Dive Brief:
- Although investigations into the cause of the Eaton Fire remain incomplete, Southern California Edison will launch a Wildfire Recovery Compensation Program this fall to compensate victims of the fire, company executives said during a Thursday afternoon earnings call.
- The fund will limit legal costs associated with the fire and help the community recover faster, executives said. They expect to recoup the cost of the program through California's Wildfire Fund, which reimburses utilities for claims stemming from wildfires.
- A spate of catastrophic wildfires in recent years, including this year's Eaton Fire, has prompted concern about the fund's stability. But Edison International President and CEO Pedro Pizarro told analysts he believes the state legislature will find a solution within the current legislative session.
Dive Insight:
Analysts on Thursday's call questioned the “logic” of launching a compensation fund while the fate of the California Wildfire Fund remains an active debate at the state legislature. But Pizarro defended the move as the right thing to do for a community devastated by loss — and ultimately for the company as well.
“You have a community that's been deeply impacted. It's just heart breaking to think about everything that's happened there,” he said. “And so to the extent that we have a probable loss and Edison is already dealing with lots of litigation already, etc, then I think it's a good idea to support the community by moving quickly.”
Southern California Edison has already been sued by multiple parties, including the County of Los Angeles, for its alleged role in the fire. Investigations by the LA County Fire Department and SCE remain incomplete, but as yet have not identified possible ignition sources beyond the company's transmission lines, Pizarro said.
The total potential cost of the fire remains unknown, but a report issued last week by real estate firm Redfin suggested that the nearby Palisades Fire, which destroyed nearly 7,000 structures, could cost more than $50 billion. The Eaton Fire destroyed more than 9,000 structures, according to the California Department of Forestry and Fire Protection.
Pizarro told analysts on the call that the fund should have something like $22 billion available to reimburse SCE — and that he believed this should be sufficient to reimburse the company for claims related to the fire once its own $1 billion self-insurance fund is exhausted.
He said that the state would find a solution to shore up the fund and, in the long term, address the broader risk of wildfire. But he declined to comment on Wednesday's news that Gov. Gavin Newsom plans to propose an $18 billion expansion of the fund, with participating utilities paying for half the upfront cost. The other half would be paid via an ongoing charge on customers' electric bills.
In principal, Pizarro said, he opposes additional payments into the fund by utility shareholders. But, he said he had not yet seen the governor's proposal, and would need to consider the balance of everything it contained.
“We don't foresee and frankly, don't see a need for having upfront contributions like there were in AB 1054 previously,” he said. “The process of going through claims can take quite a long time and so we don't anticipate that there would be a very rapid depletion of the fund.”
But Angie Storozynski, an analyst representing Seaport Global Holdings on the call, balked at the the suggestion of new cash contributions by utilities to shore up the fund.
“All of the fixes that we're hearing from the legislature seem temporary to me,” she said, asking “what's the incentive, really, to an investor to support California utilities given the headaches ... and the fact that you're not really being remunerated for the higher risk that you are accepting? Again, that's just being blunt here.”
