California Should Not Let the Wildfire Fund Run Dry

Protecting Californians from Wildfires

Wildfires continue to devastate lives and communities across California, despite extensive efforts to reduce wildfire risk. These efforts will take more time to show results, and the potential for further catastrophic wildfires – fueled by the effects of climate change – remains undeniable.

Utility customers have already paid, and continue to pay, for major investments in wildfire prevention and mitigation such as hardening power lines, undergrounding wires, and increasing vegetation management – measures that reduce utility-caused fires. But no amount of mitigation can eliminate wildfire risk entirely.

When a wildfire is caused by utility infrastructure, California needs safeguards that protect both victims and utility customers from being overwhelmed by the financial fallout of catastrophic fires. The state’s Wildfire Fund was created under Assembly Bill 1054 in 2019 to serve as a financial backstop, ensuring that catastrophic wildfire costs are not borne solely by utility customers. While the Wildfire Fund is just one part of the $35 billion in wildfire-related costs that utility customers paid from 2019 to 2024 (other costs are related to wildfire prevention and wildfire insurance), it is a critical component for addressing the consequences of wildfires.

Today, however, the Fund is at risk of depletion. Catastrophic wildfires ignited between July 2019 and today have the potential to trigger major financial liabilities that threaten to exhaust the Fund. If those liabilities are high enough to deplete the Fund – and the Fund is not continued – victims and customers could once again be left to bear the full costs of catastrophic wildfires. Legislative action to continue the Wildfire Fund is urgently needed as a short-term measure to protect victims and utility customers until longer-term solutions are in place

Why the Wildfire Fund Matters

The Wildfire Fund does more than cover costs after a catastrophic wildfire – it is designed to keep the entire system fair and stable. It requires equal contributions from utility customers and shareholders, so investors share the risks and remain accountable. Without it, customers could be left solely responsible for paying wildfire liabilities.

The balance of responsibility is essential: the Fund protects Californians from unpredictable wildfire costs, ensures victims are compensated more quickly, and holds shareholders accountable for their fair share of catastrophic wildfire costs.

Without the continued protection of the Wildfire Fund, another catastrophic wildfire could threaten not only the health and safety of Californians but also impose significant financial consequences on victims and customers.

Wildfires – utility-linked and otherwise – have already stressed the insurance industry, increasing premiums and driving up costs, making California less affordable.  With insurance costs continuing to climb and the Wildfire Fund at risk of being exhausted by the next catastrophic wildfire, victims will have no recourse but to seek recompense from utilities. In turn, the utilities will look to recover those costs from their customers.

If the costs to utilities are high enough, they may seek relief through bankruptcy.  But bankruptcy does nothing to lower high electricity rates, improve reliability or reduce wildfire risk and safety.  

Ensuring the Viability of the Wildfire Fund

As we work to ensure the viability of the Wildfire Fund, continuation must reflect fairness and protect affordability. Key features must include:

• Activation only if needed:  Additional funding should only be accessed if the current Fund is exhausted.
• Fair compensation:  Victims should be compensated quickly and equitably, without endless legal battles.
• Equal contributions:  Utility customers and shareholders should continue to share costs equally, consistent with the precedent set by AB 1054.

• Future-focused reforms:  A continuation of the Fund should also commit to exploring long-term solutions, including:
  • Inverse condemnation reform:  California’s strict liability standard makes utilities responsible for wildfire damages even when they operated prudently. Under this standard, utilities and their customers must cover the costs of damages even if a wildfire was ignited without negligence. This imbalance drives up costs and must be reexamined.
  • Tort reform and guardrails:  Reasonable limits on claims and litigation costs — including caps where appropriate — to ensure more dollars go directly to wildfire victims while keeping overall costs in check.
  • Alternative funding mechanisms:  Exploring other ways to stabilize wildfire-related costs, including wildfire prevention, over the long term.

Building on Legislative Progress on Affordability

The Legislature is already taking meaningful steps to address affordability by advancing several proposals that could drive down costs for ratepayers, including requiring the utilities to present inflation-constrained alternatives when seeking large rate increases, prioritizing cost-effective wildfire mitigation, and reducing the overall cost of building infrastructure needed for California’s clean energy transition.

These efforts are critical. But, in the short-term they are not enough to shield Californians from the rising costs of catastrophic wildfires. Continuing the Wildfire Fund is a necessary stopgap that protects wildfire victims, stabilizes utilities, buys time for risk-reduction efforts to take hold, and creates space for long-term affordability reforms like inverse condemnation and tort reform.