A last-minute bid by California Gov. Gavin Newsom to reduce electric utilities' wildfire liabilities failed in the state legislature after an outcry from survivors.

Instead, California lawmakers introduced a bill Saturday that includes limits on executive compensation at utility companies that start wildfires, a "fast pay" program for victims, and a ban on private-equity funds from buying wildfire claims. They are set to vote on it Tuesday before closing out their current legislative session.

But what's more notable are the items that weren't included in the bill. Newsom had pushed for deeper changes to how wildfires are paid for, and who pays, when an electric utility's equipment sparks a destructive inferno. His office argued in a fact sheet that when costly fires plunge utilities into bankruptcy, fire victims can end up competing with other creditors and that their compensation is at risk.

"The status quo is untenable in the short term, and in the long term catastrophic, potentially," Newsom said in a press conference last week.

After lawmakers introduced the current bill, without the provisions he sought, Newsom released a statement urging the legislature in the future to pursue "full structural reform-not a partial one," he said.

Lawmakers and advocates who participated in negotiations during recent weeks said Newsom sought to cap some damages paid to wildfire victims, eliminate the ability of insurance companies to recoup their costs from utilities, curb reimbursement to local governments for destroyed infrastructure and limit attorneys' fees in wildfire lawsuits.

Newsom's office declined Monday to comment on these policy goals.

Investors were caught on the back foot by the absence of such provisions. Shares of PG&E and Southern California Edison parent Edison International, two major investor-owned utility companies, tumbled sharply on Monday.

The companies both criticized the bill, with PG&E saying it "does not adequately address the financing risks created by California's current wildfire liability framework." Edison said the legislation "would not address the stable financing framework utilities need to support California's climate goals and deliver affordable, reliable electricity in a time of increasing demand."

State Sen. Sasha Renée Pérez, whose district includes Altadena, said she thinks Newsom was trying to come up with a plan that would better prepare California for the next major fire. But she wanted more focus on accountability for utilities that spark the infernos, such as bans on stock buybacks, and balked at limiting damages for survivors without more public debate.

"This idea that we're going to cap noneconomic damages and somehow try to come up with an amount for all of the various situations that people go through when they are experiencing a wildfire, it just, to me, was not right," Pérez said in an interview. "It wasn't appropriate for us to have that conversation, and I just frankly think it's unfair to survivors."

Joy Chen, an Altadena resident who leads an advocacy group for survivors of the 2025 Eaton Fire, said a mid-August briefing by one of Newsom's advisers on the proposal left her "absolutely stunned."

Chen's group, Every Fire Survivors Network, organized other victims to challenge the governor's effort in the California legislature. She found allies in the insurance industry and among trial lawyers. The groups mounted a frantic lobbying campaign to persuade lawmakers not to adopt what they described as a bailout for utility companies' shareholders at the expense of victims.

"For somebody who talks a lot about democracy, this has been an unbelievable subversion of democracy," Chen said, criticizing Newsom for pushing behind closed doors for "a multibillion-dollar transfer of wealth from wildfire survivors to Wall Street."

Over the past two decades, equipment owned and maintained by California's investor-owned utilities have started at least seven wildfires that each destroyed more than 1,000 structures. Those include the two most-destructive blazes in state history: the 2018 Camp Fire, sparked by PG&E Corp. power lines, and last year's Eaton Fire, which the Los Angeles County Fire Department recently attributed to an out-of-service Edison International transmission tower.

Under California law, utilities are strictly liable for damage caused by wildfires they start, leading to a tsunami of litigation. Liabilities can reach tens of billions of dollars and pushed PG&E into bankruptcy protection in 2019, a process that Newsom has said turns survivors into "unsecured creditors."

Wall Street had high hopes for the governor's effort to change that framework. Over his nearly eight years in office, Newsom has repeatedly pushed his priorities through the Democrat-controlled legislature right before key deadlines, using his veto power as leverage over skeptical lawmakers. Investors had little doubt he would succeed again this time.

Los Angeles County communities devastated by the Eaton and Palisades fires early last year are still in recovery mode.