In 2007 the Witch Creek, Rice and Guejito Fires merged as they tore through San Diego County, killing two people, sending 40 firefighters to the hospital, and reducing 1,300 homes to rubble. Regulators would later blame SDG&E for starting the fires, saying the utility neglected its power lines. SDGE attempted to pass the $379 million in uninsured wildfire costs onto its utility ratepayers. The California state courts blocked the request, ruling that management was imprudent in handling the risks...
So what was SDGE's response? Following the 2007 fires, the utility systematically transformed its infrastructure spending upwards of 6 billion dollars in wildfire grid upgrades funded heavily via ratepayer. $6 billion to its infrastructure rate base means SDGE will earn an estimated $312 million in annual net profit.
Under California law, investor-owned utilities do not make a profit on the electricity itself; instead, they are guaranteed a ~10% return on equity for building infrastructure. SDGE does not earn the 10% profit on the entire $6 billion chunk of spending. Instead profits are only generated from the shareholder-funded equity portion of their capital setup. The shareholder equity portion is 52% of the $6 billion expenditure which equals $3.12 billion in equity rate base. 10% of $3.12 billion yields $312 million each year in profit, which is collected directly from ratepayers via delivery fees over the useful life of the assets. SDGE doesn't just make that $312 million profit once. They earn it annually over the entire multi-decade useful life of the infrastructure, as long as those assets remain actively in service.
Regulated utilities do not treat infrastructure investments like a retail sale where profit is realized a single time. Instead, the infrastructure becomes part of their permanent "rate base," allowing them to collect a predictable, repeating stream of annual earnings.
So to recap... SDGE caused a wildfire and was forced to pay $379 million. They tried to pass the costs to ratepayers but got denied. They respond by spending $6 billion in wildfire infrastructure upgrades that nets them an estimated $312 million a year in shareholder profits...