PG&E is in the news again.
Last month, the utility corporation cut power in Northern California on several occasions to prevent its aging power lines from causing wildfires in the windy, dry conditions that occur in the state each fall. The series of power cuts negatively impacted over one million customers, but PG&E is at it again. This week, they once more began shutting off power in several counties. The shutoffs have created chaos and hardship for consumers and businesses alike.
Wildfires aren’t the only problem that has plagued PG&E and harmed its customers. In 2010, a natural gas explosion in San Bruno, just south of San Francisco, killed eight people. Investigators found PG&E responsible. The company had failed to maintain the pipeline properly, diverted $100 million from a fund used for safety to boost executive compensation, and falsified records regarding the type of pipe in the ground.
The San Bruno explosion galvanized the California Public Utilities Commission to launch a multi-year investigation into the risk management practices of the state’s investor-owned utilities. Those efforts, which I participated in on behalf of a ratepayer advocacy group, led the commission to adopt a new methodology developed by myself and my colleague, professor Charles Feinstein, to evaluate risks and utility-designed programs to manage those risks.
Providing safe and reliable service is the most fundamental requirement for any regulated utility. That means proper maintenance to ensure distribution lines are in good working condition and adequately trimming trees near those lines, so as to avoid the types of catastrophic wildfires PG&E has caused.
Yet, despite internal documents demonstrating PG&E’s aging power lines could cause wildfires, the company failed to upgrade those lines. But PG&E claims that the necessary upgrades and tree trimming would cost between $75 and $150 billion dollars and take a decade or more to complete. So, having failed to provide safe electric service, PG&E now claims that preemptive shutdowns are the best approach for the foreseeable future.
These multiple-day shutdowns are imposing on customers and businesses, along with the resulting economic losses. Such costs are often measured based on the "value of lost load," which has been estimated at between $2 and $10 per kilowatt-hour, depending on the type of customer.
Take, for example, the recent outage that affected almost one million customers for about two days. If the average customer (residential, commercial, and industrial) uses 50 kWh per day, that implies a loss between $240 million and $1.2 billion. Those costs don’t include the risks to the lives of individuals with health problems who rely on electric-powered devices, such as kidney dialysis machines, to manage their health.
Moreover, shutdowns create their own wildfire risk.
To cope with the outages, many PG&E customers have been purchasing generators, often low-cost, gasoline-powered ones that create their own fire hazard. So, while claiming the preemptive shutdowns will protect customers from the company’s faulty equipment, PG&E is instead increasing the risk of wildfires caused by its customers’ equipment.
How does this risk that PG&E's own equipment will cause a wildfire compare with the risk that a gasoline-powered generator will start a wildfire? PG&E either doesn’t know or won’t say.
Additionally, PG&E’s claim that these preemptive shutdowns are the best policy approach is not supported by any cost-benefit analysis the company has provided publicly. For example, the average cost to trim trees along distribution lines has been estimated to be around $6,000 per mile.
Even if PG&E spent 100 times that amount, or $600,000 per mile, the cost to trim trees along the company’s approximately 31,000 miles of overhead transmission and distribution lines in high fire risk areas would be only $18 billion, far less than PG&E claims. PG&E states it has begun its “System Hardening Program” for 7,100 miles of circuits.
PG&E hopes to complete 150 miles this year and states it expects to complete all of the work in 10 years. That’s probably small comfort to customers without power.
PG&E has also published estimates of the cost to underground distribution circuits, which would virtually eliminate the risk of wildfires, claiming that doing so costs $3 million per mile. But an Edison Electric Institute study estimated the cost of converting existing overhead lines in rural areas, where most of the affected areas are located, to underground ones, at between $160,000 and $2 million per mile.
Some blame climate change for the increase in wildfire risk. Others blame the state’s ill-conceived forest management policies that have prevented clearing away dead and diseased trees. Still, others blame customers for moving to remote areas where wildfire risk is high.
But regardless of the blame game, the bottom line is that, thanks to years of neglecting to maintain its electric system properly, PG&E’s customers will continue to pay some of the highest electric rates in the nation, be charged billions of dollars more for the privilege of PG&E to meet its most basic obligations, and likely endure disruptive shutdowns for years to come.
This piece originally appeared at the Washington Examiner
Photo: Ezra Shaw/Getty Images