As of late last week, investigations were under way into whether equipment owned and operated by Southern California Edison, the utility subsidiary of Rosemead-based Edison International, sparked two of the fires that swept through L.A. County earlier this month: the Eaton Fire that ravaged Altadena and the much smaller Hurst Fire that burned near Sylmar.
For Edison, this is reminiscent of the situations it faced with the 2017 Thomas Fire (and subsequent mudslides) that burned through Ventura and Santa Barbara counties and the 2018 Woolsey Fire that tore through parts of Los Angeles and Ventura counties. Those fires combined destroyed or damaged roughly 3,000 structures. In the Thomas Fire, Southern California Edison equipment was tied to one of two ignition points. In the Woolsey Fire, the utility acknowledged that its equipment may have sparked the blaze.
Under the state’s unique inverse condemnation law that entitles property owners to compensation if their property is damaged by a utility or other public use, Edison faced thousands of claims and, so far, has had to pay out more than $6 billion to settle those claims.
Is Edison equipment responsible?
In the current fires, Southern California Edison is facing allegations that its power transmission equipment sparked the blazes.
In the Eaton Fire that as of Jan. 15 had destroyed or damaged more than 5,100 structures, Edison filed a safety incident report with the Public Utilities Commission noting that its equipment was damaged by flames; though the utility could not say whether those flames were the initial spark or whether they swept through after the fire had ignited elsewhere.
The PUC and other government entities have launched investigations into the role of Edison equipment in igniting the Eaton Fire.
However, some were not willing to wait for those investigations to conclude. Last week, a pair of lawsuits against Edison were filed on behalf of property owners in the Eaton Fire burn area alleging that Edison equipment sparked the fire.
Meanwhile, Edison has acknowledged that in the vicinity of the Hurst Fire near Sylmar, a downed power line was discovered at one of its towers, though the company again would not say whether the damage occurred before or after the fire started.
“Typically, when there’s a spark created by equipment, we will see the electrical anomaly – we haven’t seen that,” Edison International Chief Executive Pedro Pizarro said on ABC’s “Good Morning America.”
“But we have not been able to get close to the equipment,” Pizarro added. “As soon as we can get close to it, we will inspect and be transparent with the public.”
Even if Edison were ultimately found to be responsible for its equipment igniting the Hurst Fire, that blaze had only destroyed two structures as of Jan. 15.
Will state wildfire fund be tapped out?
Whatever the case in either fire, Edison now faces a different landscape for claims payouts. That’s because five years ago, the state set up a wildfire fund to help defray utility costs related to wildfire damage.
The fund was supposed to be capitalized at a level of $21 billion. But so far, the state’s three investor-owned utilities – including Edison – have contributed only $14.7 billion to the fund. This has raised concerns that if billions of dollars’ worth of claims come in against Edison, there won’t be enough money in the fund to completely reimburse the utility.
Then there’s the issue of whether Edison is ultimately found to have acted imprudently in either instance, by failing to adequately implement fire mitigation measures such as vegetation clearance around its equipment. If the utility is found to have acted imprudently, the utility could be forced to repay up to $3.9 billion to the fund.
Shares temporarily plunge
Edison International shares plunged 26% over the three trading sessions following initial reports of fire activity near Edison equipment around the time of ignition of the Eaton Fire; they hit a 52-week low of $57.27 on Jan. 13. But then Edison shares rebounded a bit as analysts and investors began realizing it would take months to sort out the role of Edison equipment in the Eaton Fire’s cause and that the damage from the Hurst Fire would not be severe.
On Jan. 15, shares rose nearly 5% after an analyst report reached similar conclusions and said the stock had already fallen far enough.
