 billion Wildfire Fund is paid for half by utility customers and half by shareholders [2]. The chief executives of PG&E and Edison wrote to legislative leaders that the two companies had lost $20 billion in market value since the previous Thursday [3]. Newsom said the bill “did not address the underlying structural problems driving this crisis” [3].

The fast-pay program and the ban on private equity buying claims were sensible pieces. But a package that moved utility stock that hard without substantially changing what utilities owe was not reform [2]. Letting it die leaves the question for the fall hearings Assembly leaders promised, with no date set [3].

CA California AB 1776: a single-firm monopoly claim, enforced by prosecutors

What it does. AB 1776, by Assembly Majority Leader Cecilia Aguiar-Curry, adds to the Cartwright Act a ban on monopolizing or monopsonizing, attempting to, maintaining a monopoly or monopsony, or conspiring to do so [4]. Today the Cartwright Act reaches only combinations of two or more companies; single-firm conduct is policed under the federal Sherman Act [4]. A plaintiff must allege and prove “substantial market power,” and courts must apply the California Supreme Court’s framework from In re Cipro Cases I & II [4]. Only the Attorney General or a district attorney may sue, cases are deemed complex, and the claim can’t serve as the predicate for a private Unfair Competition Law suit [4]. Businesses with 100 or fewer employees and $10 million or less in average annual receipts are exempt [4]. The bill also tells courts to read the state’s antitrust laws liberally [4].

Where it stands. The Senate passed it 30-9 and the Assembly concurred 60-16 on August 30 [5, 6]. It is on the governor’s desk [6].

Pratt’s read. Credit first. The bill that reaches Newsom is much smaller than the one introduced. The private right of action is gone, removed before the August appropriations vote [7]. That is the difference between a few enforcement actions a year and a plaintiffs’ market. The small business exemption and the prosecutor-only rule are real concessions [4].

Supporters, a coalition of unions, consumer groups and small business advocates, call it “a modest, pro-business proposal to promote competition, affordability, and fair labor standards,” built on a three-year California Law Revision Commission study [4]. That is a fair description of where it ended up, with one exception. The Sherman Act asks whether a company has monopoly power. AB 1776 asks for “substantial market power,” a standard the opposition coalition, including the California Chamber of Commerce, says no federal or California court has applied to single-firm conduct [4]. Their warning is satellite litigation “over the meaning of ‘substantial’” [4]. Add an instruction to read the law liberally and the reach is hard to price. The opponents include biotech, medical device, airline, banking and construction groups, which tells you where the exposure sits [4].

The state hasn’t priced it either. The Department of Finance opposed the bill in part because the cost depends on how many cases the Attorney General brings, CalMatters reported [6].

CO Colorado Initiative 195: a graduated tax on corporate income qualifies

What it does. Initiative 195 amends the flat-tax clause of the Taxpayer’s Bill of Rights and, for tax years starting January 1, 2027, replaces the 4.4% flat rate with six brackets [9]. Individuals and C corporations would pay 3.7% on the first $25,000, 4.2% to $100,000, 4.4% to $500,000, 7.4% to $750,000, 7.9% to $1 million and 8.4% above that [9]. New revenue above what the flat rate would have raised goes to a Colorado’s Future Fund for schools, health care and child care [9].

Where it stands. The Secretary of State found 130,938 valid signatures out of 165,765 submitted and announced on September 1 that the measure had qualified for the November 3 ballot [8]. It will compete with Initiative 232, which caps the rate at 4.4%; the measure with more votes would set the rate [10].

Pratt’s read. Proponents say 97% of taxpayers get a cut, the measure raises $2 billion a year, and taxes rise only on the top 3% of individuals and the largest 5% of corporations with income over $500,000 [10]. The rate schedule is the same for a C corporation as for a person [9]. A company with $5 million of Colorado net income would pay 8.4% on its last $4 million, against 4.4% today [9]. Owners of S corporations and partnerships, whose business profits land on their individual returns, reach the 7.4% bracket at the same $500,000 [9]. The Independence Institute’s Jon Caldara argues the brackets aren’t indexed to inflation and that “with enough time we would all be in the top bracket” [10].

Colorado has spent decades marketing a single low rate. Initiative 195 trades that for a top marginal rate nearly twice as high, aimed at exactly the employers that decide where to put the next plant. That is a high price for a state competing with Texas and Arizona for those decisions.

On the calendar

Newsom has until September 30 to sign or veto AB 1776 [7]. SB 492 is dead for the session, and Assembly leaders have promised fall hearings on wildfire costs without a date [3]. Colorado votes on Initiatives 195 and 232 on November 3 [8, 10]. If Initiative 195 passes and controls, its brackets apply to tax years beginning January 1, 2027 [9].