The latest draft report to the California Catastrophe Response Council and the Legislature on Wildfire Fund Operations states that the fund seems overwhelmingly able to meet its obligations under three different scenarios laid out by experts.
The three scenarios laid out by the authors are a base scenario, where there is a 60% and 40% settlement rate, 10% mitigation credit, and 100% prudency; a mitigation and climate change scenario, where there is 40% settlement rate, mitigation gains are offset by climate change, and 100% prudency; and a high settlement rate scenario, where there is a 70% settlement rate, 10% mitigation credit, and 100% prudency.
The authors state that there is an estimated fund durability for 2022 in the first scenario of 99.5% to 99.7%, of 99.6% for the second scenario, and 99.4% for the third scenario.
Writing in the report, the authors said: “The estimated one-year Fund durability for 2022 ranges from 99.4% to 99.7% across the scenarios. This can alternatively be stated as a range of 1-in-170 to 1-in-340 chance that the Fund will suffer losses in 2022 that will ultimately exhaust all sources of claim-paying capacity.”
It added: “Due to the length of time from when a wildfire occurs, it is determined to have been caused by an IOU and eligible claims ultimately flow to the Fund, the likelihood that all sources of claim-paying capacity will be exhausted in 2022 is 0%. In other words, on a paid basis, the Fund will most certainly have cash remaining at the end of 2022. However, on an incurred basis, there is a small probability that the losses that occurred (or will occur) in 2022 could ultimately exhaust the fund.”
The Fund was originally established three years ago under the 2019 Wildfire Legislation signed into force by Governor Gavin Newsom. Its purpose is to provide money to reimburse claims arising from a covered wildfire caused by a utility company participating in the Fund through capitalisation. The Fund’s $21bn in capacity is split between contributions from San Diego Gas & Electric Company, Southern California Edison, and Pacific Gas & Electric Company, along with surcharges on non-exempt ratepayers.
