Edison Under Fire

Summary

Boiling Point: Edison Under Fire
Host: Sammy Roth
Guest: Pedro Pizarro, President and CEO of Edison International
Release Date: April 3, 2025

---

Introduction

In the April 3, 2025 episode of Boiling Point, climate columnist Sammy Roth engages in a comprehensive discussion with Pedro Pizarro, the President and CEO of Edison International, parent company of Southern California Edison. The conversation centers around the Eaton Fire's devastating impact, Edison's role in wildfire prevention, the challenges of transitioning to renewable energy, rising electricity rates, and the broader implications of climate change on California's energy landscape.

---

Edison's Response to Wildfires

The Eaton Fire, which resulted in 17 fatalities and destroyed over 9,000 buildings in Altadena, has thrust Edison into the spotlight. While the exact cause remains under investigation, Edison has acknowledged the possibility that one of its transmission lines may have ignited the blaze.

Key Points:

• Wildfire Prevention Efforts: Since 2017, following a series of catastrophic fires, Edison has intensified its wildfire mitigation strategies, including deploying insulated wires and enhancing vegetation management.

  “We've done more, added other equipment that helps reduce the risk of fire... our work had reduced the risk of our equipment starting a catastrophic fire as of the end of last year by 85 to 90% compared to pre2017.”
  — Pedro Pizarro, 07:01

• Public Safety Power Shutoffs (PSPS): Edison employs PSPS as a last-resort measure to prevent fires during high-risk conditions, continuously refining their targeting to minimize disruptions.

  “Shutting off power when the risks are high... but that's still been a tool of last resort.”
  — Pedro Pizarro, 05:46

• Impact of Climate Change: Pizarro emphasizes that the increasing frequency and intensity of wildfires are exacerbated by climate change, necessitating robust adaptation measures.

  “Climate change is a big element of the wildfire risk that we've seen.”
  — Pedro Pizarro, 07:03

---

Financial Implications and Rate Increases

Edison's wildfire mitigation and infrastructure upgrades have led to significant financial implications for both the company and its customers.

Key Points:

• Rate Increases: Approximately 10% of Edison’s electric bills are now attributed to wildfire mitigation, a stark increase from seven years ago. Overall, system average rates have surged by about 50% over the past five years, primarily driven by power market costs rather than wildfire prevention alone.

  “Today around 10% of the Edison bill is related to wildfire mitigation... The largest driver was power market costs.”
  — Pedro Pizarro, 14:00

• Future Projections: Edison anticipates that rate increases will stabilize to around 2.6% per year through 2028, aligning more closely with inflation rates.

  “Our rate increases will be about 2.6% per year through 2028.”
  — Pedro Pizarro, 16:59

• Return on Equity (ROE): Edison has requested an increase in ROE from 10.33% to 11.75%, justifying it as a reflection of the heightened risks and investments in wildfire mitigation.

  “We've hired an outside expert... they came up with a range of something like 10.7 to 11.75% as the fair range.”
  — Pedro Pizarro, 28:05

• Profitability: In the previous year, Edison reported profits of $1.62 billion, the highest since the energy crisis two and a half decades ago.

  “Edison made $1.62 billion last year... more profit than the company made at any time since the energy crisis 25 years ago.”
  — Pedro Pizarro, 28:05

---

Climate Change and Net Zero Goals

Edison is actively contributing to California’s ambitious climate goals, aiming for net-zero emissions by 2045. Pizarro outlines the company's strategy to balance climate mitigation with necessary infrastructure investments.

Key Points:

• Electrification as a Solution: Edison underscores the importance of electrifying various sectors to enhance energy efficiency and reduce overall energy consumption.

  “Electric appliances... use a lot less energy to do work.”
  — Pedro Pizarro, 19:35

• Projected Energy Demand: The company forecasts an 80% increase in electricity sales by 2045, necessitating substantial grid expansion and investment in clean, firm energy sources like advanced geothermal and nuclear power.

  “Total electricity sales across the state, we see almost doubling... which means you need a much bigger grid.”
  — Pedro Pizarro, 22:33

• Policy and Infrastructure Challenges: Pizarro highlights the significant delays in transmission line projects, often taking 10 to 12 years to complete due to siting and permitting hurdles.

  “Today it takes probably about a dozen years... most of the time is spent on the siting and permitting and approvals process.”
  — Pedro Pizarro, 24:08

---

Rooftop Solar and Distributed Energy

The integration of rooftop solar is pivotal in Edison's strategy, yet it has been a contentious issue due to its impact on the utility's revenue model and ongoing debates over net metering benefits.

Key Points:

• Subsidies and Incentives: Edison acknowledges the role of subsidies in making rooftop solar viable but stresses the importance of adjusting incentives as solar technology becomes more cost-effective.

  “Subsidies should be reduced significantly as solar costs come down.”
  — Pedro Pizarro, 43:34

• Storage Integration: Approximately 80% of new solar installations now include storage solutions, enhancing grid resilience and reducing reliance on utility infrastructure during outages.

  “Something like 80% of solar installations have storage now.”
  — Pedro Pizarro, 42:42

• Future Projections: Edison aims to double its rooftop solar capacity by 2045, advocating for continued, appropriately sized incentives to support this growth.

  “We see a doubling of the amount of rooftop solar investment out there.”
  — Pedro Pizarro, 22:44

---

Public Trust and Community Relations

Building and maintaining public trust is a cornerstone of Edison's operations, especially in the wake of catastrophic events like the Eaton Fire.

Key Points:

• Transparency and Accountability: Edison pledges to maintain transparency throughout investigations and rebuild efforts, emphasizing honest communication with the community.

  “Ensuring that we will be transparent is point one.”
  — Pedro Pizarro, 14:00

• Community Engagement: The company is committed to supporting affected communities through rebuilding initiatives and charitable activities, reinforcing its role as an integral part of the region.

  “Helping those communities come back stronger... that's how we build public trust, one step at a time.”
  — Pedro Pizarro, 47:02

---

Government Policies and Future Challenges

Edison navigates a complex policy landscape, balancing state and federal regulations while advocating for reforms to expedite infrastructure development.

Key Points:

• Permitting Reforms: Pizarro expresses optimism about upcoming reforms aimed at streamlining the permitting process for electric infrastructure, which are crucial for meeting climate goals.

  “Reforms at the federal and state levels if we're going to have any opportunity... getting to Net Zero by 2045.”
  — Pedro Pizarro, 24:08

• Inflation Reduction Act (IRA): The potential repeal of the IRA poses challenges for clean energy investments, as the associated tax credits directly impact customer electricity bills.

  “We're out there advocating for maintaining as many of those credits as possible because they're helping our customers see a lower bill.”
  — Pedro Pizarro, 47:19

• Legislative Efforts: Edison monitors legislative developments, such as AB 1167, which addresses the allocation of costs for utility advertisements, ensuring that such expenses do not unfairly burden customers.

  “We do not run ads that are about our brand image... it's something that PUC does not allow.”
  — Pedro Pizarro, 51:57

---

Conclusion

The episode "Edison Under Fire" delves into the multifaceted challenges Edison International faces amidst escalating wildfire risks, the imperative transition to renewable energy, and the socio-economic implications of these shifts. Pedro Pizarro articulates a vision of robust infrastructure investment, transparent community engagement, and strategic policy advocacy as essential components for navigating California's turbulent climate and energy future.

---

Notable Quotes:

• “Climate change is a big element of the wildfire risk that we've seen.” — Pedro Pizarro, 07:03
• “The cost of action is high, but the cost of inaction is a lot higher.” — Pedro Pizarro, 13:35
• “These investments are crucial to helping our economy take steps to both mitigate climate change and adapt to the climate change that's already baked in.” — Pedro Pizarro, 17:03
• “Total energy bill going down 40% from current levels in real terms by 2045.” — Pedro Pizarro, 20:17
• “Public trust is one of the key things that we need to earn every day from our public.” — Pedro Pizarro, 45:30
• “If they know that we're going to be honest and speak our minds and be trying to do the right thing at all times, I think that's what you could ask for.” — Pedro Pizarro, 54:33

---

This summary captures the essence of the "Edison Under Fire" episode, providing an in-depth overview of the critical discussions between Sammy Roth and Pedro Pizarro. It outlines Edison's ongoing efforts to mitigate wildfire risks, manage financial challenges, contribute to California's climate goals, and maintain public trust amidst a rapidly evolving energy landscape.

Transcript

[Podcast Host]

This is an LA Times Studios podcast.

[Sami Roth]

My name is Sami Roth and I'm the climate columnist for the Los Angeles Times. This is Boiling Point, Southern California. Edison has been in the news a lot since January. The company supplies power to 15 million people, making it the second biggest electric utility in the country after Pacific Gas and Electric. If you've read about Edison lately, there's a good chance it's because of the Eaton fire, which killed 17 people and destroyed more than 9,000 buildings in the Altadena area at the base of the San Gabriel Mountains. Nobody knows for sure yet what sparked the fire, but Edison has acknowledged there's a chance that one of its transmission lines may have been the ignition point. State officials are investigating, but even in advance of any final conclusions, Edison is already facing dozens of lawsuits from wildfire victims. If the company is ultimately found responsible, it could be forced to pay billions of dollars. A lot of that money, if not most of it, could end up being charged to Edison customers in their electric bill.

[Pedro Pizarro]

Edison's corporate headquarters are in Rosemead, about.

[Sami Roth]

10 miles east of downtown Los Angeles. Earlier this week, I drove to Rosemead to sit down with Pedro Pizarro, president and chief executive of Edison's parent company, Edison International. There was a lot I wanted to ask him about the Eaton fire, obviously, but also climate change and electric vehicles and rising electric rates and Edison's profits and rooftop solar and the Trump administration.

[Pedro Pizarro]

Suffice to say, Pedro and I had.

[Sami Roth]

A lot to talk about.

[Pedro Pizarro]

I hope you'll listen to our conversation.

[Sami Roth]

And then send me an [e-mail] to share your thoughts.

[Pedro Pizarro]

I can't promise I'll have time to.

[Sami Roth]

Respond to all of them, but I do promise to read them.

[Pedro Pizarro]

Okay, here we go. Pedro, thank you very much for being with us on the Boiling Point podcast.

Sami, thanks for having me.

So, I'm really curious. So you've been with. With Edison for how long now? How many years?

Over 25 years.

25 years. And you first became president of Southern California Edison, the subsidiary, in 2014. Okay, so more than a decade.

Yes.

So in the time you've been leading SoCal Edison and now Edison International. I guess I'm curious. When. 2014. I mean, the wildfire situation was not quite as bad as it is today. We've had a lot of the really worst fires since then. I guess. I'm curious. Did you ever imagine that so much of your job would just be consumed by responding to fires, trying to prevent fires? Just so much of it. Your time and Energy just taken up by the wildfire crisis. I mean, it just seems like it must be a lot of your job at this point.

No, I don't think anybody ever imagined that, Sammy. I mean, California's always had wildfires and there were some really tough ones down in the San Diego area in 2007, for example, outside of our territory. So all the utilities in the state had fire prevention programs. We had them as well, with support from the public utilities. I don't think anybody, not utilities, not academics, not government, ever imagined the kind of catastrophic damage we started seeing in 2017. It's convergence of a lot of things. It's climate change, it's the building of more and more infrastructure in higher and higher risk places. My wife grew up in the area. We met in college back east and then came back together for grad school.

Where'd she grow up?

She grew up in San Fernando Valley to Hunga and then Granada Hills. And we met in Boston, came out here together. But she remembers fire when they lived in Tohunga, right by the edge of their yard because they lived up against the hills. They were called forest fires back then because it was the forest and very few people lived in the forest. Now it's the wildland urban interface because as real estate prices got so big tough in California and more and more building into these canyons and high fire risk areas, so you had a number of things that converged to create these catastrophes that nobody imagined.

So you referenced that 2017 things started to get much worse. That was the year of the Thomas fire here in Southern California. Right.

Well, it first started with the wine country fires in Northern California, then the Thomas and Konigstein fire in our area. Then in 2018, there was a campfire up north.

Right. That was the one with Paradise.

With paradise, correct. And then we had the Woolsey fire. And so those were four large catastrophic, awful fires in a year and a half, two year period. Since then, there's a lot that we and the other investor owned utilities have done in concert with the Public Utilities Commission to harden our systems and deploy all sorts of new equipment. For example, we've, we have 17,000 miles of distribution wire in the 27% of the Southern California Edison area that's currently deemed high fire risk. Of those 17,000 miles, 7,000 miles were already underground. It's just how they were built. Typically newer developments out of those 10,000 overhead miles, over 6,400 are now replaced with insulated wire covered conductor we call it, which is one of our big tools for Mitigating wildfire.

It reduces the risk that these lines are going to spark a fire. Exactly.

To reduce the risk, since we've done that, we have done more, added other equipment that helps reduce the risk of fire, like fast acting equipment, et cetera, more stringent vegetation management, trimming the use of public safety, power shutoffs, preemptively turning.

Off the power when the risks are high.

When the risks are high. And we've been able to target that more and more narrowly as we add more equipment. But that's still been a tool of last resort. We've also added weather monitoring equipment, high definition cameras. All of these things together have helped reduce the risk of catastrophe. In fact, we had turned over our data to an outfit called Moody's, rms. Moody's is one of the big credit rating agencies. They own this outfit called RMS that does work for the insurance industry. They do actuarial analysis and they had estimated that Edison's work had reduced the risk of our equipment starting a catastrophic fire as of the end of last year by 85 to 90% compared to pre2017. However, we've always known the risk can never be zero. And that's why the state has been so aggressive in a number of other measures around a wildfire framework.

I want to ask you more about the risk reduction and why it's so hard to get to zero, which you're right, it is pretty much impossible to get to zero. And I want to get more into that before we do. Why is it that so many of the, I mean, utility infrastructure is obviously not the only cause of fire? I mean, there are all sorts of reasons that fires start. And it's also impossible to get all ignition risk to zero. We live in a tinderbox when it's dry in California and when it's hot. And those conditions are, as you said, getting worse with climate change. So the risk is there. But why is it that it seems like a lot of the really biggest, most destructive fires are caused by utility infrastructure? I mean, thinking of the campfire that Thomas and Woolsey fires, some of the wine country fires, what's going on here where it seems like transmission and distribution lines do seem to spark some of the biggest ones.

So I think nationally something like 90% of ignitions are caused by something other than electric utility lines. But you're right, Sammy. We have seen some of the most destructive fires in California emanate from electric infrastructure. And I think there's a few reasons that come together. First, as electric utilities, we have an obligation to serve Everyone, everywhere, no matter what the risk. If we were a quote unquote normal business, right. Or could make those choices on our own, there are areas that we would probably choose not to serve.

Some of the rural, more distributed, higher.

Fire risk areas where you might say, look, you can take all these measures, but at the end of the day, either the probability of an incident happening because you have tougher weather patterns there, you have a canyon where winds get channeled and you have these really destructive winds ripping through, might be areas that are tougher to underground because of the terrain, might be areas where the consequence of an ignition is really high. Right. Areas that are living next to the tinderbox of a forest that's tough to maintain or that hasn't been maintained by whatever the government agency so that you could get quick fire spread if a spark starts. The fact that we need to put infrastructure in people's backyards, no matter where those backyards are, is one factor. But then there's more. There's also the fact that as I mentioned earlier, we've had more and more homes and businesses built in California in these high fire risk areas, the wild and urban interface. So we need to serve the infrastructure there. Once we're serving it, if something happens that we couldn't prevent in spite of all our efforts, then the risk of that fire becoming large, spreading quickly is much higher. If you're in that high fire risk area and if you now have a very dense population there, which is true in a number of the areas where you're seeing fire start. And so then on top of that, of course, add in the other factors that are more cross cutting, like climate change and more extreme weather patterns. The fact, for example, Sammy, that prior to the Eaton fire, our area, which is my home, I living in pasadena for almost 37 years, I don't think we had seen a drop of rain in something like over eight months. Right. That's not a typical weather pattern for us to be sitting in January without a drop of rain in December and November, etc. All of that adds up. And so there's some factors that are utility related, but other factors that are simply not.

Totally several different things going on here and climate change and what we can do to do better and faster on climate change. I want to come back to and circle back to that before the conversation's over in terms of having built all of these communities in places that maybe we shouldn't have done that to begin with. Only so much that can be done about that now, that's not a problem that Edison can solve. That's not a problem that probably California can solve at this point. Altadena was built where Altadena was built. I mean, Altadena is not even maybe the best example. I don't even know if you would define that as the wild land urban interface. Cal Fire has been putting out its new maps of high fire hazard zones in California and they don't even capture most of Altadena in that. I mean, it's really just a city that happens to be next to a forested mountain.

Well, on that, the LA Times had a recent article that I thought it was well done that talked about that Cal Fire update. And you're right, it didn't really change the portions of Altadena that are considered high fire risk area very much. It's the portions that are what I would think of as that wild and urban interface, basically the parts of the community that border the mountains with the Angeles National Forest. Now the article captured, well, the fact that Cal Fire's latest model does not include a factor yet that's called urban conflagration. And that's when you have a big urban area where you can have that quick fire spread. And I believe they quoted somebody from Cal Fire talking about how future iterations might. So we might see that designation change yet.

[Podcast Host]

It's sort of very similar as to being a foster parent. You go in it not for the length of time, but to know that even two months or 10 years can still create a big impact in a child's life. So CASA is a nonprofit organization that stands for Court Appointed Special Advocate. And they specialize in making sure that the child's needs are met, whether it's medical, health, educational, and ensuring that the child is receiving the most ability they can.

[Pedro Pizarro]

What I did want to ask you about is the obligation to serve. To serve, you know, make sure that everyone gets electricity in equal measure everywhere. You know, 100% reliability as best you can help it. This is something that's been sort of cropping up in some of my reporting because there's this sort of separate but related conversation about electric rates in California which have been going up as probably just about everyone listening to this conversation knows electricity is getting more expensive. Part of the reason for that, although not the whole reason, is that your company and the other investor owned utilities are spending a lot of money and customers are ultimately paying for a lot of this to try to prevent wildfire ignitions, burying power lines, trimming trees, taking other steps to reduce wildfire risk. And a question that a Lot of folks that I talk with for my reporting are starting to ask is, are we spending too much money trying to get as close as possible, although not all the way to zero ignition risk because we can't get to zero.

Yes, the cost of action is high, but the cost of inaction is a lot higher. And so the reality is, even if you take a look at say, the January events this year.

Yeah, the Eaton fire, in the Palisades.

Fire, Eaton Fire and Palisades fire. And look, we still don't know whether Edison equipment caused Eaton fire. Certainly possible it did. And I've pledged to be transparent with the public as we continue to investigate.

This is being investigated by the state and by your company.

By the state, by our company, as it should be. And for me, preserving public trust, making sure people understand that we will be transparent is point one. And this is our community too. We've had a number of our employees impacted. So this is heartbreaking for all of us. But to your question, we saw in that January event separate from the Eaton fire after the first wave of the windstorm, there were multiple ways to this. We saw something like 50 or 60 different things on the system that might have been yet another ignition. But for all of the investment we had made in things like insulated wire, covered conductor, in things like public safety, power shutoffs, which are challenging and you brought up. So the investments are actually making a difference, an important difference at being one point, another point I would make, yes, this has been costly. And so today around 10% of the Edison bill is related to wildfire mitigation in one way or another. That was much, much, much lower seven years ago. It was really not a factor. By the way, I'll point out that if you look historically over say the past three decades, Edison system average rates went up at around the level of inflation on average over that 30 year period. That changed over the last five years from say through 2024.

It's kind of what, 50% over the last five years? Something to that extent.

It's been certainly a lot higher than inflation. The main driver of it, however, was not actually wildfire. The largest driver was power market costs. Coming out of the 2020 heat waves. You saw power shortages in California, the first rotating outages in two decades since the energy crisis that sent power prices very high across the state. Reminder to your listeners that Edison does not actually make most of the electrons it delivers. It only makes about 15%. So we rely per Public Utilities Commission direction on the external power market for, you know, to purchase around 85% of the electrons we deliver. I give a lot of credit to the state because since 2020, there's been a lot that's been done to try and moderate those prices and that that pressure has come down somewhat. But something like 40, 45% of our increases were due to the power market in one way or another. I want to say something like 20. Some percent of the increases were due to that increment in wildfire costs. Importantly, as we move forward, we've estimated that our system average rate increases are going back down to inflation levels for the 2024-2028 period. And that's even assuming that Edison gets all of the requests it's asked for, which typically doesn't. You know, we have a general rate case out there. We have cost recovery for the Woolsey fire. We have some other items out there. We believe that our rate increases will be about 2.6% per year through 2028.

But even if the rate increases come back down to inflation, that's still coming from a starting point of rates are really high because they've been going for years.

Yeah. So system average rates in California are certainly higher than the national average. We have been working really hard at Edison over the last decade on minimizing our cost increases, reducing costs, reducing our operations and maintenance costs. Today, our system average rates are something like 30% lower than those of our peers being PGE and San Diego Gas and Electric. And a lot of credit to PG&E. They are very focused now on having the similar sort of cost reduction that we have managed. The other lens here, that's important. Sami, and you write a lot about climate change, which I really appreciate. These investments are crucial to helping our economy take steps to both mitigate climate change and adapt to the climate change that's already baked in. The adaptation part is things like the investments we've had to make for wildfire because climate change is a big element of the wildfire risk that we've seen. I view that as some of the earliest investments in climate change adaptation. I think as a society, we have more investments needed coming because we see something like 3ft of average sea level rise. By 2050, we see a 20% increase in wildfire ignition risk across all ignition sources by 2050, we see extreme heat being seven times more frequent and hotter than than it is today by 2050.

Which is going to drive people to turn their air conditioning up more and use more electricity and drive their bills up even higher.

Yes. But climate change mitigation, now let's turn to that. Right. These investments are also enabling a strong grid that can help people electrify across the economy. We're already seeing it in California. Right. In California today, 25% of new vehicle sales over the last couple of years have been electric. Compare that to 10% across the rest of the country. One of the important insights that's come from our team's analysis that's been validated by other third party groups analysis is that as you get to a net zero economy, which California has targeted for 2045, a prime tool for that will be electrification. It turns out that from a physics perspective, electric appliances, whether it's a car, whether it's a heat pump, water heater, they use a lot less energy to do work.

So they're more efficient.

More efficient. My electric car uses less energy in the form of electricity to move a mile than my old gasoline car did in terms of gasoline. So it's really important to take a look at the total energy bill that customers are paying. Right. Because it's a transition. And so if we want to be able to do a fair comparison across time, you can't just look at the electric bill. Yeah, that one's going to be going up because we're going to need to make investments to replace all this infrastructure that's fossil fuel fired in the economy. And people will be using more electricity to do more things across the economy. So you really need to look at the total energy bill. We see that total energy bill going down 40% from current levels in real terms by 2045.

So even though people are using more electricity and that might be getting more expensive, they're using less gasoline. They're using less natural gas for their appliances in their home.

Yeah. Yes. And the amount of energy they're using in the form of electricity will be lower than the amount of energy they would have used using gasoline because of the efficiency. So you get the efficiency pickup and the substitution pickup. 40%. Putting in a different terms, terms that frankly probably matter more to your listeners today, the average customer in Southern California Edison's area is spending about 7% of their household income on energy. Electricity plus natural gas plus gasoline. With that 40% reduction I mentioned, we see the, we call it the share of wallet, that total of the household income going towards energy going from 7% today to 3% in 2045. When you think about the transition to net zero, turns out it's not just about climate, it's the prime driver, but it's actually going to enable some real savings for the average household. In our state.

You mentioned 2045. That's the year by which California has a law right now saying we need 100% clean electricity on the grid. That's also the year by which we're targeting net zero emissions in California. There are several states that are trying to get there faster than 2045. And especially on the clean electricity front, if you look at the science of getting to net zero emissions, that really the scientists will tell you, well, if you want to get to net zero emissions by 2045, you probably want to get to clean electricity sooner than that, because that's kind of step one before you electrify the whole economy. Should state policymakers be trying to get us to clean electricity sooner than 2045?

Well, that would be a laudable goal. It would be wonderful. I'm not sure it's realistic right now. Right now I'm worried about getting there by 2045 rather than later. And we put out a white paper last year. It's on Edison's website, if your listeners are interested. It's called Reaching Net Zero. Put it out last fall, right before Climate Week in New York and then the United nations climate meeting in Azerbaijan. And so one of the insights of that paper was that the numbers that I just shared with you still hold. We see load increasing even more than we thought it would be.

Load? The amount of electricity.

Yeah, the demand for electricity. So total electricity sales across the state, we see almost doubling. We see well over 80% increase through.

2045, which means you need a much bigger grid, by the way.

Which means you need a much bigger grid. Significant investment is needed to move all the power around, and you need more distributed resources, too. So, for example, we conclude that we expect to see something like a doubling of the amount of rooftop solar investment out there, which is important. I know you've written a lot about that as well. But in any case, what we found in the paper was that that 2045 target is still achievable. It's still achievable, but has some real challenges. Probably the largest challenge is you're going to need so much more infrastructure built, not just wires, but also what we think of as clean, firm generation. Generation is net zero, but that doesn't have the variability of a lot of the current renewables like solar or wind. It could be for clean term. It could be solar paired with storage. It can be natural gas paired with carbon capture. It could be new nuclear. It could be advanced geothermal. There's significant investment need for that and for the wires. To transmit it. Probably the biggest impediment we see right now, Sami, is the challenges with siting and permitting infrastructure. It is just so hard to build anything anywhere. You've heard of nimby, right?

Not in my backyard.

Not in my backyard. You've heard of banana?

No, bananas and I've eaten a banana, but I don't know what acrobat bananas.

Built absolutely nothing anywhere near anyone. So you have NIMBY and banana. That's this reality. So today it takes probably about a dozen years, 10 to 12 years to build a new transmission line. Now building it actually is probably two years worth, two or three years. Most of the time is spent on the siting and permitting and approvals process. And so we need reforms at the federal and state levels if we're going to have any opportunity, any chance of getting to Net Zero by 2045 or shortly after.

So there are several things here I want to come back to, especially the rooftop solar question, which I can hear many listeners to this kind of banging their hands together right now saying, ask them about rooftop solar. And I'm going to. But first, all of the investments that you're talking about in the grid and transmission. You talked earlier about how Edison doesn't make money on electricity sales, but you do make money on building infrastructure. You get a return on investment of I think it's about 10 point something percentage points right now today.

10.33%.

10.33%. And that's money that Edison rate payers, your customers are charged and that's profit that goes to shareholders. So this is good for your business, Right? I mean, and I say that not as a cynic. I mean you're a business, you have to make money, but that is your bread and butter. I mean, so when you're talking about the electrification of the economy and how good that is for climate, that's also like your business model going forward.

Absolutely. And let's make sure your listeners understand the business model. Right. So you're right. In California we have something called decoupling, which means that if we sell more electricity, we don't actually get more profit from that. Right.

But if you have to build more infrastructure, well, you have to build more infrastructure. That is how you make a profit.

So let's talk about how we do that. We have investors, both debt investors and equity investors. And the analogy here is for those of your listeners who are homeowners, right, they have a loan from the bank that's a debt they also put a down payment in for their house and if the house appreciates, they have equity in the house. So we have both debt and equity investors. The. The rate of return you talked about is the rate of return for equity investors. They are the ones who are putting capital up front so that neither our customers nor the state have to come up with that capital. They then get that capital paid back by customers over time along with the rate of return. And so our investors are putting that capital upfront, and our equity investors, the stock, the shareholders look to get an investment rate back that is commensurate with what other utilities are earning across other states and geared towards the risks that are unique to California. And that's what has led to the Public Utilities Commission authorizing a rate of return of 10.33% today for Southern California Edison. By the way, I think you've sometimes written about that as a guaranteed rate of return. It's not a guaranteed rate, Sammy. It's an authorized rate of return.

I gotcha. Last month, you guys put in a request and the other utilities put in their own requests, but you guys requested to increase the return on equity from 10.33 to 11.75%. That's correct. And I don't have the numbers in front of me for PGE and SDG and E, but the requests they put in were not quite as high. I think one was 11.25, and they were both a little lower than 11.75. I don't have the financial expertise to judge whether 11.75 is a good number, but I know there are a lot of folks who look at that, who know that their electric bills are going up and up and up and who just say, how can Edison be asking for higher profits right now? And Edison made $1.62 billion last year. Southern California Edison, which. Not a record amount, but more profit than the company made at any time since the energy crisis 25 years ago. Why are you asking for that increase? Why should folks think that that's fair?

Yeah, that's a fair question, and I'm glad you asked it, Sami. Again, we rely on investors to put capital up front so that customers don't have to come up with the $6 billion a year that we invested last year. Because of the great needs that we have, we see that going up to as much as $8 billion a year over the next several years. Those investors have a choice as to where to invest. There are a lot of other electric utilities across the country in states that carry lower risks than our territory carries.

You're talking about like wildfires?

Yeah, whether it's wildfire or other risks. Right. Every state has its own different set of risks and rewards. And so what we do is we hired an outside expert. No, we hired them. Right. But they bring in independent expertise and they took a look at what utilities like us are earning across various states and they're trying to normalize that for the various risks there. They came up with a range of something like 10.7 to 11.75% as the fair range that an investor would expect to invest capital into Edison, given our particular risk. They then said in that analysis they did not try to capture any sort of adder or incremental for the extreme wildfire risk that we have here. In particular, the fact that the state has a terrific framework. Maybe we can talk about that in a few minutes, Sammy. But we do have a framework that the legislature passed for how we do wildfire mitigation that requires us to have wildfire mitigation plans set up a wildfire insurance fund in case that in spite of everybody's efforts, there's a catastrophic fire, so there's money there for victims. And then it set the rules for how a utility is judged on all of this. That framework, which frankly is a model for the rest of the country, is now at risk of not being large enough. Because now that we've seen the scale of the Eaton and even the Palisades fire, which was not related to investor owned utility infrastructure, but from an investor perspective, they're saying, hey, we thought that the largest fire in California might be something like the campfire, which was around $10 billion in damages. Now we're seeing the combination of Palisades and Eaton, two fires, same area, same windstorm, same time, which are tens of billions of dollars. The framework we have in California that has a $21 billion insurance fund may simply not be big enough.

And that's an insurance fund, by the way, that's paid for half by utility shareholders, half by.

Half by customers.

Half by customers.

Correct. And so given that risk that that framework might not have enough capacity for future fires, the experts said, well, we have this broad range of 10.7 to 11.7% ROE return on equity for being proposed, said Edison is clearly at the high end of that risk range. Therefore, the request that Edison puts in should be at the high end of that range that we've seen elsewhere. By the way, Sam, I'll point out that there's other examples in areas that don't have the same wildfire risk. For example, I believe one of the large Florida utilities put in a request for an 11.9% return on equity. And so understand that this is commensurate with other utilities out there.

As a reporter who covers you guys and has been writing about energy for 10 years, I'm sympathetic to the idea that you have a hard job. I mean, as you said, you've got to serve everybody. You've got to balance keeping the lights on, trying not to spark wildfires, trying not to let rates get too high, getting profit to investors so that they keep investing in the company, meeting the climate and clean energy goals of the states. Like, not an easy job from the perspective of a lot of customers. Is there anything that you guys can just be doing better? Because I think that something I hear from readers a lot is why isn't my utility, whether It's Edison or PG&E, or SDG and E, like, why aren't they just better? I know that maybe doesn't seem like the fairest question, but whether it's why do they, do they really need a little more profit? Or why can't they just do a better job at not starting fires, or why do they need to keep going after rooftop solar? I think there's a lot of folks who just are really frustrated and want to know why their utility can't just do better at something.

I have 14,000 colleagues across Edison who work with heart and soul to power this community. We have a really critical job for our communities and we, and I know all of my teammates, take that really seriously. We have six values for the company. The first one is safety, but one of the other values is called continuous improvement. Because, Sami, we recognize we ain't perfect and we never will be. You asked a question in terms of cost. So when I think about our cost trajectory, that's one of the things that when I first became head of the utility at Southern California Edison Back in 2014, my team at the time and I put a big emphasis on finding ways to reduce our cost per customer. And at the time, we were probably around the middle of the pack and we worked hard and we actually ended up driving our cost per customer to around top quartile. That moment existed for a little bit of time. And then the wildfire, the catastrophic wildfires of 2017 came in, which meant that we had to put in significant investment towards wildfire, which brought us back down to probably around the middle of the pack in cost. We also operate in a high cost state. California is a high cost state where a lot of investment is required in our Systems to make it more reliable, more resilient, and more ready for all the electrification that's coming. We are a safer state today, which I know is difficult to say after seeing the January, horrible Palisades and Eaton fires. But the reality is there's a lot that's been done with not only utility investments, but with the investments in firefighting, with their greater focus on building codes and standards, which still has more work to go. There's a lot that's been done to reduce the risk, but we again, always know that, unfortunately, the risk will simply never be zero. And when you look at what happened with policies in Eaton, the fact that we had 100 mile an hour winds eight months after we had the last drop of rain, and winds so strong that the firefighting aircraft that are designed to fly at night in order to combat the fires around the clock could not fly because the winds were too strong, that's a lot that came together to create a catastrophe. And that will always be possible. We know that those conditions will get worse over time. And, you know, as climate change comes in, as I said earlier, 20% higher risk of wildfire ignitions and damage by the time we get to 2050.

Going back to my muddled question from earlier about the balance between reliable electricity and reducing wildfire risks, do you think the next time you see conditions like we did during the windstorms in January, with the dryness and the winds that ultimately led to the Eaton fire, are those conditions where you think you'll be more likely to, you know, shut down wires or do a public safety power shutoff?

Look, we're looking at that and we always look to learn after every event with our wildfire mitigation plans. We have an annual update that we file with the state's Office of Energy Infrastructure Safety and the Public Utilities Commission. We capture those learnings every year and keep on improving. We're also taking a look at our construction practices. And in particular, we have a team that's focused on the rebuild efforts for both the Malibu and especially the Altadena areas. And in those areas, going back to your question on those trade offs across reliability, resiliency and cost, you might know that the governor sent me a letter, I don't know, a few weeks ago.

Yeah. Calling for you to underground the lines as you rebuild the building.

Well, not quite stressing the importance of undergrounding, but he also mentioned costs. And what he asked for was our thoughts. How are we planning to rebuild in these areas? The team right now is looking at those rebuilt plants in an Area like Altadena where you had this horrible, heartbreaking loss, these beautiful neighborhoods. There's a lot of Altadena that now looks like a brand new development, unfortunately. Right. It's a catastrophe. But in brand new developments today we underground. There's going to be some portion of Altadena that wasn't underground before that will be underground now because sadly it looks like a new development. But we're looking at that, we're looking at how do we build more resiliency into those homes and neighborhoods. Is there a role for batteries either at the home premise or at a community level? Are there other ways that we can help that neighborhood, which a lot of it is not technically in high fire risk area. But as we were talking about earlier, I suspect that once Cal Fire updates future models to include.

I mean it's clearly a high fire risk area.

It's a high fire down. I think the fire showed it. Right. So it's an area that could then be subject to lots of public safety power shutoffs if conditions continue to get worse. Can we build more resiliency using in technology so that people can have reliability and resilience so that our customers can experience fewer public safety power shutoffs even as climate change drives worse wildfire risk?

Do you think there's an opportunity in Altadena to rebuild all electric? Is that something that you're thinking about.

And you had a good column on this, I think about a month after the fires.

Yeah, yeah, thank you. I did write about that.

Yeah. I think you were talking about. I think you were concerned about the relaxation of building codes in order to stimulate quick building.

Yeah. There have been efforts by local officials in Los Angeles and LA county and now at the state level even to basically make it as easy as possible for people to build back with gas and electric, which in my opinion is not the right way to go. But I'm curious what you think.

Yeah, I think it's a trickier question in terms of what happens tomorrow in an area that lost thousands of homes. And so I can understand the desire for speed. I think you can have speed and go all electric, but that's a broader policy decision that is made by people other than us. Well, our part will be we are rebuilding those systems to be able to be all electric, whether that's in 2025 or in 2045. For example, in Altadena we had a number of 4kV, 4000 volt circuits. That's an older, lower voltage. Modern systems are built at the 12 or 16,000 volt level. Just the analogy for your listeners is that's building bigger pipes that can accommodate more electricity down.

So you're going to build with the capacity for people, higher capacity for people when they get there, whether that's tomorrow or in 2035 or whenever.

So we're rebuilding the system that way because when we make these investments, they're 40 year investments. We know we're in a state that 20 years from now wants to be net zero, which means a lot more all electric. And so it would be foolish of us to put in smaller systems now that will need to be upgraded in five or 10 years. So we're going to have the capacity to take our customers all electric. The policy choice belongs to government leaders other than us.

So since we're talking about rooftop solar and batteries now, one of the arguments that people have been making for rooftop solar for years, which I think you're somewhat, at least endorsing now, is that the more distributed local, clean energy resources you have, it limits the need to build out the grid quite as much. It makes it easier to shut off power in a pinch when you have, you know, dangerous wildfire conditions. When people do lose their power, they can keep themselves powered with rooftop solar and with batteries, et cetera. You know, the fight that's been happening over rooftop solar and the net metering incentive program over the last few years in California has been a really bitter and divisive battle. Where you guys have been, you and the other utilities have been pitted against the rooftop solar industry.

It's kept you busy. You've written a lot on this.

It's kept me, I think I've. Over the last 10 years, I've probably written 40 stories on this topic. I guess my question is if you guys have in your models and in your white papers that there's going to be a doubling of distributed solar capacity by 2045 in California, you've argued successfully that these net metering incentives or these credits should be reduced significantly. The Public Utilities Commission has done that. But I don't want to relitigate that argument right now. I'd recommend that people go and read the 40 stories I've written on this topic for the arguments for and against.

But especially your last one I thought was very balanced.

I appreciate that. What comes next? I mean, I would like to think that you guys will start putting forward some ideas here for if you think this should double, what should the state be doing instead? If you've now won the fight over net metering, what should we be doing to promote rooftop solar? If it wasn't what we were doing before.

Let's start with some context. I think the first solar subsidies in California came out in 1996.

If I remember right, it was a long time.

I don't know the year solar panel costs or, you know, rooftop solar costs today are something like less than 1/7 what they were back then. That's a role for subsidies. Right? And to me, subsidies, there's not an infinite pot of money out there across the economy. We need to target them to the technologies that need the most help maturing coming up the curve so that they can stand on their own two feet. That's point one, point two. Remember that those costs don't come from money growing on a tree. It's other customers who pay for solar customers. And there's a benefit to some level of subsidy if it's right sized. But as solar costs came down, the subsidies did not keep pace with that. They stayed at that high level. And so today it's not our estimate, it's the state's estimate through the. I think the public advocate's office estimates that the annual subsidy right now from non solar customers.

I did say I didn't want to re litigate this.

Well, but you brought it up, Sammy. So I got to give you the context for your listeners today. The subsidy is $8.5 billion going from non solar to solar customers. So that's an important fact. Right. Moving forward, the states changes in the incentives that are really supporting having solar paired with storage are working. I think in our latest period, something like 80% of solar installations have storage now.

Right. And that's with solar installations as a.

[Sami Roth]

Whole going down quite a bit, although they're stored.

[Pedro Pizarro]

Actually. That's not correct. That's not correct. I have a chart I can show you. Your listeners won't be able to see it, but as we approach the change in the subsidies, we saw a big spike up in installations because people or customers were appropriately trying to get in. Under the older, more attractive program, there was a decline in installations. And we see all the installations because we have to connect them to our system. Right. So there was a pretty steep drop from that inflated peak down to a much lower level. But guess what? Today we're seeing something like close to 5,000 installations per month, which is the number that we were seeing prior to all of that.

[Sami Roth]

But what should happen next? If we need to double the amount.

[Pedro Pizarro]

Of solar that we have in California, what would you recommend? If that's what Edison is projecting at.

A high level, we need to make sure that we have the right size incentive for solar. It has benefits in terms of being clean energy. The Public Utilities Commission should continue to look at what's the right level based on where technology costs are in the future. It's a part of the grid and it's one that we're counting on. It's necessary but is not sufficient.

[Podcast Host]

It's sort of very similar as to being a foster parent. You go in it not for the length of time, but to know that even two months or 10 years can still create a big impact in a child's life. So CASA is a nonprofit organization that stands for Court Appointed Special Advocate and they specialize in, in making sure that the child's needs are met, whether it's medical, health, educational, and ensuring that the child is receiving the most ability they can.

[Pedro Pizarro]

I think in general there's a pretty intense mistrust of utilities in California. And you know, I know that you, as you said, you employ, was it 14,000 people and you're a huge part of the economy. So this isn't everyone clearly, but there's a lot of, there's a lot of folks who are, a lot of the people who are really paying attention to energy and climate issues in California and who are thinking about utilities are doing so because they're unhappy with something again, whether it's their cost of electricity or the fires or they're worked up about rooftop solar. Is there something that Edison can or should be doing to work with a lot of the people or to bridge some of this gap that exists? Because I think it would be a lot easier if there was more trust and less animosity. But I don't think that's really going to happen without some sorts of gestures or acts of goodwill or additional dialogue. And I don't really know what that looks like. Is that something that you think about at all?

Yeah, absolutely. I mean, look, public trust is one of the key things that we need to earn every day from our public. I think customers in the community seeing us trying to do the right big things that are meaningful that are going to move this community forward. I, for example, see this plan we're going to be sharing in a few weeks here on how we plan to rebuild the Malibu and Altadena areas stronger. There have been 6,000 homes lost in Altadena, 5,000 homes lost in the Palisades area. Many of those are in Edison's territory. Helping those communities come back stronger where their grids more resilient and also our engagement then with the community through our charitable activities through donations. Those are all ways in which we show that, hey, we're part of this community. We're not the kind of company that can choose to move headquarters someday and take our poles and wires with us. We've been here almost 140 years. We're going to be here all into the future. And so we just need to roll up our sleeves with the community, whether it's rebuilding Altadena, whether it's doing work like what we put in our general rate case, to build the infrastructure that's needed to be ready for all the electrification that's coming and be reliable and resilient, whether it's, as we think about new technologies that might help us drive our costs further down or at least moderate cost increases into the future. That's all the proof in the pudding for our customers. That's how we build public trust, one step at a time.

You've talked a lot about meeting our clean energy goals in California and our climate goals. How, if at all, do you see the Trump administration making that more difficult? I mean, there's so much news coming out of the federal government, it's hard to keep track of. Is there anything in particular that you're watching as potential roadblocks?

I think across the business community, you are seeing concerns about tariff policy and particularly the volatility, the uncertainty in what tariff policy will ultimately be. So I'm hoping that whatever it ends up being, we have some clarity and the business community can respond. On clean energy, I think there are some things that could be a challenge and also some things that could be helpful with the new administration. On the challenge side, you've heard the president and others in his administration talk about seeking to repeal the inflation Reduction Act.

That's President Biden's climate law.

Correct. And all the clean energy tax credits that are a part of that. Important for your listeners to understand that those tax credits really flow through utility bills, straight through to the customer. And so we're out there advocating for maintaining as many of those credits as possible because they're helping our customers see a lower bill for all the investments that are being made in clean energy and storage, et cetera. Fortunately, you're seeing a number of Republicans also arguing for retention of many of the tax credits. I think Representative Garbarino from New York Republican, recently led the latest letter. I think 21 Republicans sent a letter to the speaker advocating for the retention of many of the tax credits. So that certainly, though, is a challenging area if you see that those credits go away because there's support for customers to help defray the cost of the transition.

I'm guessing now you're going to bring up permitting reform.

You are a mind reader. That's why you're in your job, right? And so yes, citing and permitting reforms, really critical. We came very close to having reforms at the end of the Biden administration through a bipartisan bill, the Barrasso Manchin bill. I actually was in Washington a few weeks ago. I got to talk to a number of senior leaders in Congress and there's a lot of interest in addressing signing and permitting reform.

But you don't think with Republicans in charge of both branches and Trump in the White House, it's just going to be make it easier to build fossil fuel stuff and don't do anything for clean stuff.

I've heard President Trump speak directly about electricity and I think the administration understands that we are seeing unprecedented electric demand growth.

I guess they do like AI in data centers.

Well, it's three things, Sammy. It's AI and data centers is what people focus on a lot. We have some of that in California. It's manufacturing right now. President Biden tried to encourage US Manufacturing through the Chips and Science act to the infrastructure law. President Trump is trying to get there through tariffs. Whichever way you get there, we are seeing more manufacturing build that in the United States, probably less so in California given our high cost position. Then the third thing is just broad electrification, which we see a lot of. That's probably the biggest driver for us in California. However you get there, there's a recognition by the president and the administration that you will need more electric infrastructure and that needs to get cited and permitted. Now, I don't think we're going to see activity in Congress in the next few months because first they need to get a budget, so they need to get to the reconciliation process and all of that. But what we've been hearing is that within the next six to 12 months we may see some bandwidth in Congress to turn towards this and that electricity. It's an understood need in that kind of reform. So I'm more optimistic about that one.

Bill in the legislature this year that has caught my attention, AB 1167. And I don't know if that one is on your radar screen because there's hundreds of bills. It's from Assemblymember Mark Berman and it's a bill that would basically close what some climate advocates see as a loophole, some clean energy advocates see as a loophole, where PG and E in particular, I think more so than you guys had faced some criticism for running advertisements on TV that they call promotion. They call public safety campaigns. Critics call them promotional to advertise PG&E. And those are charged to ratepayers right now. And the critics say, no, these should be charged to shareholders. This bill would stop them and you guys and SDG and E from doing anything like that. And I believe all three IOUs, the you guys and PG&E and SDG&E opposed a similar version of this bill last year. And this is. There are some tweaks, but it's a little bit of a rerun of this bill, I guess. I want to maybe close with this question because this seems to be one where I find myself wondering, if it's not that much money and it's not that big a deal, why oppose a bill like this? What's your thinking on a question like this one? Because it seems like something where you could win some goodwill by just saying, sure, we promise not to do that.

The reason we oppose that is that that's already the policy of the Public Utilities Commission. We don't run ads. I won't speak for other utilities. We do not run ads that are about our brand image or shareholder interest and then try and charge customers for that. Just not something we do. It's something that PUC does not allow. In fact, I recall that there was a case with another utility where it was alleged that they had done that and the PUC came and chased them for it appropriately. And so I do think, and this is kind of very straight view of how government works, we should have new laws when they actually do something new that's needed and not just pile up the law books with laws that are being repetitive. I think that was the. If I recall correctly, with apologies if I don't, that's the source of the opposition. More broadly, though, Sammy, we've talked a lot during the last hour about public trust. I take that really seriously. I have the privilege of having this job. It's crazy that, you know, I have this job.

I feel the same way about my job, by the way.

And you should. I mean, you have an amazing job and you do a great, great job with it, Sammy. It's a privilege to have my role. I also recognize that I can take what I think is a lot of goodwill that we feel from the public towards Edison. And I agree with you. A lot of folks who don't like certain things, nobody. Nobody's ever loved by everybody. Right. But in general, I appreciate that. I think we have decent sense of understanding and support from a lot of our public. Sami, as CEO of the corporation that owns Southern California Edison, I can evaporate that in 30 seconds. Something I keep in mind when I was in front of the cameras immediately after the Eaton fire. You realize that it's such a difficult moment for our community and there's so much pain. And yeah, there's a possibility that our equipment was involved there in spite of all of our efforts. But I feel a personal responsibility to make sure that we are leveling with the public and being honest. And to me, that ultimately is the source of public trust. People might agree with us in some topics, they might disagree with us in others, but if they at least know that we're going to be honest and speak our minds and be trying to do the right thing at all times, I think that's what you could ask for.

Pedro, thank you very much for being with us on the Boiling Point podcast.

Thanks for having me, Sam. Always great chatting with you.

[Sami Roth]

One more thing you might remember I asked Pedro whether California should move up its deadline for 100% clean electricity from 2045 to sometimes sooner. I'm planning to write a column about that topic in the next month or.

[Pedro Pizarro]

So, so keep an eye out. If you want to get my columns.

[Sami Roth]

In your inbox, just go to latimes.com boilingpoint to sign up again. That's latimes.com boilingpoint thanks for reading. Thank you for listening to Boiling Point. I'm your host, Sammy Roth. My producers are Mary Knauff and Jonathan Shifflett. Sound design and original music by Jonathan Shiflett. Elijah Wolfson is our editor. Denise Callahan is our studio manager. Ben Church is our Production manager. Nick Norton is our engineer. Special thanks to LA Times Studio President Anna Magzanian, President and Chief Operating Officer of the Los Angeles Times, Chris Argentieri, and Executive Editor of the Los Angeles Times, Terry Tang. Boiling Point is executive produced by Darius Derek Shon and created by me, Sami Roth.