That’s right—a buck. It also was installed more than 100 years ago in 1921 before the PG&E as we know it today came into existence. The raging blaze that the sparking wires set off killed 85 people and cost $442 billion. It also resulted in felony convictions in Butte County for PG&E.
Just how the utility ended up in this situation is detailed carefully in “California Burning,” a book by Wall Street Journal reporter Katharine Blunt. Blunt had written extensively about the wildfires and utilities for the Journal before doing plenty research to put together the book.
She discussed it on a recent WSJ webinar, laying out her findings including the failures of the company as well as the regulators.
One of the basic challenges is how regulators set rates of return for investor-owned utilities. The returns are based on capital investment, not day-to-day operations. The incentive becomes to drive down operating costs, including maintenance, to maximize capital that provides investor returns. That incentivized the utlilities to limit maintenance expenses. The power lines that sparked the Camp Fire were inspected by helicopter, which is efficient and questionable if you’re looking for small parts. The small parts would have been called out, but that assumed good record keeping for 100 years.
The confluence of a variety of changes and decisions over the last 30 years put PG&E into bankruptcy once and then again after wildfire costs soared. The hastily passed utility deregulation that drove up power costs set up the first one.
When the gas pipeline exploded in San Bruno in 2010, killing eight people and destroying a neighborhood, the investigation revealed just how poor the company’s maintenance was as well as its records. It paid more than $2 billion to settle claims resulting from the deadly explosion.
It turned out, Blunt said, that the same maintenance issues were becoming evident on the electrical site.
Two other trends were making it even more challenging:
1, The state’s increasingly aggressive push for green power---solar and wind—that is significantly more expensive than fossil fuels. The Legislature and regulators pushed the utility to enter into expensive long term contracts.
2. All the responsible parties did not foresee the long term drought that has gripped the state, drying forests and killing trees, as well as the effects of climate change. Regulators and utilities in Southern California had long understood their problem with wildfires driven by Santa Ana winds, but there wasn’t considered much of a threat in Northern California. The last decade has changed that view.
The horrific fire sparked by PG&E equipment now has the company spending millions to underground high voltage lines running through dangerous areas. Undergrounding had been considered too expensive, but it will be a worthy investment to limit wildfire danger and reduce maintenance costs from trimming trees back from power lines.
That’s switch in thinking today’s situation has brought up for PG&E and other utilities.
