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Gov. Bob Ferguson signed a bill sponsored by state Rep. Peter Abbarno, R-Centralia, on Monday, May 19, that gives more financial flexibility to utility companies to respond to certain emergencies.
House Bill 1990 allows private utility companies that provide electricity, gas and water to sell bonds to cover costs related to major natural disasters such as wildfires, floods, earthquakes and more.
The process is called securitization. It is meant to allow utility companies to bankroll urgent repairs and restore services to customers as soon as possible in the wake of disasters without immediately raising rates.
“This bill is about protecting people and making sure that when disaster strikes, our communities can bounce back faster, and without passing the unbearable costs of rebuilding onto families and ratepayers,” Abbarno stated in a news release. “It is a proactive, smart investment in our communities' resilience and financial stability.”
In order to securitize their costs and sell bonds to raise funds, the companies or public utilities would first have to petition the Washington state Utilities and Transportation Commission (UTC). The commission can only approve the action if certain conditions are met. For example, a federal or state declaration of disaster would meet the criteria.
The UTC is also responsible for ensuring the costs cited by a utility are “reasonable, prudent and likely to result in lower long-term costs for customers compared to standard cost recovery approaches.”
Once a utility has the funds, there are also restrictions on how they can use them. For example, if a company is ruled liable for causing or contributing to a disaster due to negligence, it cannot use the emergency funds to cover legal fees or penalties associated with that liability.
Some utilities in recent years have been deemed responsible for natural disasters, such as wildfires ignited by downed power lines.
“With growing threats from natural disasters, this bill puts Washington on a stronger footing,” added Abbarno, whose community has suffered from catastrophic flooding in the Chehalis River Basin. “It ensures we can respond swiftly, rebuild safely and protect ratepayers from financial shocks.”
While the new law is aimed at helping utility companies recover from disasters, it's important to note that this process does not make costs associated with repairs go away. Rather, it allows a utility provider to spread those costs out over many years in order to avoid immediate rate hikes on communities dealing with natural disasters.
The new law received widespread support in the Legislature and passed by a wide margin in both houses. Due to an emergency clause in the bill, it will go into effect immediately, unlike most bills, which go into effect 90 days after the session ends.
“I appreciated the bipartisan support and effort to get this bill over the finish line,” Abbarno said. “I hope this policy is never needed; however, Washington will be better prepared in case of a catastrophic event.”
