What Is California AB 1054 and How Does It Work?

California Assembly Bill 1054, signed on July 12, 2019, is the state law that rebuilt how investor-owned electric utilities pay for wildfire damage and how regulators hold them accountable for fire prevention. It created a roughly $21 billion wildfire claims fund, capped how much utility shareholders can lose when their equipment ignites a fire, and tied every one of those financial protections to new safety obligations. The law was California’s response to Pacific Gas and Electric Company’s bankruptcy under about $30 billion in wildfire liabilities and the realization that the existing legal framework could not absorb modern wildfire losses.

The Problem AB 1054 Was Built to Solve

California applies a doctrine called inverse condemnation to its utilities. If a utility’s equipment starts a wildfire, the utility is strictly liable for the resulting property damage, even if it followed every safety rule. The doctrine comes from the California Constitution’s protection against private property being taken or damaged for public use without just compensation, and courts have extended it to privately owned utilities on the theory that delivering electricity is a public use.

The effect is unforgiving. Reasonable conduct is a defense in ordinary negligence law. Under inverse condemnation, it isn’t. The 2017 and 2018 fire seasons showed what that exposure meant in practice. PG&E, facing an estimated $30 billion in liabilities from fires including the Camp Fire that destroyed Paradise, filed for bankruptcy in January 2019. Southern California Edison and San Diego Gas & Electric faced their own mounting claims.

AB 1054 did not touch inverse condemnation itself. Instead, it built financial shock absorbers around it: a dedicated claims fund, a cap on shareholder losses within any rolling three-year window, and a friendlier standard for passing reasonable costs to ratepayers. In return, utilities had to accept heightened safety requirements and ongoing oversight.

The California Wildfire Fund

The core of the law is the California Wildfire Fund, a roughly $21 billion pool designed to keep utilities solvent enough to pay wildfire claims. The money comes from two sides in roughly equal shares.¹

On the shareholder side, PG&E, Southern California Edison, and San Diego Gas & Electric paid a combined $7.5 billion initial contribution from company equity when they joined the fund. They also pay annual installments totaling $300 million per year over ten years, bringing the shareholder total to about $10.5 billion.²

The ratepayer side also totals about $10.5 billion, collected through a monthly surcharge on utility bills called a non-bypassable charge. It applies to customers of all three investor-owned utilities and is collected over 15 years, from 2020 through 2035.¹ As of June 2025, the fund had received approximately $13.5 billion in total capitalization from both sources.³

How Wildfire Claims Actually Get Paid

The fund does not pay wildfire victims directly. By statute, it reimburses participating utilities only after the utility has already paid or settled eligible claims.⁴ A fire occurs, the utility faces claims from property owners, insurers pursuing subrogation, and other injured parties. The utility pays or settles those claims from its own resources. Then it seeks reimbursement from the fund for amounts above its annual retention threshold, which is currently $1 billion per utility per year.¹

That retention means each utility absorbs the first billion dollars in claims on its own before the fund contributes anything. Only “covered wildfires” qualify. The fire must have ignited on or after July 12, 2019, must have been caused by a participating utility’s equipment as determined by the responsible government agency, and the utility must have held a valid safety certification when the fire started.⁵

For victims, the practical takeaway is that claims still run through the utility by way of litigation, settlement, or insurance subrogation, not through a government claims process. The fund works behind the scenes to keep the utility capable of paying.

The Cap on Shareholder Losses

If the California Public Utilities Commission later determines that a utility’s wildfire costs were not just and reasonable, the utility must reimburse the fund. But that reimbursement is capped. The cap equals 20 percent of the utility’s transmission and distribution equity rate base, measured over a rolling three-year period.⁶ The dollar amounts are substantial. For 2023, PG&E’s cap was approximately $3.3 billion, Southern California Edison’s about $3.9 billion, and San Diego Gas & Electric’s about $1.2 billion.⁷

The cap has two important exceptions. It disappears if the utility acted with conscious or willful disregard for the rights and safety of others, or if the utility lacked a valid safety certification on the date the fire started.⁶ In either situation, the full reimbursement obligation stands with no ceiling. That structure is what gives utilities a direct financial reason to keep their safety certifications current and avoid reckless conduct.

How Utilities Pass Costs to Ratepayers

Before AB 1054, a utility seeking to recover wildfire costs from ratepayers bore the full burden of proving its conduct was reasonable. Public Utilities Code Section 451.1 changed that, though the change is more layered than a straight burden flip.

Under Section 451.1, a utility that held a valid safety certification when the fire started is initially presumed to have acted reasonably. An opposing party, typically the CPUC’s Public Advocates Office representing ratepayer interests, must raise “serious doubt” about the utility’s conduct to challenge that presumption. If serious doubt is established, the burden shifts back to the utility to prove its actions were reasonable.⁸ A utility without a safety certification gets no such benefit and bears the standard burden of proving reasonableness by a preponderance of the evidence.

The statute also defines “reasonable” in practical terms. It is not limited to a single best practice. Reasonable conduct covers a range of actions consistent with the utility’s system needs, ratepayer interests, and the requirements of government agencies, and the CPUC can factor in conditions beyond the utility’s control such as wind speed, temperature, and humidity.⁸ Critics say the standard makes it too easy for utilities to shift wildfire costs onto customers. Supporters say that without it, no private utility could operate in a fire-prone state under strict liability.

The Safety Requirements Utilities Have to Meet

Every financial protection in AB 1054, from fund access to the liability cap to the favorable prudency presumption, depends on the utility holding a valid annual safety certification. The Office of Energy Infrastructure Safety issues these certificates under Public Utilities Code Section 8389, and each is good for 12 consecutive months.⁹

To earn a certificate, a utility must have a current Wildfire Mitigation Plan approved by Energy Safety, agree to implement the recommendations from its most recent safety culture assessment, maintain a board-level safety committee with members who have relevant safety expertise, and operate under an executive compensation structure, approved by Energy Safety, that ties incentive pay to measurable safety performance. The compensation rules can tie 100 percent of incentive pay to safety metrics and can wipe out all incentive compensation if the utility causes a wildfire that kills someone.⁹

The Wildfire Mitigation Plan itself, governed by Public Utilities Code Section 8386, is extensive. It must address vegetation management around power lines, infrastructure hardening such as undergrounding and pole replacement, procedures for Public Safety Power Shutoffs during extreme fire weather, a prioritized list of wildfire risks across the service territory, routine inspection programs, and a plan for restoring service after a fire.¹⁰ Energy Safety’s performance assessment division monitors whether utilities actually follow through on these commitments.¹¹

What Customers Pay on Their Bills

The ratepayer half of the fund is collected as a non-bypassable charge on monthly utility bills. It applies to all residential and commercial customers of PG&E, Southern California Edison, and San Diego Gas & Electric. Customers of municipal utilities or community choice aggregators who still receive transmission and distribution service from one of the three investor-owned utilities also pay the charge. “Non-bypassable” means a customer cannot avoid the charge by switching electricity providers.

The surcharge runs from 2020 through 2035, with the total present value of ratepayer contributions reaching approximately $10.5 billion.¹ It appears as a separate line item and is a dedicated fee flowing into the wildfire fund rather than a traditional rate increase.

Can the Fund Survive the January 2025 Fires?

The fund’s capacity has shifted from a theoretical question to an immediate one. In January 2025, the Palisades and Eaton fires devastated parts of Los Angeles County. Combined insured losses are estimated between $20 billion and $45 billion, with the Eaton fire alone potentially reaching $15.2 billion in insured losses. If Southern California Edison is found to have caused the Eaton fire, the resulting claims could consume the fund’s entire remaining capacity.³

The fund’s 2025 annual report stated directly that claims from the Eaton fire “may be substantial enough to fully exhaust the Fund.” Even PG&E and San Diego Gas & Electric, which were not implicated in the January fires, face credit rating scrutiny because the fund’s overall health affects all three participating utilities.³

The fund has no fixed end date; it continues until its assets are exhausted. If more money is needed before that, the fund can issue revenue bonds through the California Department of Water Resources, backed by future ratepayer surcharge revenue.³ That borrowing capacity provides a buffer, but it effectively commits future surcharge payments to cover past wildfire claims.

If the fund is fully exhausted, the consequences for utilities are severe. The shareholder liability cap disappears, meaning utilities face unlimited reimbursement obligations for imprudent conduct.⁵ The Section 451.1 prudency standard would still apply, so reasonable costs could still move to ratepayers. But without the fund as backstop, the risk of another utility bankruptcy returns, which is the scenario AB 1054 was built to prevent. The fund administrator is developing a wind-up plan governing how remaining assets would be allocated among competing claims if exhaustion becomes unavoidable.³

1
California Wildfire Fund. CA Wildfire Fund Questions
2
California Legislative Information. California Code PUC 3280 – Definitions
3
California Wildfire Fund. 2025 Annual Report on the California Wildfire Fund’s Operations
4
California Wildfire Fund. California Wildfire Fund
5
Edison International. Assembly Bill 1054 Wildfire Fund Summary
6
California Legislative Information. California Code PUC 3292
7
California Wildfire Fund. Appendix 1 – Liability Cap Calculations
8
California Legislative Information. California Code PUC 451.1 – Cost Recovery for Covered Wildfires
9
California Legislative Information. California Code PUC 8389 – Safety Certification
10
SDG&E. California Code PUC 8386 – Wildfire Mitigation Plans
11
Office of Energy Infrastructure Safety. Wildfire Mitigation Plan Performance Assessment