A fund established to help utility companies pay for wildfire damage is at risk of insolvency in California, pending the outcome of the investigation into the Eaton fire.
The story starts in January, when the Eaton fire swept through the Los Angeles area, destroying thousands of buildings, mostly concentrated in Altadena.
Within weeks, evidence that a dormant power line started the fire was growing. By April, the Los Angeles Times reported that the executives at utility service Edison International had suggested the possibility that a dormant electric line was responsible for the fire.
It’s still unclear what happened — the investigation is ongoing — but if the cause was a power line, the California Wildfire Fund is in trouble, according to state documents released yesterday.
David Eisenhower, a spokesperson for Edison, told Homes.com that the company expects the investigation to take 12 to 18 months.
That said, if Edison is found liable for the Eaton fire, the resulting damage claims “may be substantial enough to fully exhaust” the $21 billion fund, administrators wrote in a draft report. Governor Gavin Newsom created the fund in 2019 to help cover the costs of wildfires caused by utility companies.
Finding ways to pay for the costly Eaton Fire
Concerns about the fire’s cost — and how to pay for it — aren’t new. Estimates included in the materials released Wednesday suggested that, in all, there could be more than $15 billion in insured losses.
Data from Homes.com revealed that the fire is responsible for $7.8 billion in residential real estate damage alone.
In one of the state documents, an unnamed councilmember suggested that utility companies are not incentivized to keep claims low because they’re not being held financially responsible. The utility company takes the claims and essentially charges the cost to the fund.
“We don’t have leeway to challenge claims that are consistent with industry norms, but are we impressing on the utilities that they need to settle claims with diligence?” the lawmaker wrote. “Since the claims they settle are just passed on to us, they don’t have much incentive to keep claims low.”
Eisenhower, the Edison representative, said the company “[treats] any claims fairly.”
“We are confident that policymakers understand the importance of a durable wildfire fund,” he added.
Another concern: How will the fund be replenished?
Some reports have suggested that Newsom and other officials are considering raising consumer electric bills to contribute to the fund.