Six years ago, Pacific Gas & Electric filed for bankruptcy after it was found liable for sparking a succession of devastating wildfires, including the blaze that destroyed the town of Paradise and led to more than 100 deaths.

Wall Street investors lost confidence and ratings agencies threatened to downgrade California’s investor-owned utilities, prompting legislators to come up with an innovative solution: the establishment of a $21-billion wildfire fund, split equally between shareholders and utility customers.

Now, after two major wildfires have destroyed thousands of homes and left at least two dozen dead in and around Los Angeles, the state’s wildfire fund would face its first major test if another utility is found liable for sparking the blazes.

Even the lawmaker who spearheaded legislation to set up the wildfire fund is not sure whether his efforts to mitigate the risk to utility companies — allowing them to keep functioning in a state prone to escalating risk of wildfires — is enough.

“This is the most profound test case that the fund will potentially be up against,” said Christopher Holden, a former Democratic legislator who sponsored the bill that created the fund. “This is a new frontier,” said Holden, who lives in Pasadena and had to evacuate during the Eaton fire.

“It was a new frontier when we wrote the bill — and now, just five years later, we’re going through another frontier.”

If investigators determine that a utility company caused the Eaton or Palisades fire, it could send shock waves across the utility industry and the broader insurance market.

Mark Toney, executive director of TURN, The Utility Reform Network, said the massive scope of the L.A. County fires raised significant questions about the fund’s ability to cover insurance liability. Even if the fund is able to bail out utility companies for the fires, it’s uncertain whether it could then cover fires that may crop up in the future.

“Will the fund work right?” Toney said. “Who ends up paying?”

The causes of the fires have yet to be determined.

Investigators looking into the Eaton fire — which caused at least 17 fatalities and damaged an estimated 7,000 structures across Pasadena and Altadena — are focusing on an area around a Southern California Edison electrical transmission tower in Eaton Canyon.

Edison has denied fault in the Eaton fire. In a statement to The Times, the company said that its work to mitigate wildfires had cut the risk of catastrophic fires by 85% to 90% compared with the risk before 2018.

The Los Angeles Department of Water and Power, the municipal utility that operates in Pacific Palisades, says it did not opt into the wildfire fund because it would have been too costly for its customers. If the large municipal utility was liable for the Palisades fire, the city of L.A. could face exorbitant financial costs.

But sources with knowledge of the investigation have told The Times that the fire, which started in the Skull Rock area north of Sunset Boulevard, appears to have human origins. Officials are looking into whether a small fire possibly sparked by New Year’s Eve fireworks could somehow have rekindled Jan 7.

Michael Wara, an energy and climate scholar at Stanford University, said the state’s entire insurance landscape, not just California’s wildfire fund, might have to be recalibrated if a utility company were found to have caused a major L.A. fire.

“The big question is how available and affordable is overall insurance?” said Wara, who has served on the California Catastrophe Response Council, the fund’s oversight body. “California, I think, is going to face greater challenges than it has over even the last few years, when it hasn’t been easy for its primary insurers and other entities to access these global reinsurance markets that fund losses after a catastrophe.”

Under California law, utility companies are strictly liable for all damages to real property associated with a fire, including houses.

The wildfire fund is a new model in which the state’s three big owner-operated utility companies — Pacific Gas & Electric Co., San Diego Gas & Electric Co. and Southern California Edison — pay into a fund, which they can then tap into if their equipment is determined to have caused a blaze. When that happens, they are responsible, on their own, for the first $1 billion of losses. After that, the wildfire fund will pay.

“If the wildfire fund did not exist today, Edison might be in real trouble,” Wara said. “We would see something probably similar to what happened to PG&E after the Camp fire.”

Back then, Wara said, utilities were held to a standard of strict liability: If electrical equipment was found to have caused the fire, they were on the hook.

Now, if Edison is ultimately held responsible, Wara said, the company can go to the wildfire fund and get money.

“That’s really important in terms of making sure that the victims are made whole, at least for their property losses,” he said.

Although it is too soon to estimate the damage of the Eaton fire, Wara said thousands of structures have been lost in an area where the average home value is around $1.3 million. Costs, he said, could reach $10 billion.

If officials find that Edison caused the fire but acted responsibly, Wara said, as much as half of the fund’s $21 billion could be depleted.

“That’s half the fund in one fire — five years into the life of the fund,” said Wara, who has served as a wildfire commissioner for California and a member of the California Catastrophe Response Council, the oversight body of the California wildfire fund.

The problem is compounded by the fact that the wildfire fund has so far amassed only $14 billion, because utility companies cannot immediately expect ratepayers to pay their share of half the $21 billion.

“If you are an investor in PG&E or Edison, you might look at this and think, ‘Hmm, I thought the fund was big enough. Maybe now I’m not so sure.’ The fund is there to provide confidence. If the fund isn’t big enough, there will be less confidence.”

The California Department of Forestry and Fire Protection, or Cal Fire, will lead the investigation into what caused the fires.

Then, the California Public Utility Commission determines whether the utility company acted reasonably or unreasonably and, if so, to what degree.

If a utility was found to have failed to act prudently, Wara said, it would have to reimburse the fund. The amount it would pay, however, is capped on the size of the reimbursement relative to the size of their rate base.

Edison International Chief Executive Pedro Pizarro told Bloomberg Television that state regulations allowed the company’s holder liability to be capped at $3.9 billion.

“The reason the cap is there is if Edison is reimbursing the fund, that’s basically electricity customers reimbursing the fund,” Wara said. “Edison will go to the California Utility Commission and say, ‘We need this money to be expensed in rates.’”

The fund would also have to pay for wrongful deaths, Wara said, but that’s a different kind of claim.

“You have to show negligence, and that may be hard to prove, actually, because Edison may have acted reasonably, and yet the fire still was set by their equipment,” Wara said. “Edison would have a lot of reason to claim that it has acted reasonably, in a sense that it has spent enormous sums to try to reduce the risk, and there’s an agency that’s overseeing all of this and approving and monitoring compliance with its plans.”

Still, even if the wildfire fund bailed out Edison, there could be grave consequences for Edison and other utility companies. If a large portion of the wildfire fund’s $21 billion was depleted, that could affect market perception of the fund, negatively affect utility company credit scores, and plunge investor-owned utilities — which cover about 80% customers across the state of California — into chaos.

On Tuesday afternoon, shares for Edison International, the utility’s parent company, rose less than 1% to $57.27, marking a more than 24% drop in the week since the fires broke out. That represents a more than $7 billion decline in the company’s market cap.

“If the [utility] market collapses, then we’ve got a catastrophic situation,” Holden said. “We have to secure the market going forward.”

Last fall, state regulators criticized Southern California Edison for falling behind in inspecting transmission lines in areas at high risk of wildfires.

Utility safety officials also said in a report that the company’s visual inspections of splices in its transmission lines were sometimes failing to find dangerous problems.

“We have not seen in our telemetry any indication of an electrical anomaly,” Edison International CEO Pedro Pizarro said Monday on Bloomberg Television. “Typically, when you have a fire across infrastructure, you see voltage dropping. We have not seen that in our study.”

Pizarro said Edison had turned off distribution lines near the start of the Eaton blaze before it erupted in a canyon near Altadena, but not the transmission lines. “Transmission lines are larger and stronger,” he said, “and so they can operate safely at higher wind speeds.”

Several of California’s most destructive wildfires in the last decades have been caused by aging electrical equipment. The 2018 Camp fire was caused by 100-year-old high voltage transmission towers. The 2019 Kincade fire was caused by a line built half a century ago. It may be the case, Wara said, that California’s older utility infrastructure, even when inspected, is not up to the job.

“A lot of the transmission system in California is quite old,” Wara said. “There were pulses of construction activity that led to the system we have and the last big one was when Pat Brown was governor.. .If something failed on that tower that caused ground faults, at some point we need to ask ourselves… maybe we shouldn’t be relying on old infrastructure?”

In an era when hurricane-force winds can whip up wildfires that engulf vast areas, Toney questioned whether it made sense for a utility company to be responsible for the fate of every home. Wildfires, he said, are caused not just by faulty utility equipment, but by lightning, arson, even legal fireworks, and then fueled by poor development and insufficient cutting back of vegetation and landscaping.

“It’s a mistake just to isolate utility,” Toney said. “It’s time for a new paradigm. When it comes to the cost of rebuilding, the utilities may not be big enough.”

No one can be surprised that Republicans are hoping to exploit their Washington trifecta — the White House and majority control of the House and Senate — by implementing vast federal budget cuts in order to save their 2017 tax cuts from expiration.

Now we’re beginning to see some meat on the bare bones of GOP policies, thanks to a “menu” of fiscal policy reforms recently leaked to Politico.

The one-page document, which Politico reports was produced by the House Budget Committee chaired by Rep. Jodey Arrington (R-Texas), lists dozens of cutbacks adding up to supposed savings of as much as $5.7 trillion over 10 years.

The primary near-term goal appears to be staving off the expiration next year of the 2017 tax cuts, which disproportionately benefited corporations and the wealthy.

Many of these proposals are vague, presumably deliberately, though the drafters surely know the details. The ideas tend to match proposals that have been advanced by congressional Republicans in the past, and include some that were implemented by the first Trump administration and reversed or dropped by the Biden White House.

The main targets, moreover, are programs that the GOP has advocated paring back or eliminating for years, such as Medicaid, the Affordable Care Act and food stamps. Cuts in some programs are described in the “menu” under misleading headings.

Proposals that would cut Medicaid benefits or eligibility for thousands of Americans are titled “Making Medicaid Work for the Most Vulnerable.” A sheaf of proposals to raise costs for Obamacare enrollees comes under the anodyne heading, “Reimagining the Affordable Care Act.”

Arrington hasn’t commented publicly on the leaked document. His committee hasn’t responded to my request for comment. But he has made his name as a budget hawk: “We ought to be able to unleash growth through tax cuts,” he told the Wall Street Journal after the November election, “and we ought to be able to bend the spending curve.”

How many of these proposals can actually be enacted by the current Congress is unclear, since the GOP majority is narrow in the Senate and razor-thin in the House. Some proposals could hit hard in states and districts represented by Republicans. But the theme of the proposals is unmistakable — safety net programs and several Biden initiatives are on the chopping block.

Let’s examine some of the lowlights:

—Medicaid: Hostility to this federal-state program, which provides healthcare for low-income households, is a Republican hobbyhorse.

The proposal would change Medicaid into a block-grant program that provides federal assistance to states based on their population. As I’ve reported in the past — including when Trump proposed the change during his first campaign for office — block grants are just budget cuts in disguise. They’re invariably aimed at antipoverty programs.

Block-granting Medicaid would sap states’ ability to respond to changing conditions driving up healthcare spending, such as the COVID pandemic. The committee asserts that this change would yield as much as $918 billion in savings over 10 years. That’s the equivalent of about 15% of the federal share of Medicaid spending — potentially a major hit to state budgets.

The committee also advocates paring back the federal share of Medicaid spending on enrollees signed up under the ACA’s Medicaid expansion, which brought childless low-income adults into the program, to the percentage paid under traditional Medicaid. The ACA set the federal share for Medicaid expansion at 90% of costs.

The federal share in traditional Medicaid averages about 69% but varies by state, from a minimum of about 60% to a maximum of 83%. So this change, which the committee pegs at a 10-year savings of $690 billion, would place a further strain on state budgets. The proposal also would reduce the federal share of Medicaid administrative expenses, set by law at no less than 50%.

The committee also advocates imposing work requirements on Medicaid recipients. It claims that this would save $120 billion over a decade, but that could be achieved only by throwing thousands of enrollees out of the program. We know this because that’s exactly what happened when Arkansas tried it during the first Trump term.

The work rules did nothing to reduce joblessness, exacerbated a healthcare crisis, and raised administrative costs for the state. The Arkansas program was overturned by a federal judge, who also blocked other red states from proceeding. The Republican love for this policy despite ample evidence of its failure remains a mystery.

—Public assistance: Republican attacks on the most economically vulnerable Americans continue apace. The committee proposes reducing federal spending on Temporary Assistance for Needy Families (TANF), the federal-state program generally described as “welfare,” by 10%, to produce $15 billion in savings over a decade.

This is nothing but a cruel hit on America’s most desperate households. In no state do TANF benefits reach even 60% of the poverty level for a family of three. In 17 states — mostly those with large Black populations — they’re below 20% of the poverty level. In all but 11 states including California, according to the Center on Budget and Policy Priorities, TANF benefits were eroded by inflation between 1996 and 2023, sometimes by more than half.

A related proposal would reinstate the tightened standards for the “public charge” rule instituted in the first Trump term. This malevolent policy was aimed at immigrants by denying them entry or improvement in their immigration status if they were thought likely to access public assistance programs.

Trump added Medicaid and other noncash programs to the traditional roster of cash programs such as food stamps as signs the recipients would become a public charge.

As then-California Atty. Gen. Xavier Becerra noted at the time, the change was designed not only to throw millions of people out of public assistance programs, but also to have a chilling effect that would keep people who need healthcare and other help from seeking it. The Trump rule succeeded in doing so, according to an analysis by KFF; it was rescinded by Biden.

The menu lists “SNAP reforms” as the source of $22 billion in savings over a decade. It doesn’t specify the “reforms” sought in the food stmp program, but simple math suggests that they would involve either throwing people out of the program or reducing benefits, which currently average $6-$7 a day per person.

—The Biden Agenda: Other elements of the GOP menu take aim at key initiatives passed under Biden, including many that had bipartisan support.

It proposes dropping the green-energy provisions of the 2021 infrastructure bill, which included funding to modernize the nation’s public transit systems, building a national network of electric vehicle chargers and converting thousands of school buses to electric energy. The committee claims this would save $300 billion over 10 years, but since much of this spending is going to red states and conservative districts, rescinding it might be a tough lift for the GOP.

—The coming emergencies: The committee proposes to place restrictions on emergency spending — limiting the spending to the “recent average” to produce $500 billion in savings over a decade. This sounds like the elevation of hope over reality, since recent emergencies include not only the California fires, but tropical storms that leveled whole communities from Florida and Louisiana to Tennessee, North Carolina and Pennsylvania last year. Mother Nature, plainly, doesn’t pay much attention to budgetary posturing. Global warming is likely to raise the cost of emergency relief, not reduce it.

Politics as well as natural conditions will get in the way of these policies’ implementation. But it’s worth knowing what the Republicans aspire to achieve, and assessing their intentions.