More than 30 million Californians across the state could see their electric bills go up to pay for the devastating Eaton fire, as officials scramble to shore up a state wildfire fund that could be wiped out by damage claims.
One early estimate places fire losses from the Eaton fire at $24 billion to $45 billion. If Southern California Edison equipment is found to have sparked the blaze on Jan. 7, as dozens of lawsuits allege, the damage claims could quickly exhaust the state’s $21-billion wildfire fund.
“Everyone is concerned about this,” said Michael Wara, director of Stanford’s climate and energy policy program, who was involved in the fund’s creation. “If we need to put more money into the fund, where will it come from?”
The wildfire fund was created to shield the state’s three big utilities from bankruptcy in the event one was found liable for massive fire damages.
At a meeting last month, members of the state Catastrophe Response Council, which oversees the fund, were told that Gov. Gavin Newsom and legislative leaders were being urged to extend a monthly surcharge on electric bills beyond its planned expiration in 2035. The fee, called the non-bypassable charge, adds roughly $3 a month to the average residential bill.
“They are asking the people of California to put more money into the fund,” said council member Paul Rosenstiel, a former investment banker and Newsom advisor, according to a transcript of the meeting. “Some of them are asking for an extension of the non-bypassable charge.”
The fee is paid by customers of the state’s three big for-profit utilities — Edison, Pacific Gas & Electric and San Diego Gas & Electric.
Rosenstiel didn’t respond to a request for comment. At the meeting, he didn’t say who was lobbying the governor and lawmakers to extend the surcharge to ratepayers.
California utility executives have told their investors they have been talking to Newsom and legislative leaders about shoring up the fund. PG&E executives have said that they have asked that no new money come from utilities or their shareholders, which would likely leave electric customers to pay more.
“We continue to advocate that we don’t think there is a good case that investors should contribute to the fund,” Patti Poppe, PG&E’s chief executive, told Wall Street analysts in an April conference call.
A Siller Skycrane removes Southern California Edison’s tower 208 from a hillside in Altadena in May. The idle transmission tower, suspected of sparking the Eaton fire, will be examined at a lab.
(Myung J. Chun/Los Angeles Times)
Pedro Pizarro, chief executive of SoCal Edison’s parent company Edison International, was asked in a recent call with Wall Street analysts about the prospects for legislation that would bolster the wildfire fund.
“Clearly the governor’s office is engaged, as are our legislative leaders,” he said, adding that he was “certainly very encouraged by the level of diligence and engagement that I’m seeing.”
Asked to elaborate, Kathleen Dunleavy, a SoCal Edison spokeswoman, said the utility was not seeking a specific solution to questions of the fund’s durability.
“Our focus is to convey the importance of a strong wildfire fund,” she said. “We are not being prescriptive in how to achieve that.”
This year, the electric bill surcharge is expected to add $923 million to the fund, according to California Public Utility Commission records. If the fee was extended an additional 10 years, it would require customers of the three utilities to pay an additional $9 billion into the fund.
That doesn’t sit well with consumer advocates, who point out customers are already on the hook to contribute half of the $21-billion fund, while also paying higher bills to cover costs such as undergrounding and insulated electric wires.
Those measures are intended to make the electric system safer. Yet despite spending billions of dollars last year on wildfire mitigation, the number of fires sparked by its equipment jumped from 90 in 2023 to 178 last year.
Altadena homes lie in ruins after the Eaton fire.
(Robert Gauthier/Los Angeles Times)
“We think ratepayers have more than done enough,” said Mark Toney, the executive director of The Utility Reform Network, also known as TURN, a consumer group in San Francisco. “My position is that ratepayers should not pay another penny.”
Rosenstiel said at the May meeting that Newsom and legislative leaders were also being asked for the state’s general fund, which pays for schools, healthcare, prisons and other government operations, to contribute to the fund that protects utilities from wildfire claims.
The governor’s office declined to answer questions and said Newsom’s schedule didn’t allow time for an interview.
Newsom has a seat on the Catastrophe Response Council. He was a no-show at the group’s most recent meeting, sending a designee in his place.
Assemblywoman Cottie Petrie-Norris (D-Irvine), the chair of the Assembly’s Utilities and Energy Committee, acknowledged that lawmakers are concerned about the fund but said that they are still considering remedies.
“All options are on the table and are being considered and evaluated,” she said. “I have certainly not arrived at a solution yet.”
The cause of the Eaton fire, which killed 18 people and destroyed more than 9,000 homes, businesses and other structures in Altadena, remains under investigation.
Edison CEO Pizarro has said a leading theory is that an unused, decades-old transmission line in Eaton Canyon was reenergized and sparked the blaze. Video captured flames erupting under an Edison transmission tower on the night of the fire.
If Edison’s equipment is found to have started the inferno, the state’s wildfire fund is expected to cover most of the cost of damages over $1 billion, under a 2019 law that was passed after PG&E went bankrupt from its liability for the deadly 2018 Camp fire.
The first $1 billion in damages from the Eaton fire would be covered by insurance that electric customers paid for.
The total cost of the fire in Altadena won’t be known until dozens of lawsuits make their way through the courts, which could take years.
A February study by UCLA economists Zhiyun Li and William Yu estimated that the fire caused $24 billion to $45 billion in property damages and capital losses, or the cost to replace what was destroyed.
Officials at the California Earthquake Authority, which manages the wildfire fund, told members of the Catastrophe Response Council in a May memorandum that the authority had “undertaken a significant project to evaluate alternatives for extending the durability of the Wildfire Fund in the face of potential large losses.”
To determine how to strengthen the fund, authority officials said they had rehired consultants who worked with Newsom’s office in 2019 to create the fund. The four firms will be paid $4.5 million, which the fund will cover, they said.
Among the consultants is Guggenheim Securities, the investment banking arm of Guggenheim Partners. Another subsidiary of Guggenheim Partners owns stock in the state’s three big utilities.
A recommendation to tap utility customers to replenish the fund, instead of the utility companies themselves, would likely have a big impact on company share prices.
“They [Guggenheim] certainly have a vested interest in the financial success of the utilities,” Toney said.
A spokesman for Guggenheim Securities said the stocks owned by the sister company didn’t pose a conflict, saying it “maintains a robust conflict management program, including strict information barriers between its investment banking department and the rest of Guggenheim Partners.”
Wara at Stanford said if Edison is found responsible for the Eaton fire, the wildfire fund would cover what insurers paid to victims and also pay for property damage not covered by insurance.
For example, families who lost their homes but received insurance payouts lower than the value of their property could seek the balance from Edison, he said. The utility would then seek to recover those sums from the wildfire fund.
The other deadly Los Angeles County inferno that ignited on Jan. 7, the Palisades fire, is not covered by the wildfire fund because Pacific Palisades is served by the Los Angeles Department of Water & Power, a municipal utility. The fund only covers blazes ignited by equipment owned by the state’s three biggest investor-owned utilities.
“They have their insurance and that’s it,” Wara said of Palisades fire victims.
At its meeting last month, the state Catastrophe Response Council was informed that insurance claims from the Eaton fire have totaled roughly $15 billion so far.
Adding to the damage bill is the potential cost of lawsuits. The possibility that the fund will pay out large amounts for Eaton fire damages has led to dozens of lawsuits being filed against Edison, even before the official cause has been determined.
Families of Altadena residents who died have filed wrongful-death suits. Edison is also facing lawsuits from L.A. County and other local governments for damages, including to public infrastructure such as water systems. Residents living outside the fire’s borders have filed suit, saying they were harmed by lead and other toxins in the smoke.
If a court found Edison negligent in maintaining its equipment, Wara said, victims could ask for compensation for pain and suffering, which would escalate the cost.
“Then the wildfire fund is out of money,” Wara said.
Pizarro has said that Edison is “committed to a thorough and transparent investigation.”
“Our hearts go out to everyone who has suffered losses,” he said.
The 2019 law that created the wildfire fund, known as AB 1054, greatly limited what Edison would have to pay for any of the claims. The company has told its investors that its maximum liability would be $3.9 billion.
The three utilities are asking legislators to ensure that state law continues to protect them and their shareholders, even if the $21-billion fund runs out of money.
Since the January fires, Edison, PG&E and Sempra, the parent company of San Diego Gas & Electric, have each spent hundreds of thousands of dollars to lobby in Sacramento, according to required regulatory reports they filed for the first three months of the year.
A PG&E lobbyist reported taking Assemblywoman Petrie-Norris to a $267 dinner at Paragary’s, a bistro in Sacramento, on Feb. 3.
Petrie-Norris said the dinner was with Carla Peterman, a former state public utilities commissioner who is now a top PG&E executive. Petrie-Norris said they talked about a planned March hearing on electricity affordability and didn’t discuss the wildfire fund.
The next month, a PG&E lobbyist took Dee Dee Myers and Rohimah Moly, two of Newsom’s top staff members, to the upscale Prelude Kitchen & Bar, which is a short walk from the state Capitol.
Willie Rudman, a spokesman for the Governor’s Office of Business and Economic Development, said the wildfire fund wasn’t discussed at the meal. Instead it “was a general meet and greet,” Rudman said, where the governor’s staff and PG&E executives “discussed opportunities for future collaboration.”
PG&E declined to answer questions. Lynsey Paulo, a PG&E spokesperson, said in a statement that the utility’s lobbying expenses were paid with shareholder funds and not money from customers.
“Like many individuals and businesses, PG&E participates in the political process on behalf of our customers and company,” Paulo said.