Coffey Modica founding partner, Michael Coffey, was featured in a bylined article in Fire and Safety Journal Americas examining how wildfire litigation in California impacts utilities, investors and ratepayers beyond the courtroom.
By Michael Coffey | June/July, 2025
In the wake of multiple devastating fires engulfing Eaton, Altadena and Pacific Palisades in January, Los Angeles County has filed a lawsuit against local utlity Southern California Edison, alleging that their equipment caused the Eaton inferno, which destroyed more than 9,400 buildings and displaced over 100,000 residents.
The goal of these public officials is to recoup “at least hundreds of millions of dollars” that will go toward emergency response costs and recovery efforts. However, there may be a hidden cost to this action: significantly higher electric bills.
Decisions in urban planning, infrastructure and business come at a cost, and sooner or later those costs and assessments must be passed down, either to the taxpayers, ratepayers or consumers. Punishing utilities for wildfires is no exception, and there are numerous examples to prove it, California utilities have faced similar lawsuits in the past, including litigation stemming from the 2018 Camp Fire, which resulted in the bankruptcy of Pacific Gas & Electric (PG&E), the state’s largest utility. This led California Governor Gavin Newsom and the state legislature to create a $21 billion wildfire fund, largely paid for by California utility ratepayers and Wall Street investors.
Now, experts warn the damages from these new lawsuits against Edison might deplete the fund, causing Standard and Poor to downgrade Edison’s credit outlook. This will only continue the trend of costs being foisted onto ratepayers. Perhaps that’s why electric rates in California are expected to increase above inflation through 2027. Thus, California leaders’ litigious ways put the state in the dubious position of exacting punishing tolls on hardworking ratepayers and having barely solvent utilities.
Following the 2020 Labor Day fires in Oregon, as ongoing lawsuits against PacifiCorp continue awarding damages to plaintiffs, rates have increased 9.8% for ratepayers since the beginning of the year, and by 50% since 2021.
Even as Los Angeles moves forward once more to penalize Southern California Edison, pinning the blame on the utility for the destructive conflagration, state and county fire investigators have not officially deemed the utility responsible.
By launching costly litigation against one of the state’s largest utilities — before investigators have reached a definitive conclusion — local leaders risk shifting the financial burden onto businesses, homeowners and renters who had no role in causing the fires.
There’s plenty of room for debate over how much blame should go to utilities for failing to properly maintain equipment, which may or may not have initiated some of the fires. Or even whether they should be blamed for not shutting off power as fires raged and moved in record time down valleys and up hillsides. The blame game widens, too, with utilities and other organizations faulting government agencies for not doing their part. Indeed, let’s not ignore the responsibility of government agencies for their accountability and actions.
Are the electric companies responsible for making sure their power lines stay safely connected to the transmission poles? Certainly. And could sparks from fallen electrical lines start fires? Sure, that is possible too.
But are they also responsible for the severe drought conditions, or the dry brush and timber that might cause sparks to spread over tens of thousands of acres of forestry? Are they responsible for the accompanying hurricane-like winds that caused the fires to spread so quickly, making it nearly impossible to escape?
As these investigations continue, dedicated professionals and trained safety experts will draw fair, objective conclusions regarding how much blame a utility should bear for any loss of life, injury or property damage.
What happens next is that politicians and regulators urge hefty penalties against those utilities and their shareholders, with the promise that ratepayers will not bear the cost of those penalties.
Like many large corporations, utilities carry insurance coverage to help cover some of those costs, and utility shareholders — many of whom are California pensioners on fixed incomes — most certainly will see reductions in their dividend checks. Many utilities even pay for excess liability coverage for extremely large settlements.
So, utilities are penalized and take a financial hit; many people are compensated, and assurances are made to make changes in grid maintenance and forestry management. Most people may think that’s where cost impact ends. Not so.
Providing energy to the masses is a collective social endeavor. Everyone plays a relatively small part in making sure electric grids and other energy systems are constructed in a way to make lighting, cooling and heating available to as many people as possible. Contained within that monthly energy bill are funds needed to pay for labor, electric lines, transmission poles, transformers, power-generating facilities and — yes — insurance.
When businesses or large corporations are subject to excessively large liability judgements, their insurance costs go up. And if a utility’s insurance costs rise, that increase is factored in future rate discussions with their regulators and, eventually, their ratepayers.
Make no mistake, exorbitant penalties and injury settlements can significantly impact any company’s financial stability, both in terms of its operational revenues and its ability to borrow for capital investments. The Edison Electric Institute (EEI) notes that an astounding 35% of overall capital investments by electric companies in their transmission and distribution systems go toward grid hardening and resilience.
In other words, the more we penalize a utility, the less they have to invest in grid protection. And the more we penalize businesses to extremes, the less likely those businesses will stay around to serve us the goods and services we expect.
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