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Turning off the lights in California

Steven Weissman, associate director, Center for Law, Energy and the Environment | October 14, 2019
high transmission power lines in the sunset

“The experience of having a utility purposefully deny service is part of what one might call the New Reliability,” Berkeley professor Steven Weissman wrote in a New York Times opinion piece. (National Archives and Records Administration photo by Jim Olive)

The New Normal is the phrase many use to describe the ways our world is evolving as the climate changes. As we have seen in recent years in the American West, and especially in California, it means dealing with more frequent and more devastating wildfires.

Many of California’s worst fires, including last year’s Camp Fire, which killed 85 people and destroyed over 18,000 structures, have been sparked by the failure of electric transmission and distribution equipment owned by Pacific Gas & Electric, one of the nation’s largest utilities, with 5.4 million electricity customers in the central and northern parts of the state.

In recent days the company shut down service to hundreds of thousands of customers because its equipment is not safe to operate when fire danger is high. This caused chaos among its customers, and the bad news for them is that there is every reason to expect that the company will continue to shut off power well into the future to avoid the catastrophic wildfires that pushed it into voluntary bankruptcy. With operating revenue of less than $13 billion a year in its electricity business, PG&E faces liabilities from past wildfires potentially exceeding $30 billion.

And if that’s not bad enough, it is not inconceivable that PG&E’s electricity customers, who already pay comparatively high prices, could see those rates double if wildfires continue at the levels we have seen recently.

It’s fundamental to the concept of utility service that the company can reliably provide power whenever customers want it. Now the experience of having a utility purposefully deny service is part of what one might call the New Reliability.

It starts with an electric grid that is becoming less dependent on fossil fuel and more dependent on solar and wind energy. Those renewable sources provide power intermittently, and operators of the electric grid are trying to determine how to maintain 99.9 percent reliability with those variable resources as the state moves to generate all of its electricity from renewable and zero-carbon sources by 2045. Power shut-offs for public safety further undermine those efforts. If the New Reliability means less certainty from traditional grid-based power sources, then it also provides an opportunity beyond the old approach of relying on fossil fuels: Communities and individuals can begin generating renewable electricity on their own to improve reliability in a world where that is now less certain.

The time is right for this change, as solar photovoltaic systems and battery storage become less expensive. Many neighborhoods are considering microgrids, which can supply power and battery storage to interconnected customers even when the traditional grid is out of service. A microgrid circuit can run underground to reduce wildfire risk. But this approach for improving reliability raises serious equity issues: Will customers with limited funds and renters, in general, be left with less reliable service, and what should we as a society do about it?

The utilities have a lot of basic work to do. Strengthening towers, poles and wires is important. So is the more strategic use of money to convert old distribution lines from above ground to below. While new developments automatically put distribution lines underground, utilities are slow to replace older infrastructure because of the cost. The first priority must be focused exclusively on burying lines in high fire risk areas. Ugly poles and wires may cost less initially, but if they lead to multibillion dollar wildfire liabilities, they were not so cheap after all. If utility regulators were to consider the potential costs resulting from claims for fire damages, burying lines that deliver electric power and developing locally based generation from solar, wind or hydrogen fuel cells might start looking like a better deal.

Another aspect of the New Normal is that greater fire danger means utility customers will face higher prices for electric service. Those increases come in the form of higher cost for infrastructure improvement, more expensive wildfire insurance, higher allowed utility earnings if the business is now perceived to be riskier and wildfire liabilities that customers are required to cover. A new law requires ratepayers to pay $10.5 billion to help fund an insurance pool for future California wildfires.

This past spring, California’s new governor, Gavin Newsom, asked me just how high the price of electric service might climb under the New Normal and what the implications of such increases would be. My answer was simple and rather frightening. If the fires of 2017 and 2018 reflect a catastrophic new pattern, both in terms of annual losses and utility culpability, California utilities could face $15 billion in new liabilities every year. The utilities would soon exhaust their ability to borrow more money in order to spread the costs over many years. Then there would be little choice other than imposing those cost on a utility’s customers. For PG&E’s customers to contribute $15 billion to cover new liabilities, electric bills would have to double in the first year.

This would make electric service unaffordable for many customers, and it would increase the cost of electricity-dependent manufacturing and services. Significantly, it would undermine the state’s ability to attain its ambitious goals for reducing greenhouse gas emissions. Transportation is the largest source of such emissions in California. The replacement of gasoline and diesel vehicles with electric vehicles is a major part of the state’s greenhouse gas reduction strategy. Significantly higher electricity prices could eliminate the cost advantage of going electric. It would also become more difficult to persuade consumers to switch to electricity from natural gas for heating and cooking.

Perhaps the rate of catastrophic fires California has experienced over the past two years will not be sustained, but there’s every reason to expect many horrific future fires. California cannot pay for repeated multibillion-dollar losses. The long-term solution is to reduce the intensity of future wildfires by reducing the availability of burnable fuels and better managing our forests. This is a mammoth task, requiring commitment from all property managers — state, local, federal and private. The Camp Fire tragedy was a compendium of many hundreds of stories about ways in which property owners and managers along the route did or did not properly maintain their land.

PG&E may be the biggest culprit so far, but every person and business in or near the state’s vast wild lands has to be held accountable for failing to take the necessary steps to reduce the intensity of wildfires as the climate changes and makes these wild infernos more likely. And as we have seen, California has far to go to attain this critical goal.

Steven Weissman, a former administrative law judge for the California Public Utility Commission, is a lecturer at the Goldman School of Public Policy at the University of California, Berkeley. This blog post was first posted as an opinion piece in the New York Times