Rewiring Risk

California’s wildfire architecture is breaking on three sides at once. Electricity rates have risen 70 to 80 percent since 2018, driven in large part by utility wildfire mitigation and insurance that ratepayers now finance directly. The FAIR Plan—the state’s insurer of last resort—has nearly quintupled in policy count and dollar exposure over the same period. Public investment in fuels management lags badly behind expert recommendations while utility wildfire spending balloons. These three crises share a root cause: California’s strict-liability rule for utility-caused wildfires. Strict liability has transformed electricity ratepayers into the de facto insurance fund for a wildfire problem that utilities did not create alone. It pushes utilities to over-invest in grid hardening, lets insurers shift wildfire losses onto electricity bills through subrogation, and strips out the actuarial signals that would otherwise discourage development of the wildland-urban interface (WUI). These problems are all tightly interconnected, and fixing one without addressing the others will backfire. This paper argues for four reforms, which must move together: replacing strict liability with a fault-based standard; pairing that change with a managed insurance-market transition for high-risk property owners; establishing a state catastrophe reinsurance backstop; and shifting fuels-management funding from volumetric electricity rates to sustained taxpayer support.