wildfire fund

California electric customers would pay $9 billion more to shore up the state’s wildfire fund under a last-minute deal reached behind closed doors that was introduced as legislation on Wednesday.

Southern California Edison, and the state’s two other large for-profit electric companies, had been lobbying Gov. Gavin Newsom and legislative leaders, urging them to pass legislation to replenish the state’s $21-billion fund that pays for damages of utility-caused fires.

State officials have warned the fund could be wiped out by damages from the Eaton fire, which killed 19 people and destroyed a large swath of Altadena on Jan. 7.

Customers of the three utilities are already on the hook for contributing $10.5 billion to the original fund through a surcharge of about $3 on their monthly bills.

If approved, the bill amendments made on Wednesday would have customers pay $9 billion more by extending that surcharge by 10 years beyond 2035, when it was set to expire.

Under the deal, the three electric companies’ shareholders would also pay an additional $9 billion into the fund. That means the fund would increase by $18 billion if the legislation, known as SB 254, passes.

Consumer advocates and environmentalists tracking the bill said they were still trying to understand all the provisions of the 229-page bill, which had been debated in hearings in recent months, but was then significantly amended without public input. The new draft of the bill was published at 9:12 a.m. on Wednesday.

“It’s a complete gut and amend,” said Bernadette Del Chiaro, senior vice president at the Environmental Working Group. “It’s an end run around the normal legislative process.”

The complex proposal was introduced just days before the state legislature’s session ends, which means it may receive little public debate.

The session was scheduled to end on Friday, but any amendments must be public for 72 hours, which would push a vote to Saturday morning.

Mark Toney, executive director of The Utility Reform Network, a consumer group, said he was disappointed that ratepayers — who are already paying the country’s second highest electric rates — would have to pay more. But he pointed to some measures that could help reduce the upward pressure on bills.

For example, utilities would be required to finance some expensive transmission projects through a lower-cost method of public financing that legislators said could save ratepayers $3 billion.

Toney said after reviewing the bill’s language his group planned to support it even though it “falls short of addressing the growing affordability crisis.”

Assemblymember Cottie Petrie-Norris (D-Irvine), the bill’s co-author, defended the last minute amendments, saying the legislature needed to move quickly to bolster the fund as the wildfire season begins in California.

She said many of the provisions added to SB 254, including the public financing of transmission lines, had been included in other bills that had been repeatedly been debated in public hearings.

Petrie-Norris, who is chair of the Assembly Utilities and Energy Committee, defended the process and said that she believed electric customers were getting “a good deal” since half the $18 billion addition into the fund would come from utility shareholders.

Also, under the plan, she said, the three utilities must spend billions of dollars more on wildfire prevention costs, which they can’t earn a profit on.

The share prices of Edison International, Pacific Gas & Electric, and Sempra, the parent company of San Diego Gas & Electric all rose Wednesday on the news.

Newsom and lawmakers created the state wildfire fund in 2019 through a bill known as AB 1054 to protect the three utilities from bankruptcy in the event their electric lines sparked a catastrophic wildfire.

Under the law’s protective measures, Edison could pay nothing or just a fraction of the damages for the Eaton fire if its equipment is found to have sparked the fire.

A representative for Newsom did not immediately respond to a request for comment.

The investigation into the fire is ongoing. Edison has said a leading theory is that a century-old transmission line, not used since the 1970s, somehow re-energized and sparked the blaze.

The insured property losses alone could be as much as $15.2 billion, according to an estimate released in July by state officials. That amount does not include uninsured losses or damages beyond those to property, such as wrongful death claims. A study by UCLA estimated losses at $24 billion to $45 billion.

Damages from the Palisades fire, which also ignited on Jan. 7, are not covered by the state wildfire fund. The city of Los Angeles’ Department of Water and Power, a municipal utility, services the area of Pacific Palisades destroyed by that fire.

Only customers of Edison, PG&E and San Diego Gas & Electric pay to support the wildfire fund. And only those three utilities are covered by its protections.

Gov. Gavin Newsom is preparing draft legislation that would add an additional $18 billion to a state fund for wildfire victims that officials have warned could be exhausted by January’s deadly Eaton wildfire.

Under Newsom’s plan, customers of the state’s three biggest for-profit utilities would pay another $9 billion to supplement a state fund created in 2019 that holds $21 billion.

The other $9 billion would come from shareholders of Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric, according to a draft of the proposal.

“We continue to work with the Legislature on policy that will stabilize California’s Wildfire Fund to support the recovery of wildfire survivors and to protect California utility consumers — even as wildfires become bigger and more destructive due to climate change,” Newsom’s office said in a statement Thursday.

Customers of the three utilities are already on the hook for contributing half of the original $21 billion fund through a surcharge of about $3 on their monthly bill. The proposal would have customers pay $9 billion more by extending that surcharge by 10 years beyond 2035, when it was set to expire.

“We’re very disappointed to be at a point where there is even talk of more ratepayer money going to the wildfire fund,” said Mark Toney, executive director of the the Utility Reform Network, a consumer advocacy group.

Utility executives also criticized the plan, which was reported earlier by Bloomberg, for proposing that their shareholders pay additional amounts into the fund.

Pedro Pizarro, chief executive of Edison International, told Wall Street analysts on a conference call that the company has told Newsom and lawmakers that any legislation to shore up the fund “would not have a shareholder contribution.”

“We will need to see the balance of an ultimate package,” Pizarro said.

Newsom’s plan has been circulating with legislative leaders and others and would require approval of the state Senate and Assembly. Under the draft proposal, the $18 billion would go into a new “Continuation Wildfire Fund.” The new fund would not be created until the administrator of the state’s original wildfire fund determines additional funds are needed.

Newsom and lawmakers created the $21 billion fund in 2019 to protect utilities from bankruptcy in the event their equipment sparks a devastating fire.

Toney said said state officials told him then that there was a 99% chance the fund would last 20 years. Now it could be wiped out by a single fire.

He said he believes there needs to be limits on the liabilities that the fund will pay for. “We can’t go back every three or four years and put more money in,” he said.

Since the fund was created, electric customers have also paid $27 billion for tree trimming and other work aimed to prevent wildfires, which is fast driving up electric bills, Toney said.

Despite that spending, fires sparked by Edison’s equipment leaped from 90 in 2023 to 178 in 2024.

The investigation into the Eaton fire, which killed 19 people and destroyed thousands of homes and businesses in Altadena, is continuing. Video captured the fire igniting on Jan. 7 under an Edison transmission tower.

Pizarro has said a leading theory is that a dormant Edison transmission line, not used since 1971, somehow became electrified and sparked the blaze.

The insured property losses alone could be as much as $15.2 billion, according to an estimate released by state officials last week. That amount does not include uninsured losses or damages beyond those to property, such as wrongful death claims. A study by UCLA estimated losses at $24 billion to $45 billion.

Southern California Edison’s plans to compensate Eaton fire victims for damage were met with skepticism Thursday from lawyers representing Altadena residents, but drew tentative support from others who say the initiative could help shore up the state’s $21-billion wildfire fund.

The utility announced its Wildfire Recovery Compensation Program this week, saying it would be used to quickly pay victims, including those who were insured, while avoiding lengthy litigation.

The announcement comes as state officials consider ways to shore up the state’s fund to compensate wildfire victims, amid fears that it could be fully exhausted by Eaton fire claims. Fees that attorneys receive as part of victim settlements could further strain the fund.

State Sen. Henry Stern (D-Calabasas) said Edison’s new program may have some merit as potentially “a more efficient way” than lawsuits to make sure victims are fairly compensated.

He pointed out that lawyers were “coming across the country to represent” Eaton fire victims. “Are they really getting their money’s worth when they pay 30% to these lawyers?” Stern asked.

Mark Toney, executive director of the Utility Reform Network, said Edison’s program had the potential to reduce costs that otherwise must be covered by the wildfire fund, which was established in part by a surcharge on the bills paid by customers of Edison, Pacific Gas & Electric and San Diego Gas & Electric.

“If Edison is determined to be the cause of the fire, anything they can settle early reduces the costs that otherwise would be paid later,” Toney said.

The utility has released few details of how the program would work, leaving victims who are already coping with uncertainty with more questions. And lawyers who had been seeking to represent victims in lawsuits against Edison were quick to urge caution.

“Without admitting fault or providing transparency, Edison is asking victims to potentially waive their rights,” said Kiley Grombacher, one of dozens of lawyers involved in litigation against Edison for the Jan. 7 wildfire that killed 19 and destroyed 9,000 homes in Altadena.

According to Edison, the program would be open to those who lost homes or businesses as well as renters who lost property. It would also cover those who were harmed by smoke, suffered physical injuries or had family members who died.

“People can file a claim even if they are involved in active litigation,” said Kathleen Dunleavy, an Edison spokeswoman.

Dunleavy said the company would be releasing more information soon, including on eligibility requirements.

At a Thursday meeting in Sacramento of the Catastrophe Response Council, which oversees the wildfire fund, officials said they were creating criteria that Edison must follow in designing the program, including having measures to prevent fraud and clear eligibility standards.

Sheri Scott, an actuary from Milliman, told the council that the firm estimated that losses from the Eaton fire ranged from $13.7 billion to $22.8 billion.

“We heard from our guest today that we might run out of money very quickly,” said Paul Rosenstiel, a member of the council appointed by Gov. Gavin Newsom.

He urged state lawmakers to consider changing the law that created the fund so that less money was at risk of flowing to third parties who aren’t fire victims.

PG&E created a program to directly pay victims of the 2021 Dixie fire, which burned more than 960,000 acres in Northern California. It created a similar program to compensate victims of the 2022 Mosquito fire, which burned nearly 77,000 acres in Placer and El Dorado counties.

PG&E said it offered Mosquito fire victims who lost their homes $500 per square foot and $9,200 per acre for those whose lots did not exceed 5 acres. To aid in rebuilding efforts, victims who decided to reconstruct their homes were eligible for an additional $50,000.

Lynsey Paulo, a PG&E spokeswoman, said in an email that the company paid nearly $50 million to victims of the Dixie fire through its program. That money went to 135 households, she said.

“PG&E’s program was designed to provide claimants with resources to rebuild as quickly as possible and help communities recover,” she said.

Richard Bridgford, a lawyer who represented Dixie fire victims, said that PG&E’s offer was lower than victims won through lawsuits, and that only a fraction of those eligible for the PG&E program decided to participate, he said.

”Victims have uniformly done better when represented by counsel,” said Bridgford, who now represents victims of the Eaton fire.

Edison’s announcement of its program came as fire agencies continue to investigate the cause of the Eaton fire. Edison said in April that a leading theory is that a dormant transmission line, last used in 1971, somehow was reenergized and sparked the blaze. The company says the new compensation program “is not an admission of legal liability.”

“Even though the details of how the Eaton Fire started are still being evaluated, SCE will offer an expedited process to pay and resolve claims fairly and promptly,” Pedro Pizarro, chief executive of Edison International, the utility’s parent company, said in a news release. “This allows the community to focus more on recovery instead of lengthy, expensive litigation.”

The utility said it had hired consultants Kenneth R. Feinberg and Camille S. Biros, who had worked on the September 11th Victim Compensation Fund, to help design the program.

If Edison is found responsible for the fire, the $21-billion state wildfire fund would reimburse the company for all or most of the amounts paid to victims through the new program or through lawsuits and insurance claims.

Half of the fund’s $21 billion came from charges to electric bills of customers of Edison, PG&E and SDG&E. The other half was contributed by shareholders of those three companies, which are the only utilities that can seek reimbursements from the fund.

Seeking to avoid lengthy litigation, Southern California Edison said Wednesday it will offer to compensate Eaton fire victims directly for damages suffered, even though it has yet to formally concede that its equipment ignited the blaze on Jan. 7.

Edison said it planned to launch a Wildfire Recovery Compensation Program this fall that would be open to those who lost homes, businesses or rental properties in the fire that killed 19 people and destroyed more than 9,400 homes and other structures in Altadena. It would also cover those who were harmed by smoke, suffered physical injuries or had family members who died.

“Even though the details of how the Eaton Fire started are still being evaluated, SCE will offer an expedited process to pay and resolve claims fairly and promptly,” Pedro Pizarro, chief executive of Edison International, the utility’s parent company, said in a press release. “This allows the community to focus more on recovery instead of lengthy, expensive litigation.”

The utility said it had hired consultants Kenneth R. Feinberg and Camille S. Biros, who had worked on the September 11th Victim Compensation Fund, to help design the program.

Dozens of lawsuits have been filed against Edison in the wake of the Jan. 7 fire that videos captured igniting under a transmission line in Eaton Canyon. The cause is still under investigation, but Pizarro has said a leading theory is that an idle Edison transmission line, last used in 1971, somehow became re-energized and started the blaze.

An attorney who represents fire victims expressed skepticism of the plan, saying it could lead to reduced compensation for fire victims.

“In the past, the utilities have proposed these programs as a means for shorting and underpaying victims,” said attorney Richard Bridgford said. “Victims have uniformly done better when represented by counsel.”

Edison said the program would be designed to quickly compensate victims, including those who were insured. People can apply with or without an attorney, it said. The program is expected to run through 2026.

“The architecture and timing of the SCE direct claims program will be instrumental in efficiently managing funding resources, mitigating interest costs and minimizing inflationary pressures so funds can address actual claims and fairly compensate community members for their losses,” Pizarro said.

If Edison is found responsible for the fire, the state’s $21 billion wildfire fund is expected to reimburse the company for all or most of the payments it makes to victims. Brigford said he believed the wildfire fund would be enough to cover the Eaton fire claims.

“They are trying to make people panic so they don’t get adequate representation,” he said.

Others are concerned that the state wildfire fund is inadequate. Officials at the Earthquake Authority, which administers the wildfire fund, said in documents released in advance of a Thursday meeting that they fear the costs of the Eaton fire could exhaust the fund.

State officials plan to discuss what can be done to lengthen the life of the fund at the meeting.

Edison said more information on eligibility and other details of the compensation plan would be released in the coming weeks.

In a high-stakes gamble, Wall Street hedge funds are offering to buy claims that insurers may have against Southern California Edison if the utility is found liable for causing the devastating Eaton fire in Altadena.

The solicitations are legal, but have alarmed California state officials — who loathe the idea of investors profiting from a disaster that claimed 18 lives and destroyed more than 9,400 homes and other structures.

“I think everyone in this room looks at a catastrophe, like what happened in Southern California, and our natural instincts are to say, ‘What can we do to help?’” Tom Welsh, the chief executive of the California Earthquake Authority, which manages the state’s wildfire fund, said at a recent public meeting. “There are other actors in the environment who look at that situation in Southern California and ask instead, “What can I do to profit?’”

The investors are aiming to buy so-called subrogation claims from insurance companies. These are claims that insurers would file against Edison seeking reimbursement for the money they paid to their policyholders for fire damages if it’s determined the utility’s equipment triggered the wildfire that began Jan. 7.

For the insurers, selling the claims — even at a steep discount — allows them to get at least some reimbursement for the money they’ve paid out. For the hedge funds buying the claims, it’s a gamble that could pay big if Edison is found liable and they can cash in those claims for much more than they paid.

More than $17 billion in insurance claims for the Eaton and Palisades fires has been paid out so far, according to the California Department of Insurance.

State officials say California has a stake in the trading of fire-related subrogation claims, which was previously reported by Bloomberg, because of the potential effect on the state’s wildfire fund.

That fund, which currently has about $21 billion, would be used to cover most of the costs of damage claims should Edison be found liable for starting the Eaton blaze. While the cause is still under investigation, a leading theory is that a decommissioned transmission line in Eaton Canyon was reenergized and sparked the blaze, Edison has said.

The wildfire fund is managed by a state board called the Catastrophe Response Council. At its last meeting in May, Welsh told the board that solicitations from New York brokers and investment firms began landing in his email inbox in March.

Ronald Ryder at Oppenheimer & Co., a New York investment firm, told Welsh in an email on April 15 that his company was currently trading the subrogation claims. Ryder wrote that there had already been 10 transactions worth more than $1 billion in recovery rights for the Eaton fire as well as the Palisades fire in Pacific Palisades, where the city of Los Angeles faces potential liability.

In another email, Ryder told Welsh that investors were bidding 47 cents on the dollar for the claims related to the Eaton fire. For the Palisades fire, the bidding was 5 cents on the dollar, Ryder wrote.

Welsh warned the council that “speculative investors” might hold onto the Eaton claims and “really try to get outsized profits by demanding settlements from Edison of 75, 80, 85 cents on the dollar.”

If that were to happen, the wildfire fund could pay out “hundreds of millions, if not billions of dollars” more than if the claims were settled directly by the insurers, he said.

“That would really, very negatively impact the durability of the wildfire fund,” Welsh said.

Oppenheimer declined to comment, and Ryder didn’t respond to messages.

Under a 2019 state law, the state wildfire fund would be expected to reimburse Edison for most of the insurers’ payments to policyholders if its electrical equipment is found to have started the Eaton fire. The Palisades fire, which occurred in territory serviced by the L.A. Department of Water and Power, isn’t covered by the state fund.

California lawmakers created the wildfire fund in 2019 to protect the state’s three biggest for-profit utilities — Edison, Pacific Gas & Electric and San Diego Gas & Electric — from bankruptcy if their equipment sparks catastrophic wildfires.

The possibility of large settlements paid out by the wildfire fund has led to dozens of lawsuits against Edison, even before the cause of the fire has been determined.

If found responsible for the fire, Edison would negotiate settlements with the insurers, as well as with homeowners and others who have filed lawsuits, saying they’ve been harmed. The utility would then ask the state wildfire fund to cover those amounts.

If the insurers have sold their claims, however, the investors who bought them would reap the returns. Attorneys who handle the complex transactions would also get a cut and “generally take a very high percentage off the top,” Paul Rosenstiel, a catastrophe council member, said at last month’s meeting.

Already, Gov. Gavin Newsom and other state leaders are worried that the $21-billion wildfire fund could be depleted by damage claims from the Eaton fire.

Welsh recounted how a hedge fund had profited in 2019 by buying insurers’ subrogation claims against PG&E after its transmission line was found to have started the 2018 Camp fire that killed 85 people and destroyed much of the town of Paradise. Bloomberg reported at the time that hedge fund Baupost Group made a profit of hundreds of millions of dollars by buying the claims at 35 cents on the dollar and later getting a settlement valued at much more.

To stop hedge funds from profiting on the claims, Welsh said, the earthquake authority is now considering changing its claim administration procedures to make the settlements less lucrative for those investors.

One possible change being discussed, according to authority staff, would require a utility that ignited a wildfire to prioritize settling the claims of victims and insurers who have not sold their subrogation rights before those claims owned by hedge funds.