A year after the Eaton fire, survivors and the state’s electric utilities are clashing over whether state law should continue to protect the companies from the cost of disastrous wildfires they ignite.
Southern California Edison says that with the help of those state laws it expects to pay little or even none of the damage costs of the Eaton fire, which its equipment is suspected of sparking.
But in recent filings to state officials, fire victims and consumer advocates say the law has gone too far and made the utilities’ unaccountable for their mistakes, leading to even more fires.
“What do you think will happen if you constantly protect perpetrators of fires,” said Joy Chen, executive director of the Eaton Fire Survivors Network.
At the same time, Edison and the state’s two other big for-profit electric companies are lobbying state officials for even more protection from the cost of future fires to reassure their investors.
If government investigators find Edison’s equipment ignited the Eaton fire, at least seven of the state’s 20 most destructive wildfires would have been caused by the three utilities’ equipment.
The debate over how far the state should go to protect the electric companies from the cost of utility-sparked wildfires is playing out in Sacramento at the California Earthquake Authority. The authority is managing a broad study, ordered by Gov. Gavin Newsom, aimed at determining how to better protect Californians from catastrophic wildfires.
Chen said she was concerned by a meeting this month that she and another survivor had been invited to by authority officials and consultants they had hired to work on the study.
She said a primary focus of the discussion was how to shield utilities and their shareholders from the damages of future fires, rather than on the costs to survivors and other Californians “living with the consequences of utility-caused fires.”
Chen later sent authority officials an email pointing to a Times story that detailed how four of five top executives at Edison International were paid higher bonuses the year before the Eaton fire even as the number of fires sparked by the utility’s equipment soared.
“The predictable outcome of continuing to protect shareholders and executives from the consequences of their own negligence is not theoretical. It is observable. More catastrophic fires,” she wrote.
“The Eaton Fire was the predictable outcome of this moral hazard,” she added.
An authority spokesman said Chen and other wildfire victims’ perspectives were “invaluable” to officials as they complete the study that is due April 1.
He said the authority had made “no foregone conclusions” of what the report will say.
Pedro Pizarro, chief executive of Edison International, told the Times last month that he disagreed strongly with claims that state law had gone too far in protecting utilities.
“The law keeps us very accountable,” Pizarro said. He added that the laws were needed to shield utilities from bankruptcy, which could drive electric bills higher.
In December, Edison and the two other utilities told authority officials in a filing that they and their shareholders shouldn’t have to pay any more into the state wildfire fund, which was created to pay for the damages of utility-caused fires.
So far, electric customers and utility shareholders have split the cost of the fund.
The companies said that making their shareholders contribute more to the fund “undermines investor confidence in California utilities.”
They proposed that officials instead find a new way to help pay for catastrophic fires, possibly using state income taxes, which require the wealthy to pay a higher share.
“Instead of relying on an increase in utility bills to cover extreme catastrophic losses, something that disproportionately impacts lower-income Californians, this system could share costs more equitably across society,” the three companies wrote.
While the investigation into the cause of the Eaton fire has not yet been released, Edison has said a leading theory is that a century-old transmission line no longer in service was briefly re-energized and sparked the fire.
Edison last used that transmission line in Eaton Canyon more than fifty years ago. Utility executives said they kept it up because they believed it would be used in the future.
Utilities and state regulators have long known that old, unused lines posed fire risks. In 2019, investigators traced the Kincade fire in Sonoma County, which destroyed 374 homes and other structures, to a dormant transmission line owned by Pacific Gas & Electric.
The electric companies’ legal protections from utility-sparked fires date back to 2019 when Gov. Newsom led an effort to pass a measure known as AB 1054.
Then, PG&E was in bankruptcy because of costs it faced from a series of wildfires, including the 2018 Camp fire. That blaze, caused by a decades-old transmission line, destroyed most of the town of Paradise and killed 85 people.
Under the 2019 law, a utility is automatically deemed to have acted prudently if its equipment starts a wildfire. Then, all fire damages, except for $1 billion dollars covered by customer-paid insurance, are covered by the state wildfire fund.
The law allows outside parties to provide evidence that the utility didn’t act prudently before the fire, but even in that event, the utility’s financial responsibility for damages is capped.
Edison has told its investors that it believes it acted prudently before the Eaton fire and will have the damage costs fully covered.
The company says the maximum it may have to pay under the law if it is found to be imprudent is $4 billion. Damages for the Eaton fire have been estimated to be as high as $45 billion.
Pizarro said the possibility of Edison paying as much as $4 billion shows that state law is working to keep utilities accountable.
“If we were imprudent and we end up getting penalized by $4 billion for the Eaton fire, that’s going to be a very painful day for this company — not only the pain of being told that we were imprudent, but also the financial toll of a penalty of that size,” he said.
Chen’s group is not alone in urging the state to change the laws protecting utilities from wildfire costs.
William Abrams of the Utility Wildfire Survivor Coalition detailed in a filing how the present laws had been shaped by the utilities and “a small circle of well-resourced legal and financial actors.”
AB 1054 had weakened safety regulations, he said, while leaving wildfire survivors across California “under-compensated and struggling to rebuild.”
He proposed that the companies be required to use shareholder money and suspend their dividends to pay for fire damages.
Carmen Balber, executive director of Consumer Watchdog, told state officials that Edison is expected to have damages of the Eaton fire covered despite questions of why it did not remove the “ghost line” in Eaton Canyon and failed to shut down its transmission lines, despite the high winds on the night of the fire.
“We recommend establishing a negligence standard,” Balber said, “for when utilities’ shareholders need to pay.”
Among the consultants the authority has hired to help write the study is Rand, the Santa Monica-based research group; and Aon, a consulting firm.
Both Rand and Aon have been paid by Edison for other work. Most recently, Edison hired Rand to review some of the data and methods it used to determine how much to offer Eaton fire victims in its voluntary compensation program.
Chen said hiring Edison’s consultants to help prepare the study created a conflict of interest.
The authority spokesman said officials were confident that their “open and inclusive study process” will protect its integrity.
Aon did not return a request for comment.
“Our clients have no influence over our findings,” said Leah Polk, a Rand spokesperson. “We follow the evidence and maintain strict standards to ensure our work remains objective and unbiased.”
Chen said she was not convinced. “You have the fox guarding the hen house,” she said.