Compass Lexecon Valuation Methodologies Provide the Foundation of Southern California Edison’s First-of-its-Kind Wildfire Recovery Compensation Program

On October 29, 2025, Compass Lexecon client Southern California Edison (SCE) launched its Wildfire Recovery Compensation Program for victims of the Eaton Fire. The fire destroyed more than 5,000 homes and many businesses in and around Altadena, CA in January 2025. The goal of the program is to accelerate reconstruction of the Altadena community, and it is the first of its kind to offer wildfire victims an expedited and individualized path to recovery. This voluntary program enables eligible individuals and businesses to receive settlement offers within 90 days of submitting a claim, or to opt for a more detailed review.

The program relies on valuation methodologies developed by Compass Lexecon, which implemented sophisticated machine learning algorithms and statistical models to estimate the pre-fire value, post-fire value, and diminution in value (DIV) of residences destroyed in the fire, as well as related losses suffered by claimants. SCE retained RAND, a leading non-profit research organization, to review and evaluate Compass Lexecon’s analysis before launching the program. RAND concluded that “the data and methods that were used by Compass Lexecon to estimate the pre-fire, post-fire, and DIV values for SFRs destroyed in the Eaton Fire were appropriate. The analyses used modern statistical methods and, in our judgment, were thoughtfully done and well executed.”

Compass Lexecon’s work on this matter is ongoing, and is led by Hal Sider, Evan McKay, Otto Hansen, Bill Kluender, and Mallika Arora. Magne Mogstad, the Gary S. Becker Distinguished Service Professor in the Department of Economics at the University of Chicago, also advised on the project. Compass Lexecon worked closely with Belynda Reck, Jennifer Hayden, Brendan Bond, and Christine Qin at SCE.