In recent weeks, battle lines have emerged on two fronts as Southern California Edison, the utility subsidiary of Rosemead-based Edison International, comes to grips with the billions of dollars in damage costs it faces from the massive fire that ravaged Altadena in January.

Last month, Edison proposed a compensation fund for wildfire victims modeled after the compensation fund for Sept. 11 terrorist attack victims. Edison said details of the plan were still being worked out, but that it would be ready for victims to tap sometime this fall.

But lawyers representing some of the property owners blasted Edison’s proposal, saying that it would shortchange victims and leave them no recourse should other expenses and complications arise in coming years.

Days later, reports emerged that California Gov. Gavin Newsom is preparing draft legislation to add $18 billion to the state’s wildfire fund, supplementing the $21 billion currently in the fund. There have been concerns that claims from the Eaton fire – estimated in the tens of billions of dollars – could drain the existing fund.

However, a battle is brewing on who would be paying into the fund. Newsom’s plan calls for $9 billion from ratepayers of the state’s three investor-owned utilities, including Southern California Edison, and $9 billion from utility profits that would otherwise go to shareholders. Edison Chief Executive Pedro Pizarro, in comments to analysts in the company’s quarterly earnings call on July 31, said Edison shareholders should not put any more money into the fund.

This battle is expected to come into sharp focus this week as the Legislature takes up Newsom’s proposal.

Edison likely liable

Southern California Edison finds itself in the middle of these two battles over Eaton Fire costs because Pizarro himself has stated publicly that, although investigations are still ongoing, the blaze may have been triggered by Edison equipment tied to a long-dormant power line. According to this leading theory, during the fierce windstorm of Jan. 7, that line, which was de-energized in 1971, apparently became re-energized and generated sparks that triggered the blaze. Those sparks appeared in video footage obtained by a team of plaintiff attorneys.

The fire went on to kill at least 19 people and destroy more than 9,400 structures in Altadena over the next several days. Those include more than 6,000 single-family homes, about 100 multifamily buildings, another 150 commercial buildings and at least 3,000 other minor structures.

Insured losses from the blaze have been estimated to top $15 billion, while a UCLA study estimates the total damage cost of the fire – including deaths, injuries, health impacts, lost wages and other impacts – could top $40 billion.

The California Department of Forestry and Fire Protection, or Cal-Fire, and the Los Angeles County Fire Department are leading the investigation into the cause of the fire. The agencies have not given a timeline for presenting their findings, but that is not expected for several more months, perhaps not until early next year.

In addition to these official investigations, law firms representing fire victims have conducted their own examinations using drone technology. Their preliminary findings have been incorporated into scores of lawsuits that have already been filed against Southern California Edison.

Speedy payout or leaving money on table?

When Edison announced last month the creation of the Wildfire Compensation Recovery Program, it said it is working with disaster compensation experts Kenneth Feinberg and Camille Biros. Feinberg and Biros are best known for administering the compensation fund for victims and their families of the Sept. 11 terrorist attacks.

“The goal for SCE’s Wildfire Recovery Compensation Program is to model the program after several successful direct claims programs we have designed,” Feinberg said in the announcement. “These programs can quickly and fairly compensate individuals and businesses that have experienced losses resulting from these tragic events.”

The announcement said that Feinberg and Biros will help set up the program for Southern California Edison but will not administer it once it’s up and running. The program is expected to start this fall and run through next year.

Southern California Edison has not yet released much detail on the program, such as who would be eligible to receive the funds, how “fair compensation” would be determined and whether there would be long-term health monitoring.

But Pizarro said it was important to unveil the program now, rather than wait for all the investigations to be concluded or all the program details to be finalized.

“Community members shouldn’t have to wait for the final conclusions in the Eaton Fire investigation to get the financial support they need to begin rebuilding,” Pizarro said. “Even though the details of how the Eaton Fire started are still being evaluated, SCE will offer an expedited process to pay and resolve claims fairly and promptly. This allows the community to focus more on recovery instead of lengthy, expensive litigation.”

Attorneys representing Eaton Fire victims have a different take. They say this is Edison’s attempt to pay wildfire claims on the cheap and that settlement awards obtained through the legal process would likely be significantly larger. Of course, the attorneys themselves stand to get a slice of those settlement awards.

Kiley Grombacher, co-founding partner in the Westlake Village law firm Bradley/Grombacher, and co-founder of the California Fire Victims Law Center, is representing several Eaton Fire victims in lawsuits related to the fire. She said she fears that if fire victims accept Edison’s offer, they could be leaving money on the table that they deserve to receive.

“I’d hate to see Edison take advantage of people who have been put through this really catastrophic event and are at the lowest place in their lives,” Grombacher said.

Another issue for Grombacher is what she termed the premature timing of Edison’s announcement of the program.

“Without clear information about how payouts are calculated, what claims are covered, or what rights survivors must give up, it’s nearly impossible to evaluate whether the offer is fair,” she said.

Who should pay into wildfire fund?

The California Wildfire Fund was established by Assembly Bill 1054 in 2019 after a series of megafires often triggered by utility electrical wires or equipment. These include the 2017 Thomas Fire in Ventura and Santa Barbara counties, the Woolsey Fire in 2018 that burned in Los Angeles and Ventura counties and the Camp Fire that same year destroying the Northern California city of Paradise. Those blazes resulted in tens of billions of dollars in damage claim payouts from Southern California Edison and Pacific Gas & Electric, a subsidiary of San Francisco-based PG&E Corp.

The idea behind the creation of the fund was to ensure that damage claim payouts for future fires ignited by utility equipment would not bankrupt the utilities.

Each of the state’s three investor-owned utilities – Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric (a subsidiary of San Diego-based Sempra Energy) – put in seed money, both from ratepayers and utility profits otherwise destined for shareholders. The fund is currently capitalized at about $21 billion.

Amid concerns that the Eaton Fire itself could drain the fund, leaving nothing for any future fires, Newsom on July 31 unveiled a plan to further capitalize the fund with an $18 billion injection, split evenly between utility ratepayers and utility (shareholder) profits.

The plan is now before the state Legislature as it reconvenes this week after a brief summer recess. The current session ends on Sept. 12.

But in his comments to analysts in the company’s earnings conference call that same day, Pizarro said that Edison’s position in utility company negotiations on the plan is that all future contributions to the fund should come from ratepayers through the regular rate-setting process before the state’s Public Utilities Commission.

“We’ve been vocal that moving forward, an expansion of (Assembly Bill) 1054, that was purely being done along investor-owned utility rate-making principles would not have a shareholder contribution,” Pizarro said in response to an analyst’s question.

Pizarro went on to say that there shouldn’t be a need for an immediate injection of money into the wildfire fund.

“As we know, unfortunately, 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,” he said. “We don’t know how much Eaton would deplete it if Eaton ends up being SCE’s fire, but whatever that amount is, it will take multiple years.”