Federal Wildfire Relief Act of 2024.
📝 TL;DR
This bill creates a federal fund administered by FEMA to partially compensate wildfire victims while capping electric utility liability at 10% of their assets. In exchange for federal compensation, victims must waive their right to sue utilities, and all wildfire claims move to federal rather than state courts.
Plain English Summary
The Federal Wildfire Relief Act of 2024 (HR 10523) establishes a federal compensation fund administered by FEMA to provide financial relief for damages from catastrophic wildfires. The bill creates a three-way compensation system covering structure owners, insurance companies, and electric utilities, while simultaneously limiting utility liability for wildfire damages. It requires utilities to comply with federal or state-approved wildfire mitigation plans to access these protections, essentially creating a quid pro quo arrangement where utilities gain liability shields in exchange for meeting safety standards.
This legislation responds to the increasing frequency and severity of wildfires, particularly those caused by utility equipment, which have resulted in billions of dollars in damages and complex litigation. The bill aims to create a more predictable compensation framework while incentivizing utility companies to implement robust wildfire prevention measures.
Detailed Analysis
The bill operates through a complex mechanism that balances compensation with liability limitation. Section 3 establishes the Federal Wildfire Relief Fund under FEMA's administration, which becomes active only after the President declares a wildfire as 'catastrophic' under Section 2. The fund's eligibility requirements are stringent: utilities must comply with approved wildfire mitigation plans, and damaged structures must be adequately insured for at least 50% of their value (Section 3(c)).
The compensation structure creates a tiered system with specific limits and calculations. Structure owners can receive up to 25% of uninsured losses, capped at 50% of insured losses up to $1 million, minus any state or private insurance payouts (Section 3(d)). Insurers can recover up to 10% of their losses on qualifying structures, while utilities can receive compensation for their claim payments but limited to 10% of their gross assets (Sections 3(e) and 3(f)).
Particularly significant is the voluntary participation requirement with mandatory claim waivers. Section 3(g) requires structure owners and insurers to waive claims against utilities to receive federal compensation, effectively channeling all wildfire litigation away from utilities and into the federal system. This is reinforced by Section 3(j), which transfers jurisdiction of wildfire claims to federal courts, removing them from potentially more plaintiff-friendly state court systems.
The bill creates a regulatory framework requiring either state-approved or federally-approved wildfire mitigation plans. Section 3(i) establishes FERC's authority to approve utility mitigation plans in states without existing programs, while threatening to exclude non-compliant utilities from the liability shield. However, the bill lacks specificity about what constitutes adequate mitigation measures or how compliance will be monitored and enforced.
A critical aspect is the bill's intersection of emergency management and utility regulation. By housing the program within FEMA while involving FERC for technical oversight, it creates a unique federal approach to what has traditionally been a state-regulated utility issue. The 180-day claim resolution deadline (Section 3(d)(4)) and advance payment provisions attempt to address the urgent needs of wildfire victims who cannot wait for lengthy litigation.
🎯 Key Provisions
Presidential Declaration Requirement: Requires the President, through FEMA, to declare a wildfire as 'catastrophic' before relief becomes available. This creates a gatekeeping mechanism for fund access. (Section 2 - 'The President, acting through the Administration of the Federal Emergency Management Agency, shall be required to declare a wildfire as a catastrophic wildfire, for relief to be available under this Act.')
Catastrophic Wildfire Definition: Defines qualifying wildfires as those damaging more than 500 structures or causing over $50 million in damages, with administrator discretion for other determinations. (Section 5(1) - 'catastrophic wildfire means a wildfire occurring on or after the effective date of this Act that damages or destroys more than 500 residential or commercial structures or causes more than $50,000,000 in damages, or as otherwise determined by the Administrator.')
Utility Liability Cap: Limits utility liability for catastrophic wildfire damages to no more than 10% of the utility's gross assets, contingent on compliance with mitigation plans. (Section 3(h) - 'Subject to compliance with Federal and State approved wildfire mitigation plans, liability for damages relating to qualifying catastrophic wildfires shall be limited for covered utility operators to no greater than 10 percent of the value of the gross assets of the covered utility.')
Mandatory Claims Waiver: Requires structure owners and insurers to waive all claims against utilities as a condition of receiving federal compensation, effectively immunizing utilities from civil lawsuits. (Section 3(g)(2) - 'To receive compensation under this section, structure owners or insurers shall be required to waive claims against a covered utility in regards to damages stemming from the unique catastrophic wildfire event.')
Federal Court Jurisdiction Transfer: Moves wildfire-related claims from state courts to federal claims courts, potentially changing litigation dynamics and outcomes for claimants. (Section 3(j) - 'Claims sought outside of the parameters of the Fund...shall be the exclusive jurisdiction of a regionally appropriate Federal claims court.')
Structure Compensation Formula: Establishes specific compensation limits for property owners at 25% of uninsured losses, capped at 50% of insured losses up to $1 million, minus other recoveries. (Section 3(d)(3) - 'Structure owners shall be compensated up to 25 percent of their uninsured losses, subject to a 50 percent maximum of their insured losses up to $1,000,0000.')
👥 Impact Analysis
Direct Effects If enacted, this bill would fundamentally alter how catastrophic wildfire damages are compensated in the United States. Property owners would have a new federal avenue for recovery, potentially receiving compensation more quickly than through traditional litigation, with claims resolved within 180 days. However, they would be limited to partial recovery (25% of uninsured losses) and must waive their rights to sue utilities. Electric utilities would gain significant liability protection, with damages capped at 10% of their assets instead of facing potentially unlimited exposure for wildfire damages.
The bill would create new federal bureaucracy within FEMA to handle wildfire claims and establish FERC as a backup regulator for utility wildfire mitigation plans in states lacking their own programs. Insurance companies would face a mixed impact—they could recover 10% of losses on qualifying properties but would also be required to waive subrogation rights against utilities, potentially increasing their overall exposure.
Indirect Effects The liability limitations could reduce utilities' financial incentives for wildfire prevention beyond minimum compliance with mitigation plans, potentially leading to moral hazard. The bill might encourage more aggressive utility operations in high-risk areas, knowing their liability is capped. Additionally, by requiring federal rather than state court jurisdiction, the bill could reduce successful plaintiff recoveries, as federal courts may be less sympathetic to local community interests than state courts. The legislation could also create pressure on states to develop or strengthen their wildfire mitigation plan requirements to maintain regulatory control over their utilities.
Affected Groups - Property owners in wildfire-prone areas - Electric utilities - Insurance companies - State utility regulators - FEMA - Federal Energy Regulatory Commission - Wildfire victims - Taxpayers
Fiscal Impact The bill does not specify funding sources for the Federal Wildfire Relief Fund, creating significant fiscal uncertainty. Based on the compensation formulas and recent wildfire damages, the fund could require billions of dollars annually during severe wildfire seasons. The bill mentions no appropriation amounts, funding mechanisms, or revenue sources, suggesting either future appropriations will be needed or the fund will operate as an unfunded mandate. Administrative costs for FEMA to establish and operate the claims system, including potential independent claims managers for each catastrophic wildfire, are also unspecified. The bill's fiscal impact statement would need to be developed by the Congressional Budget Office to determine actual costs to the federal government.
📋 Latest Action
12/19/2024
Referred to the Committee on Transportation and Infrastructure, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.