SUMMARY OF AB 1054 COMPLAINT

PREMISE OF COMPLAINT

California’s investor-owned utilities (IOUs) have a long history of causing widespread disasters
in California killing at least 100 people and inflicting billions in damages. The IOUs are
responsible for dozens of wildfires which collectively destroyed tens of thousands of structures
and burned millions of acres, a deadly gas pipeline explosion that leveled an entire
neighborhood, and even the most severe gas blowout in U.S. history.

One of California’s largest IOUs—Pacific Gas & Electric Company (PG&E)—is in fact a
convicted felon for its criminally negligent maintenance of its gas pipelines which led to a gas
pipeline explosion in San Bruno. PG&E declared bankruptcy six months ago because of its
many billions in wildfire-related liabilities, yet exhaustive investigations of PG&E’s wildfire-
related activities by at least two separate media outlets have revealed PG&E spent millions
lobbying the California Legislature in the last year, while issuing billions in dividends to its
shareholders over the past few years instead of overhauling electric power lines PG&E knew in
advance were defective and likely to cause a fire.

Despite the well-chronicled history of electric and gas IOU misconduct, the Legislature chose to
pass the 57-page long Assembly Bill (AB) 1054 as an urgency measure on July 12, 2019, only
two weeks after its introduction. It is apparent California’s electric and gas IOUs have wielded
their immense political and financial resources to secure from the California Legislature an
undeserved reprieve from the consequences of future disasters.

AB 1054 should have served as a last-chance warning against further utility disasters. Instead,
AB 1054 became a bailout of the IOUs, both financially and legally, from the likely
consequences of their continued intransigence against prioritizing safety.

AB 1054 provides for utility customers to subsidize the issuance of $10.5 billion in bonds to be
accessed automatically by the IOUs whenever an IOU starts a wildfire. To complete the bailout,
the Legislature dismantled long-standing legal incentives against utility imprudence by making it
far more difficult for customers to show the imprudency of utility actions, thus ensuring
ratepayers would continually subsidize the IOUs’ wildfire liabilities. The resulting erosion of the
utility prudent manager standard violates the due process rights of utility customers and imposes
unjust and unreasonable electric rates.

AB 1054 was designated as an urgency measure, but any urgency surrounding the bill was
manufactured to pressure legislators into passing a 57-page utility wildfire bailout plan within
two weeks of introduction. For months, the IOUs and their institutional investors raised the
specter of IOU credit downgrades and even claimed the IOUs could go bankrupt and thereby

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cease electric services altogether. AB 1054’s authors perpetuated those fears at committee
meetings to manufacture an imperative for the bill to be passed as an urgency measure. Indeed,
there is no rational relationship between many of the bill’s provisions and the statement of facts
in the bill addressing its urgency status.

To limit public scrutiny into the operation of the wildfire bailout fund, AB 1054 limits the ability
of members of the public to access records showing the deliberative process of those working for
the fund. To limit the right of access, a bill must include legislative findings that demonstrate the
interest protected by the limitation and the need for protecting that interest. AB 1054 includes no
such findings.

Finally, AB 1054 provides for two gifts of public funds for the unlawful purpose of bailing out
privately-owned corporations with no public benefit in return. The Department of Finance, State
Treasurer and State Controller are to make a gift of $9 million of taxpayer money in the General
Fund, while the Surplus Money Investment Fund will provide the IOUs a $2 billion loan and up
to another $8.5 billion in additional loans.

AB 1054 thus violates the due process rights of electric utility customers, would impose unjust
and unreasonable rates upon them, was improperly designated as an urgency measure, would
violate the right of the public to access records pertaining to the public’s business, and authorizes
unlawful gifts of public funds.

LEGAL THEORIES AND RELIEF SOUGHT

The Complaint seeks validation, declaratory, and injunctive relief based on the premise that AB
1054’s unlawful bailout violates both the United States and California Constitutions.

The Complaint alleges AB 1054’s weakening of the prudent manager standard violates the
procedural due process rights of utility customers as provided by the U.S. and California
Constitutions. The Complaint also alleges AB 1054’s weakening of the prudent manager
standard would result in the imposition of unjust and unreasonable rates upon utility customers,
thereby violating their Fifth Amendment rights against unlawful government takings.

The Complaint also alleges violations specific to the California Constitution, including:

(1) Restricting the right of access to information comprising the people’s business
without making findings of fact to justify such restrictions (Art. I, Sec. 3);
(2) Improperly designating AB 1054 as an urgency statute (Art. IV, Sec. 8); and,
(3) Unlawfully gifting public funds (Art. XVI, Sec. 6).

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