# What policymakers need to know about California’s wildfire-insurance-electricity challenge *Published:* 2026-07-30 *Author:* Katelyn Roedner Sutter If you live in California, you’re already paying the cost of catastrophic wildfire three times: in your homeowner insurance bill, in your electricity bill and through your taxes. Survivors pay a fourth time through the damage and destruction of their home and community. Sadly, the bills will only keep climbing because the fires driving them keep getting worse. I am working closely on this issue with my expert colleagues on wildfire, insurance, electricity and public policy. Together, we are examining the recent report [Enhancing California’s Resiliency to Natural Catastrophes](https://www.cawildfirefund.com/sites/wildfire/files/documents/2026/sb-254-natcatresiliencyreprt-4-7-26v3.pdf) (the so-called “SB 254 report”). This is the first in a series of blog posts defining the wildfire-insurance-electricity challenge, assessing options presented in the SB 254 report, identifying tradeoffs, and making the case for urgent action. The wildfire-insurance-electricity challenge -------------------------------------------- Catastrophic wildfires have become a sobering reality of life in California. While fire is an essential part of the ecosystem in most of the state, catastrophic wildfires burn with greater severity than these ecosystems have evolved to withstand. These more extreme wildfires devastate human communities, destroy forests and other landscapes, threaten water supplies and produce poisonous smoke that is hard to escape. This new reality is driven by the convergence of climate-driven extreme weather, woody accumulation from the decades of suppression of ecologically necessary fire and housing development into wildlands. **The impacts and escalating costs from wildfires are creating dangerous failures in markets that are essential to daily life: insurance and electricity**. The growing magnitude of wildfire losses has destabilized the homeowners insurance market, causing insurers to stop offering coverage in high-risk areas, making insurance bills more expensive for everyone and leading to an increase in the number of homeowners reliant on the [CA FAIR Plan](https://www.cfpnet.com/about-fair-plan/) — the state’s insurance market of last resort. At the same time, catastrophic wildfires also impact our electric bills because utility equipment is a common cause of catastrophic fires. In California, state regulators order utilities to spend billions to reduce that risk, cover liability and recover from past events. Those wildfire-related costs add an average of [$21 to $41 a month](https://www.cpuc.ca.gov/-/media/cpuc-website/divisions/office-of-governmental-affairs-division/reports/2025/2025-sb-695-report_093025.pdf) to residential electricity bills, in a state where the cost of living is already high. California needs an electric grid that is affordable, clean, safe and reliable — and the high costs of reducing wildfire risks make it harder to afford the clean energy transition California needs. California needs long-term strategic investments in wildfire mitigation and near-term stabilizing action -------------------------------------------------------------------------------------------------------- No single actor created this problem, and none can solve it alone: the state, utilities, insurers and communities each hold part of the answer. California needs long-term investments and short-term actions that do not simply move liability and costs around. **The only solution to addressing the wildfire crisis is to reduce the risk itself through significant, sustained investment in wildfire mitigation.** Science-backed mitigation strategies that reduce losses will improve the lives of Californians while easing the pressures destabilizing the electricity and insurance sectors. These include land management strategies like fuel breaks and community strategies like home hardening. By targeting the highest risk areas, California can achieve the greatest risk reduction possible for the lowest shared cost. Policy that engages communities, utilities and the private sector can enable innovations and efficiencies that make limited dollars go further. This work is substantial, but the costs of inaction are even greater. The 2025 Los Angeles wildfires alone are estimated to have caused [up to $130 billion](https://www.anderson.ucla.edu/about/centers/ucla-anderson-forecast/economic-impact-los-angeles-wildfires) in losses. By comparison, the cost of fuel treatment in all high wildfire hazard areas in California is projected to cost [$9.7 billion in total](https://www.rff.org/news/press-releases/new-study-identifies-costs-of-wildfire-fuel-treatment-in-california/). These costs, along with home and community hardening, are a relatively small investment compared with the estimated [$140 billion](https://www.nature.com/articles/s41893-020-00646-7) in capital losses, health costs, and indirect economic impacts caused by California’s wildfires in 2018 alone. Mitigation not only reduces loss, it lowers fire suppression costs — which can be staggering. Nationally we are spending [almost $3 billion every year](https://www.nifc.gov/fire-information/statistics/suppression-costs) on suppression, with CAL FIRE’s recent average [over $800 million per year](https://34c031f8-c9fd-4018-8c5a-4159cdff6b0d-cdn-endpoint.azureedge.net/-/media/calfire-website/our-impact/fire-statistics/suppression-costs-e-fund.pdf?rev=685eeca14aa14a4c933ac8ce0102ab58&hash=0B53A434ACB593281BB5A591AF6866AD). One study focused on the Pacific Northwest found that every dollar invested in fuel treatments results in [$5-6 less spent](https://dailymontanan.com/2026/05/12/perc-report-says-investment-in-forest-fuel-treatments-leads-to-decreased-wildfire-costs/) on firefighting expenditures. Across the Western U.S. as a whole, a dollar spent on fuel treatments saves [about $3.75](https://www.ucdavis.edu/climate/news/forest-fuel-treatments-reduce-wildfire-spread-prevent-28-billion-damage) in damages. **While California scales up long-term risk reduction, it also needs near-term measures to stabilize utilities, insurance and communities recovering from wildfire.** California is unusual because investor-owned utilities can be held responsible for property damage caused by their equipment — even when they were not found to be negligent. Those utility payments help survivors rebuild and allow insurers to recover some of what they have paid out in claims. But wildfire liabilities have already pushed a major utility into bankruptcy, delayed survivor payments, raised borrowing costs and limited the utility’s ability to invest in grid safety, reliability and clean electricity. Reform should make the utilities’ financial responsibility for wildfire more predictable and fairly shared across stakeholders without reducing the compensation survivors urgently need. California must also better connect utility, property and community mitigation to insurance pricing and coverage. This is important so that mitigation investments that measurably reduce risk actually improve insurability and increase insurance affordability. But these steps will provide only temporary relief unless they are paired with meaningful, sustained reductions in the underlying risk. A step forward with the Senate Bill 254 report ---------------------------------------------- The [SB 254 report](https://www.cawildfirefund.com/sites/wildfire/files/documents/2026/sb-254-natcatresiliencyreprt-4-7-26v3.pdf) (Becker, 2025) tasked the California Earthquake Authority with developing a comprehensive assessment to analyze and develop long-term reforms that could preserve access to insurance, strengthen wildfire and natural catastrophe mitigation while improving community safety and resilience. The resulting report offers a range of policy options for addressing California’s interconnected insurance, utility and wildfire challenges. Importantly, it recognizes that reducing wildfire risk will require a “whole-of-society” effort — from front doors to mountain tops. We will always pay for wildfires. The choice is whether we pay for a more costly response and recovery, or for adequate risk reduction and resilience beforehand. The following areas are critical to get right: - Fund science-informed wildfire mitigation at a community scale - Commit to long-term, durable, and coordinated funding for wildfire mitigation that enables innovation and efficiency - Create transparency and deeper alignment between risk reduction and insurance to improve state-wide insurability - Ensure that electric bills are affordable, utilities are financially healthy enough to provide safe and reliable service and able to make the necessary investments to reduce wildfire risk In upcoming pieces, we’ll dive deeper into these topic areas, reflect on the options in the SB 254 report, and explore policy changes needed to make California wildfire resilient, insurable, and affordable. *Expert contributors to this blog series include [Jenna Knobloch](https://www.edf.org/people/jenna-knobloch), [Talley Burley](https://www.edf.org/people/talley-burley), [Michael Colvin](https://www.edf.org/people/michael-colvin) and Katie Roback from Environmental Defense Fund and [Jeremy Sokulsky](https://enviroincentives.com/people/jeremy-sokulsky/) and Brynn O’Donnell from Environmental Incentives.*