Regardless, for such a vast system wildfires are to some extent inevitable. From a macroscopic perspective a poorly maintained tower is just as foreseeable as an arsonist or an overheating car that pulls onto the side of the highway. And at some point the marginal cost of prevention far exceeds the marginal reduction in risk. In other words, a some point we just need to accept the risk.

To the extent we require PG&E to be perfectly diligent, then we incentivize people to build their houses with matchsticks.

It's annoying when people get upset about California "bailing out" PG&E. As a regulated utility PG&E can't control the prices they charge users, nor do they have any power over, e.g., building regulations that would minimize damages. In a free market for PG&E to completely internalize (and minimize) the fire hazards they create, electricity prices would almost certainly be politically unviable, particularly in remote communities.

No matter what we do the costs of these fires will be socialized. PG&E is a heavily regulated public utility. The time to punish PG&E is when they fail to abide by regulations, not after big fires.

As a society we've already decided on the principle mechanism for incentivizing diligent behavior on the part of PG&E. When big fires happen we'd be better off emphasizing remediations like changing building codes (including requiring retractive remediation), and maybe tightening PG&E regulations. But of course it's far easier and more politically expedient to simply blame PG&E outright. And the politicians who understand this dilemma? We blame them for being corrupt for not doing the "obviously right" thing. And this is why politics is broken; because we refuse to accept that there are trade-offs, that no matter what we do bad things happen, people will get hurt, and we have to make difficult decisions about maximizing equality (sic) while trying to avoid moral hazard.