On September 4, 2025, the US Department of Justice filed two civil lawsuits against Southern California Edison, the utility subsidiary of Edison International, seeking damages for wildfires it alleges were caused by the company's equipment.
The first complaint concerns the Eaton fire, which began on January 7, 2025, in the hills above Altadena and Pasadena during an extreme Santa Ana wind event. The government alleges that faulty or poorly maintained SCE infrastructure ignited the fire, which burned nearly 8,000 acres of the Angeles National Forest, and seeks more than $40 million in damages for harm to federal land and firefighting costs.
The second complaint concerns the Fairview fire in September 2022 in Riverside County. The government alleges that a sagging SCE line contacted a communications cable and sparked the fire, which damaged nearly 14,000 acres of the San Bernardino National Forest. That suit seeks about $37 million.
The scale of the Eaton fire
The Eaton fire was one of the most destructive in California's history. It killed 19 people and destroyed more than 9,000 homes and other structures, according to official figures reported by NPR and other outlets. Together with the Palisades fire, which burned at the same time on the western side of Los Angeles, it produced insured losses that the Swiss Re Institute estimated at about $40 billion, the largest insured wildfire loss on record.
The federal claims are small relative to the total losses, because they cover only damage to federal property and federal costs. The larger exposure for SCE comes from private claims by residents, businesses and insurers. NPR reported that more than 40 lawsuits had been filed against the utility in connection with the Eaton fire by early autumn, including suits from individual victims and from Los Angeles County and other public entities.
What SCE has said
SCE has said publicly that its equipment may have been associated with the ignition of the Eaton fire, and that it believes it is likely that its equipment was involved. Investigators have focused on a transmission corridor in Eaton Canyon, including an idle line that had not carried power for decades. The official cause investigation by Los Angeles County Fire Department and CAL FIRE has not yet concluded.
The utility has launched a compensation program to offer payments to people affected by the fire without the need for litigation, which it says is intended to provide faster payment than court proceedings.
NPR has also reported that distribution lines in Altadena experienced problems in the hours before the Eaton fire began, and that SCE did not shut off power to most of the circuits serving the community. The question of whether and when utilities should de-energize lines during extreme fire weather is central to how wildfire liability is assessed.
California's liability framework
California applies the doctrine of inverse condemnation to utilities, under which a utility can be held liable for property damage caused by its equipment even without negligence. That doctrine has made wildfire liability a much larger financial risk for California utilities than for those in most other states.
After the 2017 and 2018 wildfires, including the Camp fire caused by PG&E equipment, PG&E filed for bankruptcy in 2019. In response, the state created a Wildfire Fund in 2019, financed equally by utility shareholders and customers, to pay eligible claims above a threshold for utilities that maintain a valid safety certification. The fund also allows utilities to recover costs from customers if their conduct is found to have been prudent.
The scale of potential Eaton claims has raised concerns that the fund could be heavily depleted by a single event. In September the legislature passed, and the governor signed, SB 254, which adds an $18 billion continuation account to the fund, financed equally by shareholders and customers.
Market reaction and credit
Edison International's share price fell sharply in January after the fire and has remained volatile as investigations and litigation have progressed. Rating agencies have placed the company's credit ratings under review or revised outlooks, citing wildfire liability and uncertainty about the Wildfire Fund's capacity.
For other western utilities, the case reinforces how wildfire risk now dominates credit assessments. Utilities in Oregon, Hawaii and Texas have faced large wildfire claims in recent years, and investors have demanded higher returns to hold their equity and debt.
The insurance subrogation channel
A large share of the eventual claims against SCE is likely to come from insurers rather than individuals. When insurers pay homeowners and businesses for fire losses, they acquire the right to pursue the party responsible, a process known as subrogation. In past California utility fires, subrogation claims made up a substantial portion of the total, and they were often settled at a discount to face value. How SCE, the Wildfire Fund and insurers resolve these claims will determine much of the final cost.
Federal versus state roles
The Justice Department lawsuits are unusual in that federal suits for wildfire damage to national forests are relatively common, but they are rarely filed so soon after a major fire and alongside a political debate over utility accountability. The federal government is a large landowner in the West, and national forests are frequently affected by fires that start on or near utility rights of way.
The suits are civil, not criminal. They seek compensation for damage to federal resources and reimbursement of firefighting costs.
What it means for energy markets
For California's electricity customers, wildfire liability affects bills through the Wildfire Fund charge, through utility spending on wildfire mitigation, and through the cost of capital. Utilities have proposed large programs of covered conductors and undergrounding, which regulators have approved in part. Rates for customers of California's investor-owned utilities are among the highest in the continental United States.
For investors, the key questions are the eventual total of Eaton-related claims, how much will be covered by insurance and the Wildfire Fund, and whether state legislation will provide a durable framework for future fires.
What to watch
How the new continuation account is applied to Eaton claims, the release of the official Eaton fire cause report, and the progress of the federal and private litigation will shape SCE's financial exposure. The start of the autumn Santa Ana wind season in October will bring renewed attention to utility power shutoff decisions.