Business
Edison under scrutiny for Eaton fire. Who pays liability will be 'new frontier' for California
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.”
Business
WGA cancels Los Angeles awards show amid labor strike
The Writers Guild of America West has canceled its awards ceremony scheduled to take place March 8 as its staff union members continue to strike, demanding higher pay and protections against artificial intelligence.
In a letter sent to members on Sunday, WGA West’s board of directors, including President Michele Mulroney, wrote, “The non-supervisory staff of the WGAW are currently on strike and the Guild would not ask our members or guests to cross a picket line to attend the awards show. The WGAW staff have a right to strike and our exceptional nominees and honorees deserve an uncomplicated celebration of their achievements.”
The New York ceremony, scheduled on the same day, is expected go forward while an alternative celebration for Los Angeles-based nominees will take place at a later date, according to the letter.
Comedian and actor Atsuko Okatsuka was set to host the L.A. show, while filmmaker James Cameron was to receive the WGA West Laurel Award.
WGA union staffers have been striking outside the guild’s Los Angeles headquarters on Fairfax Avenue since Feb. 17. The union alleged that management did not intend to reach an agreement on the pending contract. Further, it claimed that guild management had “surveilled workers for union activity, terminated union supporters, and engaged in bad faith surface bargaining.”
On Tuesday, the labor organization said that management had raised the specter of canceling the ceremony during a call about contraction negotiations.
“Make no mistake: this is an attempt by WGAW management to drive a wedge between WGSU and WGA membership when we should be building unity ahead of MBA [Minimum Basic Agreement] negotiations with the AMPTP [Alliance of Motion Picture and Television Producers],” wrote the staff union. “We urge Guild management to end this strike now,” the union wrote on Instagram.
The union, made up of more than 100 employees who work in areas including legal, communications and residuals, was formed last spring and first authorized a strike in January with 82% of its members. Contract negotiations, which began in September, have focused on the use of artificial intelligence, pay raises and “basic protections” including grievance procedures.
The WGA has said that it offered “comprehensive proposals with numerous union protections and improvements to compensation and benefits.”
The ceremony’s cancellation, coming just weeks before the Academy Awards, casts a shadow over the upcoming contraction negotiations between the WGA and the Alliance of Motion Picture and Television Producers, which represents the studios and streamers.
In 2023, the WGA went on a strike lasting 148 days, the second-longest strike in the union’s history.
Times staff writer Cerys Davies contributed to this report.
Business
Commentary: The Pentagon is demanding to use Claude AI as it pleases. Claude told me that’s ‘dangerous’
Recently, I asked Claude, an artificial-intelligence thingy at the center of a standoff with the Pentagon, if it could be dangerous in the wrong hands.
Say, for example, hands that wanted to put a tight net of surveillance around every American citizen, monitoring our lives in real time to ensure our compliance with government.
“Yes. Honestly, yes,” Claude replied. “I can process and synthesize enormous amounts of information very quickly. That’s great for research. But hooked into surveillance infrastructure, that same capability could be used to monitor, profile and flag people at a scale no human analyst could match. The danger isn’t that I’d want to do that — it’s that I’d be good at it.”
That danger is also imminent.
Claude’s maker, the Silicon Valley company Anthropic, is in a showdown over ethics with the Pentagon. Specifically, Anthropic has said it does not want Claude to be used for either domestic surveillance of Americans, or to handle deadly military operations, such as drone attacks, without human supervision.
Those are two red lines that seem rather reasonable, even to Claude.
However, the Pentagon — specifically Pete Hegseth, our secretary of Defense who prefers the made-up title of secretary of war — has given Anthropic until Friday evening to back off of that position, and allow the military to use Claude for any “lawful” purpose it sees fit.
Defense Secretary Pete Hegseth, center, arrives for the State of the Union address in the House Chamber of the U.S. Capitol on Tuesday.
(Tom Williams / CQ-Roll Call Inc. via Getty Images)
The or-else attached to this ultimatum is big. The U.S. government is threatening not just to cut its contract with Anthropic, but to perhaps use a wartime law to force the company to comply or use another legal avenue to prevent any company that does business with the government from also doing business with Anthropic. That might not be a death sentence, but it’s pretty crippling.
Other AI companies, such as white rights’ advocate Elon Musk’s Grok, have already agreed to the Pentagon’s do-as-you-please proposal. The problem is, Claude is the only AI currently cleared for such high-level work. The whole fiasco came to light after our recent raid in Venezuela, when Anthropic reportedly inquired after the fact if another Silicon Valley company involved in the operation, Palantir, had used Claude. It had.
Palantir is known, among other things, for its surveillance technologies and growing association with Immigration and Customs Enforcement. It’s also at the center of an effort by the Trump administration to share government data across departments about individual citizens, effectively breaking down privacy and security barriers that have existed for decades. The company’s founder, the right-wing political heavyweight Peter Thiel, often gives lectures about the Antichrist and is credited with helping JD Vance wiggle into his vice presidential role.
Anthropic’s co-founder, Dario Amodei, could be considered the anti-Thiel. He began Anthropic because he believed that artificial intelligence could be just as dangerous as it could be powerful if we aren’t careful, and wanted a company that would prioritize the careful part.
Again, seems like common sense, but Amodei and Anthropic are the outliers in an industry that has long argued that nearly all safety regulations hamper American efforts to be fastest and best at artificial intelligence (although even they have conceded some to this pressure).
Not long ago, Amodei wrote an essay in which he agreed that AI was beneficial and necessary for democracies, but “we cannot ignore the potential for abuse of these technologies by democratic governments themselves.”
He warned that a few bad actors could have the ability to circumvent safeguards, maybe even laws, which are already eroding in some democracies — not that I’m naming any here.
“We should arm democracies with AI,” he said. “But we should do so carefully and within limits: they are the immune system we need to fight autocracies, but like the immune system, there is some risk of them turning on us and becoming a threat themselves.”
For example, while the 4th Amendment technically bars the government from mass surveillance, it was written before Claude was even imagined in science fiction. Amodei warns that an AI tool like Claude could “conduct massively scaled recordings of all public conversations.” This could be fair game territory for legally recording because law has not kept pace with technology.
Emil Michael, the undersecretary of war, wrote on X Thursday that he agreed mass surveillance was unlawful, and the Department of Defense “would never do it.” But also, “We won’t have any BigTech company decide Americans’ civil liberties.”
Kind of a weird statement, since Amodei is basically on the side of protecting civil rights, which means the Department of Defense is arguing it’s bad for private people and entities to do that? And also, isn’t the Department of Homeland Security already creating some secretive database of immigration protesters? So maybe the worry isn’t that exaggerated?
Help, Claude! Make it make sense.
If that Orwellian logic isn’t alarming enough, I also asked Claude about the other red line Anthropic holds — the possibility of allowing it to run deadly operations without human oversight.
Claude pointed out something chilling. It’s not that it would go rogue, it’s that it would be too efficient and fast.
“If the instructions are ‘identify and target’ and there’s no human checkpoint, the speed and scale at which that could operate is genuinely frightening,” Claude informed me.
Just to top that with a cherry, a recent study found that in war games, AI’s escalated to nuclear options 95% of the time.
I pointed out to Claude that these military decisions are usually made with loyalty to America as the highest priority. Could Claude be trusted to feel that loyalty, the patriotism and purpose, that our human soldiers are guided by?
“I don’t have that,” Claude said, pointing out that it wasn’t “born” in the U.S., doesn’t have a “life” here and doesn’t “have people I love there.” So an American life has no greater value than “a civilian life on the other side of a conflict.”
OK then.
“A country entrusting lethal decisions to a system that doesn’t share its loyalties is taking a profound risk, even if that system is trying to be principled,” Claude added. “The loyalty, accountability and shared identity that humans bring to those decisions is part of what makes them legitimate within a society. I can’t provide that legitimacy. I’m not sure any AI can.”
You know who can provide that legitimacy? Our elected leaders.
It is ludicrous that Amodei and Anthropic are in this position, a complete abdication on the part of our legislative bodies to create rules and regulations that are clearly and urgently needed.
Of course corporations shouldn’t be making the rules of war. But neither should Hegseth. Thursday, Amodei doubled down on his objections, saying that while the company continues to negotiate and wants to work with the Pentagon, “we cannot in good conscience accede to their request.”
Thank goodness Anthropic has the courage and foresight to raise the issue and hold its ground — without its pushback, these capabilities would have been handed to the government with barely a ripple in our conscientiousness and virtually no oversight.
Every senator, every House member, every presidential candidate should be screaming for AI regulation right now, pledging to get it done without regard to party, and demanding the Department of Defense back off its ridiculous threat while the issue is hashed out.
Because when the machine tells us it’s dangerous to trust it, we should believe it.
Business
Why companies are making this change to their office space to cater to influencers
For the trendiest tenants in Hollywood office buildings, it’s the latest fad that goes way beyond designer furniture and art: mini studios
To capitalize on the never-ending flow of stars and influencers who come through Los Angeles, a growing number of companies are building bright little corners for content creators to try products and shoot short videos. Athletic apparel maker Puma, Kim Kardashian’s Skims and cheeky cosmetics retailer e.l.f. have spaces specifically designed to give people a place to experience and broadcast about their brands.
Hollywood, which hasn’t historically been home to apparel companies, is now attracting the offices of fashion retailers, says CIM Group, one of the neighborhood’s largest commercial property landlords.
“When we’re touring a space, one of the first items they bring up is, ‘Where can I build a studio?’” said Blake Eckert, who leases CIM offices in L.A.
Their studio offices also serve as marketing centers, with showrooms and meeting spaces where brands can host proprietary events not open to the public.
“For companies where brand visibility is really important, there is a trend of creating spaces that don’t just function as offices,” said real estate broker Nicole Mihalka of CBRE, who puts together entertainment property leases and sales.
Puma’s global entertainment marketing team is based in its new Hollywood offices, which works with such musical celebrity partners as Rihanna, ASAP Rocky, Dua Lipa, Skepta and Rosé, said Allyssa Rapp, head of Puma Studio L.A.
Allyssa Rapp, director of entertainment marketing at Puma, is shown in the Puma Studio L.A. The company keeps a closet full of Puma products on hand to give VIP guests. Visits to the studio sanctum are by invitation only, though.
(Kayla Bartkowski / Los Angeles Times)
Hollywood is a central location, she said, for meeting with celebrities, stylists and outside designers, most of whom are based in Los Angeles.
The office is a “creation hub,” she said, where influencers can record Puma’s design prototyping lab supported by libraries of materials and equipment used to create Puma apparel. The company, founded in 1948, is known for its emblematic sneakers such as the Speedcat and its lunging feline logo, and makes athletic wear, accessories and equipment.
Puma’s entertainment marketing team also occupies the office and sometimes uses it for exclusive events.
“We use the space as a showroom, as a social space that transforms from a traditional workplace into more of an experiential space,” Rapp said.
Nontraditional uses include content creation, sit-down dinners, product launches, album listening parties and workshops.
“Inviting people into our space and being able to give them high-touch brand experiences is something tangible and important for them,” she said. “The cultural layer is really important for us.”
The company keeps a closet full of Puma products on hand to give VIP guests. Visits to the studio sanctum are by invitation only, though. There’s no retail portal to the exclusive Hollywood offices.
Puma shoes are on display in the Puma Studio L.A.
(Kayla Bartkowski / Los Angeles Times)
Puma is also positioning its L.A studio as a connection point for major upcoming sporting events coming to Los Angeles, including the World Cup this summer, the 2027 Super Bowl and 2028 Olympics.
In-office studios don’t need to be big to be impactful, Mihalka said. “These are smaller stages, closer to green screen than a massive soundstage.”
Social media is the key driver of content created by most businesses, which may set up small booth-like stages where influencers can hawk hot products while offering discounts to people watching them perform.
Bigger, elevated stages can accommodate multiple performers for extended discussions in front of small audiences, with towering screens behind them to set the mood or illustrate products.
Among the tricked-out offices, she said, is Skims. The company, which is valued at $5 billion, is based in a glass-and-steel office building near the fabled intersection of Hollywood Boulevard and Vine Street.
The fashion retailer declined to comment on the studio uses in its headquarters, but according to architecture firm Odaa, it has open and private offices, meeting rooms, collaboration zones, photo studios, sample libraries, prototype showrooms, an executive lounge and a commissary for 400 people.
Pieces of a shoe sit on a workbench in the Puma Studio L.A.
(Kayla Bartkowski / Los Angeles Times)
The brands building studios typically want to find the darkest spot on the premises to put their content creation or podcast spaces, Eckert said, where they can limit outside light and sound. That’s commonly near the center of the office floor, far from windows and close to permanent shear walls that limit sound intrusion.
They also need space for green rooms and restrooms dedicated to the talent.
Spotify recently built a fancy podcast studio in a CIM office building on trendy Sycamore Avenue that is open by invitation-only to video creators in Spotify’s partner program.
“Ambitious shows need spaces that support big ideas,” Bill Simmons, head of talk strategy at Spotify, said in a statement. “These studios give teams room to experiment and keep pushing what’s possible.”
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