California Power Shutoffs:When Your Public Utility Is Owned By Private Investors
When the United States’ largest investor-owned utility, Pacific Gas and Electric, shut down power to millions of Californians this week, nearly no one was ready. Not governments. Not businesses. And certainly not the general public.
As parts of the state went dark, the California governor, Gavin Newsom, told reporters he was “outraged because it didn’t have to happen”.
“They’re in bankruptcy due to their terrible management going back decades. They’ve created these conditions, it was unnecessary,” he said about PG&E. “This can’t be the new normal.”
But Newsom also called public safety power shutoffs in cases of potential wildfire risk “not novel”. State regulators approved PG&E’s plans. And the municipalities that called on vulnerable residents to use personal resources to pre-emptively evacuate knew this was coming.
The wide-scale public safety power shutdown revealed the depth of California’s infrastructure problems amid a growing climate crisis, as “de-energizing” policy trades one possible disaster for another.
“It’s a whole series of missteps over a long period of time by PG&E and by a whole bunch of other actors that led us to this point,” said Costa Samaras, a climate resilience researcher and analyst, and associate professor at Carnegie Mellon University. “What is clear is whatever this giant mess is, it’s not in any way acceptable or sustainable.”
PG&E and de-energizing
PG&E made shutting down its grid in dry, windy weather a core part of its wildfire management strategy in 2018, after the company faced $30bn in liabilities for their role in sparking two of the deadliest and costliest fires in California history. PG&E filed for bankruptcy shortly after.
With its new “safety plan”, the company essentially admitted that keeping the lights on was dangerous – and potentially very expensive for its own bottom line. By choosing to shut down the grid this week, the utility might have stopped another spark – and another massive bill.
PG&E may be a public utility – the biggest electric utility in the US – and it may have been shutting off its lines to millions of people in the interest of public safety, but it is not, and has never been, owned by the public.
With their huge monopoly markets and guaranteed rates of return, California utilities are attractive businesses for investors. Earlier this year, utilities asked the state for an even bigger payday. Meanwhile, PG&E invested millions in state lobbying, paid out $4.5bn in profits to shareholders over the last five years, and millions in executive bonuses – all while deferring necessary maintenance and repairs to its system.
“A lot of money went to dividends that should’ve gone to your trees,” a federal judge told the company in April.
PG&E equipment has been blamed for sparking 17 out of 23 major fires across the state in 2017, and the 2018 Camp fire that all but destroyed the town of Paradise and killed 85 people. Following those two devastating fire seasons, PG&E filed for bankruptcy protection to cover its liability costs, which are expected to total upwards of $30bn, compared with the company’s market cap of $20bn. Any liabilities incurred from a new, large, devastating wildfire might have affected the company’s ongoing bankruptcy proceedings.
While PG&E’s 2019 Wildfire Safety Plan calls for the kind of maintenance the company shirked in the past – increased vegetation management around lines, more inspections and repairs on equipment, and additional weather stations – the backbone of the plan is de-energization.
Depending on how PG&E assesses the fire risk and the potential failure of the grid at any given time, the plan calls for shutting down up to 30,700 miles of transmission and distribution lines, about 25% of the grid, potentially impacting all 5.4m PG&E accounts, or roughly 16 million people.
Power lines, fire risk and climate changed weather
As officials in Oakland, California, prepared the public for large portions of the city to go dark this week, they released a statement that read, in part: “The decision to turn off power, and the speed at which it is restored, is planned and managed solely by PG&E.”
But it’s planning and management that are regulated by the state utility commission, which worked to update de-energizing rules throughout 2018 and 2019, requiring utilities to make “all feasible and appropriate attempts to notify customers” of a shutoff.
“The public safety power shutoff is a government policy being implemented by the Public Utilities Commission. There’s lots of executive branch authority over this situation,” said Leah Stokes, utilities researcher and political science professor at UC Santa Barbara. “It’s kind of a blunt instrument to use on the problem.”
After this week, there are many open questions as to how PG&E considers the problem and assesses fire risk.
“The forecast didn’t call for unprecedented extreme fire weather conditions. The power shutoff was unprecedented, but the weather conditions were not,” said Daniel Swain, climate scientist at UCLA’s Institute of the Environment and Sustainability. “It isn’t entirely clear what did go into that decision. We don’t know publicly what PG&E’s thresholds are.”
State rules leave utilities to control when they will shut down the power, and how they will choose to do it. PG&E’s de-energizing plan calls for the consideration of a variety of criteria and conditions when it comes to initiating a public safety power shutoff. According to the plan, “No single factor drives a Public Safety Power Shutoff.”
Some factors include: a national weather service “red flag warning” of high fire weather, low humidity levels, forecasted sustained winds, the availability of dry vegetation or fuels, and “on-the-ground, real-time observations from PG&E crews”. But there are no hard rules or numbers by which PG&E abides when deciding whether or not to subjectively shut off the grid to millions of people in California.
California could easily meet those vague criteria a few times a year, said Swain.
“If this is the risk aversion strategy that a private utility is going to take but we’re going to be hitting those thresholds an awful lot in the present climate and might hit it even more frequently in a warmer future climate, that doesn’t seem to be a very realistic long-term solution,” said Swain. “The notion of doing this for anything short of a real emergency puts a huge burden on a lot of people.”
Regulatory and ownership solutions
And even as a business decision, for PG&E, it’s an inherently shortsighted one. “You’re losing a lot of money by putting people out of power versus if you were undergrounding lines, or made microgrids, or solar and battery backup,” said Stokes. “You could make those investments once and then have benefits in the future. Now you just have the costs without those investments.”
It’s this kind of management that’s inspired a campaign to take the electricity grid into public ownership.
“There’s a fundamental contradiction between PG&E’s mandate to make as much profit as they can for their shareholders and invest in the health and safety of Californians,” said Keith Brower Brown, co-chair of the East Bay chapter of Democratic Socialists of America, which launched a campaign for the public takeover of PG&E in 2018. “We’re not naive to the fact that there have been public utilities that have had problems too – just because something’s public doesn’t mean it’s run well. But there’s a path to accountability when you have public control.”
But more control and regulation alone won’t necessarily fix PG&E’s management, nor the grid itself.
“The only way out of this bind is not only public ownership of the company but a massive scale public investment in building the kind of safe, clean energy infrastructure that we need,” said Brown.
As it stands, those investments and priorities are controlled and directed by a profit-motivated PG&E. Newsom, the California governor, warned that changes to PG&E will come slowly – the company operates more than 125,000 transmission and distribution power lines across roughly 70,000 square miles of the state. PG&E previously put the cost of inspecting and repairing every bit of its grid at $150bn.
So the public is left to bear the costs and risks in the meantime of a new kind of disaster, along with the familiar ones.
“Nobody is investing for climate resilience at the level that’s necessary and that’s really what’s concerning about this incident – this is one of the richest areas of the country and if we can’t even figure it out there, we’re going to have problems,” said Samaras, the climate resilience researcher.
“To me this is a real learning opportunity to find where the resilience gaps are, find out who’s vulnerable, and fix it before it gets worse,” said Samaras. “This is the challenge, not just for PG&E but for the whole ecosystem: businesses, municipalities, counties. What’s the plan?”
Susie Cagle is a climate and environment reporter for Guardian US, based in Oakland. Twitter @susie_c.