As LA County sues Edison over deadly fire, is the state’s wildfire fund in jeopardy?

A potential finding that Southern California Edison’s equipment ignited the deadly Eaton Fire could upend California’s effort to shield utilities from mounting wildfire losses as climate change drives more destructive blazes.

The January blaze, which killed 17 people and destroyed 9,414 structures, remains under investigation, but residents already have filed several lawsuits blaming Edison for sparking the conflagration. 

The Eaton Fire ignited near Eaton Canyon in the San Gabriel Mountains and quickly intensified amid powerful desert winds that gusted up to 100 miles per hour, the flames morphing into a fast-moving and destructive wildfire.

On Wednesday, Los Angeles County also filed suit against Edison, saying the evidence was “clear” that the state’s second-largest utility was responsible for the blaze and that it “deliberately prioritized profits over safety” despite knowing of the “extreme fire risk” its equipment posed as Southern California faced an exceptionally strong windstorm.

“In the days and hours leading up to the Eaton fire there were red flag warnings,” Assistant County Counsel Scott Kuhn said. “We are concerned about what steps Edison took to maintain facilities…It’s certainly concerning, the fact that this keeps happening.”

Edison spokesperson Gabriela Ornelas said the power company was “reviewing the lawsuit” and would “address it through the appropriate legal process.”

“Our hearts are with the communities affected by the wildfires in Southern California,” she said.

The suit was filed alongside similar ones against Edison by the cities of 파사데나 and Sierra Madre.

While state and county fire investigators have not found Edison responsible for the Eaton fire, the suits add to concerns about Edison’s potential liability for the deadliest and most destructive wildfire since the 2018 Camp Fire, which leveled the northern Sierra Nevada foothill town of Paradise, killing 85 people.

That 2018 fire bankrupted the state’s largest utility, Pacific Gas & Electric, and led to a sweeping state overhaul of how utilities prepare for and pay for wildfire damage in an era of climate change.

Following that tragedy, Gov. Gavin Newsom and the Legislature created a $21 billion wildfire fund paid for by Wall Street investors and California utility ratepayers to help PG&E exit bankruptcy and protect utilities from being financially threatened in the future by the wildfires they cause.

Six years later, experts are warning that damages from January’s LA fires could deplete the fund, or, at the very least, raise doubts about the fund’s ability to cover future wildfire losses. In February, the Standard and Poor’s credit rating agency downgraded the outlook for Edison, saying the wildfire fund was “at risk of a material depletion.”

The fund, as of January, had more than $12 billion under management, a spokesperson said, and has so far only reimbursed PG&E for the 2021 Dixie Fire, making it the only utility to date to tap the fund. PG&E has liability of more than $1.9 billion from that fire, and can recover up to $925 million from the investor-and-ratepayer funded account. The utility is required to pay the first billion itself.

Michael Wara, an attorney and expert focused on climate policy at Stanford University, said the fund could conceivably be on the hook for $8 to $9 billion if Edison is found responsible for the Eaton Fire — and perhaps more if plaintiffs attorneys prove the power company was negligent, potentially leading to noneconomic pain and suffering damages.

“Assuming that’s what happens, then the question, really, from the wildfire fund perspective, becomes: Is there enough money to pay losses?” Wara said. “And the answer is there’s probably enough money to pay for the property losses, but there’s probably not enough money if noneconomic damages are included… We’ll just have to see.”

At least two lawsuits from residents allege Edison was negligent in maintaining equipment that caused the blaze. One class action alleges that a long-out-of-service transmission tower was energized on the evening of the fire, January 7, as the utility’s equipment experienced a power surge. An improperly grounded wire sparked the foliage surrounding the fire, causing the blaze, the suit alleges.

The lawsuit also contends that security camera footage from a nearby Arco gas station published in The New York Times captures the moment of ignition from the tower. 

In a Feb. 6 report to the state Public Utilities Commission, Edison said its investigation into the cause of the fire was ongoing but acknowledged that videos from “external parties” had suggested a possible link to its equipment. 

“While we do not yet know what caused the Eaton wildfire, (Southern California Edison) is exploring every possibility in its investigation, including the possibility that SCE’s equipment was involved,” said Pedro J. Pizarro, president and chief executive of the utilities’ parent company, Edison International. “We have been fully engaged since the start of the fires in supporting the broader emergency response, containment, recovery and investigation efforts.” 

Utility equipment has caused less than 10% of California’s wildfires — but nearly half of its most destructive fires, according to the state commission.

처럼 wildfires across the U.S. have intensified, California has found itself on the leading edge of efforts to prevent more deadly and destructive fires ignited by downed power lines and malfunctioning equipment.

For the past five years, the state’s largest power companies have been trimming trees, deploying drones, using risk-detection technology, insulating power lines and burying lines underground.

Californians have paid a hefty price for utilities’ wildfire safety measures: From 2019 through 2023, the commission authorized the state’s three largest power companies to collect $27 billion in wildfire prevention and insurance costs from ratepayers, according to a 보고서 to the Legislature.

The costs to ratepayers are anticipated to keep rising. The commission continues to greenlight more wildfire prevention spending by PG&E, Edison and San Diego Gas & Electric. Rates are expected to continue outpacing inflation through 2027.

Before the January fires in Los Angeles, California had been roiled by a debate over the high cost of wildfire safety to ratepayers. PG&E, in particular, has pressed ahead with an expensive plan to bury power lines underground, which prevents fires sparked by electrical equipment and makes the grid more reliable. Though pricey upfront, the company argues it saves money over time by reducing the need for tree trimming and maintenance.

The downside is cost and speed—undergrounding takes a long time and costs millions per mile. Edison has argued insulated wires are a faster, cheaper alternative that can still reduce wildfire risk when combined with safety measures like fast shut-offs.

Fire safety projects are a big reason why Californians pay the highest electric bills in the nation, outside of Hawaii. California’s major investor-owned utilities are regulated monopolies, so when they spend money on costs related to wildfires, they recover it through customers’ bills.

The price of electricity has fueled debate about how much California families should bear the cost of wildfire prevention, whether utilities are balancing risk and affordability, and whether the money is being spent wisely.

In contrast to PG&E’s line-burying, Edison has taken the approach of insulating its power lines.

Insulated lines, or “covered conductors,” can prevent sparks when palm fronds or tree branches collide with those lines during heavy wind events. The practice doesn’t protect against all risks — not, for instance, when a heavy tree falls and knocks down power lines off a pole. 

Some advocates have praised Edison’s method as a faster and more cost effective way to reduce risk compared to burying lines underground. Plaintiffs’ lawsuits have suggested that the blaze was potentially ignited by out of service equipment. 

“There’s probably enough money to pay for the property losses, but there’s probably not enough money if noneconomic damages are included.”

Michael Wara, Stanford University wildfire expert

Mark Toney, executive director of consumer advocacy group The Utility Reform Network, said California should consider a major shift in how it approaches wildfire prevention and recovery.

Instead of focusing only on utility-caused wildfires, the state needs a comprehensive wildfire prevention plan that addresses all fire risks — whether sparked by power lines, lightning, arson, or other causes, he said. Every state agency should be working together under a unified strategy, rather than leaving individual municipalities and utilities to figure it out on their own, he continued.

Toney also said California should act as the insurer of last resort, warning that the state’s wildfire insurance fund could eventually be depleted. He opposes simply charging utility customers more to refill it.

He also said the state needs to debate policies like inverse condemnation, which makes utilities — both public and private — fully liable for fire damages, even if they’re not negligent. He argues this rule, along with the state’s goal for 100% power reliability, should be reconsidered as part of a larger solution.

“It’s time for a new paradigm,” Toney said. “When it comes to wildfires in California, we should not only be looking at solving the LA wildfires, we should be looking at solving for all the future wildfires in California, no matter the ignition source.”

CalMatters reporter Malena Carollo contributed to this report.