The escalating cost of wildfires now adds $41 to the average monthly power bill for residential customers of California\u2019s largest utility, according to a government report.<\/p>\n
The report calls for a systemic overhaul of how the state responds to conflagrations as climate change-driven disasters threaten its economy. <\/p>\n
That surcharge accounts for 19% of the average Pacific Gas & Electric Corp. bill, and along with spiking homeowners\u2019 insurance premiums, is another way Californians are paying the price for more destructive and frequent wildfires.<\/p>\n
Those impacts are lowering home values and local tax bases, and destabilizing mortgage and insurance markets, according to the study. <\/p>\n
\u201cWildfire risk is not just an occasional catastrophe, but a recurring cost embedded in the state\u2019s economy,\u201d said the report issued this week by the California Earthquake Authority, a quasi-public agency that manages a $21-billion wildfire insurance fund to pay claims against utilities. <\/p>\n
While Californians may be aware of the economic toll of wildfires on communities, the report offers a rare glimpse at how their effects show up in individual bills. As climate-related damages become more prevalent, economists expect them to fuel consumer prices, a phenomenon they call \u201cclimateflation.\u201d<\/p>\n
Without action, according to the report, wildfire-driven inflation of Californians\u2019 electricity and insurance bills will inexorably rise. <\/p>\n
Residents already pay some of the nation\u2019s highest electricity rates, which increased 37% between 2020 and 2025. Those rates include surcharges that regulators permit utilities to pass on to customers to recoup the billions of dollars in liabilities utilities incur for starting wildfires and the cost of preventive measures to avoid future blazes. <\/p>\n
Wildfire-related charges now account for 17% of monthly charges from Southern California Edison and 14% from San Diego Gas & Electric, the state\u2019s two other big investor-owned power providers, according to the report.<\/p>\n
The report\u2019s far-reaching recommendations to stabilize the insurance market and lower costs include establishing a state-sponsored wildfire home insurer to relieve private insurance companies of liability for catastrophes. <\/p>\n
It also calls for ending utilities\u2019 liability for inadvertently starting fires and creating new programs to help property owners protect their homes and rebuild after conflagrations. Right now, utilities can be on the hook for billions of dollars in damages from a wildfire if their equipment is involved in igniting it. <\/p>\n
The proposals are likely to prove controversial among insurers, utilities and consumer advocates alike over who ultimately pays for wildfire damages. <\/p>\n
Earthquake authority spokesperson Ben Deci said in an email that the recommendations were meant to be \u201can unflinching look at the landscape of policy options available to California \u2014 each with real trade-offs that deserve honest debate.\u201d<\/p>\n
Wildfire-related costs also put California\u2019s climate goals at risk, according to the report. <\/p>\n
\u201cWhen you raise electricity prices, that makes the cost of electrifying your car or your space heating or your water heating higher, so that\u2019s going to slow progress on electrification,\u201d said Meredith Fowlie, an economist at UC Berkeley, who was not involved with the report.<\/p>\n
Nancy Watkins, a principal and actuary with consulting firm Milliman in San Francisco, said one of the report\u2019s most important recommendations is statewide coordination of efforts to reduce wildfire threats through home hardening and removing flammable materials around buildings. \u201cWe have communities that are unacceptably vulnerable to fire, and we haven\u2019t done enough to change that,\u201d she said.<\/p>\n
Since 2017, a series of destructive wildfires has cost tens of billions of dollars, including last year\u2019s Los Angeles firestorms. California\u2019s largest utilities have also struggled to adapt, as have insurers, some of which have fled the market. That\u2019s forced hundreds of thousands of homeowners to obtain coverage from the FAIR Plan, the state\u2019s insurer of last resort for properties in high-risk wildfire areas.<\/p>\n
In the wake of the Los Angeles disaster, legislation signed by Gov. Gavin Newsom last September required the earthquake authority to consult with state agencies and recommend a new model to rebalance how risks are borne by entities such as the utility wildfire fund and the cash-strapped FAIR Plan, which is now insuring homes even in low-risk urban neighborhoods as private insurers restrict coverage.<\/p>\n
The report\u2019s proposed $25-billion state-chartered replacement for the FAIR Plan would become the insurer of first resort, assuming the responsibility and risk of providing catastrophic wildfire coverage for all homeowners. That would allow private insurers to continue writing other coverage policies for homes in high-risk fire areas. It wouldn\u2019t necessarily lower homeowner premiums, the report\u2019s authors wrote, but would stabilize the market and make insurance more widely available. <\/p>\n
Eliminating utilities\u2019 liability for downed power lines or other equipment that start wildfires, unless negligence was involved, could lower customers\u2019 power bills by removing surcharges for insurance settlements. But such a change would require amending California\u2019s Constitution, which would be politically challenging. <\/p>\n
Woody writes for Bloomberg.<\/p>\n","protected":false},"excerpt":{"rendered":"The escalating cost of wildfires now adds $41 to the average monthly power bill for residential customers of…\n","protected":false},"author":2,"featured_media":577746,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[32530,2356,10247,926,192,253723,249425,148573,79329,138201,253724,253725,79,13109,91571,6322,112848],"class_list":{"0":"post-577745","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-environment","8":"tag-billion","9":"tag-california","10":"tag-cost","11":"tag-dollar","12":"tag-environment","13":"tag-government-report","14":"tag-home-value","15":"tag-homeowner","16":"tag-insurance-market","17":"tag-insurer","18":"tag-large-utility","19":"tag-liability-utility","20":"tag-science","21":"tag-state","22":"tag-surcharge","23":"tag-wildfire","24":"tag-wildfire-risk"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/577745","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=577745"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/577745\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/577746"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=577745"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=577745"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=577745"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}