In January, a wildfire tore through the Los Angeles’ Pacific Palisades neighborhood, burning 23,707 acres, destroying 6,837 structures and killing 12 people. Now, allegations have emerged that an electrical tower contributed to the severity of the wildfire — and some residents are looking for compensation.
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A group of residents impacted by the fire have filed a lawsuit against the Los Angeles Department of Water and Power (LADWP). But LADWP wouldn’t be the first utility to be sued over wildfires — and the financial consequences can be severe.
In 2019, Pacific Gas and Electric, one of the largest utility companies in the U.S., declared bankruptcy after it faced billions of dollars in claims from lawsuits related to a series of California wildfires sparked by its outdated equipment.
Eventually, PG&E agreed to pay out $13.5 billion, with a group of executives and board members being forced to personally pay $117 million for their “lax oversight of the utility’s safety measures.”
Now, billionaire Warren Buffett’s Berkshire Hathaway (BRK.B), which owns utilities through its subsidiary PacifiCorp, is tackling this by lobbying multiple states in its western U.S. operating area to enact laws that will reduce the legal risks to companies when their equipment is tied to wildfires.
The multistate lobbying blitz reported on by E&E News has “surprised both consumer advocates and other industries, leaving some powerful sectors — including the insurance and forestry industries, each with their own massive wildfire exposure — scrambling to counter what appears to be a coordinated effort to reshape the way society pays for wildfires.”
Why does it matter?
In its 2023 annual report, Berkshire Hathaway estimated that its utilities could face $8 billion in claims across all wildfire lawsuits filed in Oregon and California. But according to a company filing from August last year reported on by S&P Global, PacifiCorp now faces at least $46 billion in claims related to wildfires.
Wildfires are a growing problem
A recent Sandia National Laboratories study says power grid equipment causes about 3% of wildfires across the U.S. and 10% of wildfires in California, where fires started this way accounted for about 19% of the area burned between 2016 and 2020.
Driven by a warming planet and a power grid that hasn’t adapted to increasing heat and drought, fires are expected to increase in frequency and intensity in the coming years. Utility companies are attempting to mitigate the risk.
But some solutions, like burying cables, are expensive, while others — such as shutting down the grid during high-risk times — are unpopular with customers.
Given the increasing risk of wildfires and the potential for expensive litigation, many states are grappling with how insurance companies, utilities and other stakeholders should share the risks — and the costs — from these fires.
Berkshire Hathaway is trying to tip the scales in utilities’ favor
PacifiCorp is the largest grid owner/operator in the West and serves 1.9 million customers in six Western states.
“PacifiCorp continues to execute its regulatory and financial stabilization strategy across its six states, with a focus on more conservative and safer operating practices, creating supplemental insurance funds and limiting liability to mitigate exposure to existing and future wildfire risk,” the company wrote in its presentation slides at the Edison Electric Institute’s financial conference in November 2024.
Basically, it wants to make it easier for companies to defend themselves in court and limit the amount of money they’ll have to pay victims if they’re found liable.
The same presentation highlighted that Utah passed “favorable legislation” that allows for the creation of a fund for supplemental wildfire coverage and caps damages for wildfire claims.
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States are looking for compromise
In 2024, Utah passed a law that establishes a ratepayer-financed fund to pay wildfire claims. This builds on an existing law that limits utilities’ liability if they file and follow a state-approved wildfire mitigation plan.
Greg Abel, chair of Berkshire Hathaway Energy, refers to Utah’s legislation as “the gold standard.” And it’s clear the company wants other states to follow suit.
Speaking at Berkshire Hathaway’s 2024 annual shareholder meeting, Buffet warned that the company would not invest in states with unfavorable laws related to wildfire liability. “We’re not going to throw good money after bad,” he said.
Abel added that “fundamentally, as we go forward, we need both legislative and regulatory reform across the PacifiCorp states if we’re going to deploy incremental capital, make incremental contributions into that business.”
Since then, Wyoming and Idaho lawmakers have passed laws to limit utilities’ liability. Oregon has also introduced similar legislation.
Wildfire victims may pay the price for imperfect legislation
While these laws require utilities to have wildfire mitigation plans in place, which most agree is a good thing, not everyone is pleased with the broad protections these laws grant utilities.
For example, in Idaho, utilities will be found to have acted without negligence if they “reasonably implemented” the wildfire mitigation plan, which would prevent survivors or insurance companies from suing the utility.
Lee Ann Alexander, vice-president of the American Property Casualty Insurance Association, argues that this will ultimately harm the insurance marketplace.
“All of those concepts fly in the face of how we take care of people in this country,” she told E&E News. “Which is, if you’re responsible for a loss, you are held responsible for that — with varying degrees of accountability, burdens of proof, standards, etc.”
Cody Berne, a Portland-based attorney, told E&E News that Oregon’s law will require victims to release the utility from liability and opt-in to the wildfire fund before knowing what they’ll get paid.
This means “survivors who are desperately in need of funds to rebuild their lives are forced into the impossible position of giving PacifiCorp a get-out-of-jail-free card to get a fraction of what they’re owed,” he said.
“Where does that leave us?” said Debi Ferrer, one of the leaders of the Consolidated Oregon Indivisible Network, to E&E News. “How are people going to cope with a wildfire if the utilities are immune from paying for damages if they cause them, and if FEMA is out of money?”
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
