Why California's Wildfire Status Quo Is Not Sustainable for Ratepayers

The legislative session ended, but California's wildfire liability challenges remain.

There are many causes of wildfire ignition in California. While fires caused by electric utility infrastructure represent less than 10% of all reported wildfires, they are among the most destructive in state history. The proposals debated this year raised difficult questions about timely restitution to wildfire survivors, utility accountability, insurance, and who should pay when catastrophe strikes. With these broader issues unresolved, California is left with another difficult question: what does staying the course mean for electric ratepayers?

For ratepayers, maintaining the status quo comes at a significant cost. Over the last decade, residential electric rates for customers of California's three large investor-owned utilities have increased by roughly 70% to 100%, with wildfire mitigation and wildfire liability among the primary statewide cost drivers. And wildfire costs do not necessarily drop out of bills when one disaster ends. They accumulate. Customers are paying simultaneously for past wildfire liabilities, current wildfire mitigation and insurance, and state wildfire funds.

Ratepayers cannot continue to be the financial backstop for a system with no clear endpoint. California will continue to experience catastrophic wildfires, and history has already shown what can happen when the resulting costs overwhelm the existing framework: long-term costs on customer bills, financial instability for utilities, and, in PG&E's case, its decision to declare bankruptcy.

Wildfire costs can remain on bills for decades

The scale of wildfire-related costs already facing ratepayers is extraordinary. Between 2019 and 2024, approximately $40 billion in wildfire mitigation and liability costs were authorized for recovery from customers of California's three large investor-owned utilities. In 2024 alone, ratepayers paid more than $9 billion in wildfire-related costs.

Ratepayer contributions to the Wildfire Fund extend through 2035, while charges supporting the Wildfire Continuation Fund can run from 2036 through 2045. Costs associated with individual fires can also remain in rates for decades.

The pressure is not limited to customers of the three largest investor-owned electric utilities. The final Senate Bill 254 (2025) Study Report found that smaller utilities can face particularly acute wildfire cost pressures because they have narrower customer bases and do not have access to the Wildfire Fund.

The Thomas Fire, ignited by Southern California Edison (SCE) equipment, shows how complicated that cycle can become. The fire burned across Ventura and Santa Barbara counties in late 2017. Weeks later, intense rainfall in the burn area above Montecito triggered deadly debris flows that damaged or destroyed more than 500 structures and seven bridges, and shut down Highway 101 for two weeks.

SCE later sought to recover approximately $2.47 billion from customers for damages and financing costs resulting from the Thomas Fire and subsequent Montecito debris flows. Approximately one-third of the damages and financing costs were associated with the debris flows. The Public Advocates Office helped negotiate a settlement that reduced SCE's recovery by approximately $1.085 billion, ensuring those costs were borne by shareholders rather than customers.

The Thomas Fire and Montecito debris flows show how costs from a single catastrophe can reach customer bills years after the event itself, while customers are already paying to manage current and future wildfire risk.

A utility’s financial instability is a ratepayer problem too

Pacific Gas and Electric Company (PG&E) filed for Chapter 11 bankruptcy in January 2019 following a series of catastrophic wildfires. The California Public Utilities Commission (CPUC) required important protections for customers as part of the reorganization, including that the plan be neutral on average to ratepayers. PG&E emerged from bankruptcy in July 2020.

Even with those protections, utility financial distress can affect ratepayers in indirect ways. Utilities depend on large amounts of debt and investor capital to maintain and improve the electric grid. When wildfire exposure makes a utility financially riskier, borrowing can become more expensive, and investors can seek higher returns. The CPUC has found that wildfire liability has increased utility financing costs and that credit downgrades increase costs for utilities and ratepayers. 

Reducing that financial risk can benefit customers if it lowers the cost of financing the grid. But how the risk is reduced matters. Simply moving open-ended catastrophic liability from a utility's balance sheet onto customer bills may make the utility less risky to investors but does not necessarily reduce the overall financial burden on ratepayers.

Any reform designed to lower financing costs should therefore be judged by its net impact on customers: do the savings outweigh any additional costs or liability ratepayers are asked to assume?

We cannot buy our way to zero wildfire risk

It is incontrovertible that electric utilities are responsible for maintaining the safety of their systems and providing safe and reliable service, including reducing the risk that their equipment starts catastrophic fires. In turn, ratepayers should expect wildfire mitigation investments to be carefully scrutinized for safety benefits and cost-effectiveness.

California’s three large investor-owned utilities collectively manage nearly 50,000 miles of overhead power lines in high-fire-threat districts. Given the scale of that infrastructure, it is not realistic to expect even extensive wildfire mitigation to reduce the risk of ignitions from utility equipment to zero.

The risks themselves are also becoming more complex. California's Climate Adaptation Strategy warns that extreme heat, drought, wildfire, storms and flooding can cascade and compound.

None of this lessens the utilities’ responsibility to operate their systems safely. But utility spending financed by ratepayers cannot, by itself, address statewide catastrophic risk.

Reform is necessary – even if it is difficult

California has spent years examining many of the available tools: reducing wildfire risk, containing liability and litigation costs, improving survivor cost recovery, maintaining strong utility accountability, preserving access to affordable capital, and determining how the cost of catastrophic losses should be shared.

Maintaining the current framework leaves the fundamental problem unchanged: ratepayers remain exposed to wildfire costs with no clear endpoint.

A durable approach should place meaningful limits on ratepayer exposure while protecting wildfire survivors, maintaining strong utility accountability, requiring cost-effective risk reduction, and ensuring that any savings from lower utility financial risk actually flow through to customers.

That balance is especially important given that, as of August 2026, more than two million customers were behind on their electric bills. Whatever comes next, the status quo is not sustainable for ratepayers, and they should not be expected to serve as an unlimited financial backstop for catastrophic wildfire risk.