By Hannah Wiley and Dale Kasler, SACRAMENTO BEE - CAPITOL ALERT
October 30, 2019
As California’s largest utility, Pacific Gas and Electric Company, battled bankruptcy and prepared for another round of mass power outages across the state, the company’s executive said Californians should expect to see fire-preventing blackouts for the next 10 years.
“I think this is probably a 10-year timeline to get to a point where it’s really ratcheted down significantly,” Chief Executive Bill Johnson told the California Public Utilities Commission during an emergency meeting earlier this month.
In a series of press conferences in recent days, Gov. Gavin Newsom said the state won’t bow to the utility’s timeline, calling it “an absurd period of time.”
“This is not the new normal,” Newsom said on Tuesday. “And it doesn’t take a decade to fix this damn thing.”
The new governor has a lot on the line.
While he reminds audiences he’s been in office just nine months, Newsom’s stewardship of the crisis will be a key chapter in his political career. His determination, however, can’t erase the decades of financial and logistical missteps that have driven the utility to a breaking point.
This month alone, PG&E rolled out four mass power shutoffs to millions of Californians. Despite the effort, PG&E could be responsible for sparking the Sonoma County Kincade Fire, which has blazed across 75,000 acres as of Tuesday and threatened the cities of Healdsburg and Windsor.
Company officials say they’re doing the best they can to improve safety in a “multi-year journey,” spending more than $1.6 billion this year to replace aging equipment, trim trees more aggressively and advance other measures.
But they say fixing the problem will take time; the “enhanced vegetation management” campaign could take eight years alone.
PG&E announced with great fanfare a few months ago it will rebuild the electrical grid in Paradise underground – phasing out overhead wires.
The process will take five years, it said.
Johnson also said climate change can be thanked for increasing the percentage of customers in high-fire threat zones. More than half of the company’s service area now sits in burnable areas.
Utility experts say Newsom ultimately could end up disappointed.
“I definitely think that you can do it faster,” said MichaelWara, a Stanford University energy expert who’s been advising the Legislature on wildfire issues. “But it’s not possible to do it in 10 years following the standard utility playbook.”
The Democratic governor, in fact, has promised the utility will be “held to account to do something radically different.”
He has welcomed “as many people bidding for the assets of PG&E as possible.” He’s toyed with the concept of local government control, as hedge funds edge closer to a takeover, and said he hadn’t ruled out the idea that an investor like Warren Buffett’s Berkshire Hathaway could swoop in.
Johnson said Tuesday that, regardless of ownership, “these challenges don’t go away. The risk doesn’t go away. It doesn’t get any smaller.”
Shutting down the grid also prevents the 2019 fire season from adding to the company’s already-crippling financial liability from the 2017 and 2018 wildfire season.
The utility filed for bankruptcy at the start of the year, citing those costs as a tipping point.
The grim circumstances have refreshed fears that PG&E can’t actually exit bankruptcy with a viable plan to pay off wildfire claims by a state-mandated deadline of June 30, 2020.
Local governments have since expressed interest in owning pieces of the utility themselves, an idea both Newsom and the Legislature are entertaining.
“San Francisco and San Jose are already pursuing some sort of municipalization,” said state Sen. Scott Wiener. “I intend to introduce legislation to make it easier to make that happen.”
Wiener said he’s still in the early planning for a bill, but he’s already unveiled legislation to increase PG&E’s accountability for the ongoing power shutoffs.
“They’re trying to set up expectations that we’re going to have to go through these horrible blackouts and go through these fires for 10 years, and that’s completely unacceptable,” the San Francisco Democrat said.
But Jared Ellias, a bankruptcy law expert at UC College of Hastings in San Francisco, said siphoning off pieces of the company to local governments isn’t a comprehensive fix. A big company can afford to hire experts, but smaller municipals might lack the funds to do that.
“Would the world be better off if you had 10 little baby PG&E’s that are less capable than the big one?” Ellias asked.
He raised another point.
If San Francisco succeeds in taking over the utility’s assets in the city, it will remove what is probably the most profitable portion of the business. That would make it financially more challenging to harden the grid in an area like Sonoma County. Ellias said he’s doubtful it would work.
Newsom hasn’t shown an appetite for a state takeover of the utility, an idea that holds its own risks.
Should another mega-fire strike California, the Legislature might lack the political will to raise taxes or cut other expenses to pay damages, Ellias said.
PG&E’s timeline is also an acknowledgment that it has failed to upgrade its equipment and advance safety protocol, lawmakers and consumer advocates say.
“(PG&E) can’t keep the lights on for 3 million people and make sure it’s safe to go about daily business because it doesn’t modernize its equipment,” said Jamie Court, president of the advocacy group Consumer Watchdog.
Republican Assemblyman James Gallagher, whose district was partially burned when a faulty transmission line sparked the 2018 Camp Fire that killed more than 80 people, said the state has to figure out how dollars already in the system can go toward infrastructure without raising rates for payers.
“New transmission lines, towers, undergrounding where it makes sense. The underlying issue is infrastructure. That’s what is causing these power outages,” Gallagher said.
Though necessary, the modernization will be an expensive effort. It will also require a giant workforce.
In a new law that passed in July, the Legislature created a $21 billion insurance pool, funded equally by utility ratepayers and shareholders, to cover liabilities from new fires.
To access the fund, the state’s largest utilities will have to spend $5 billion on wildfire safety, while company executives’ compensation will be tied to pursuing and installing the initiatives. Newsom cites that as an example of the kind of change that will keep California’s lights on.
On Monday, ahead of another round of power outages that could affect another 596,000 customers starting on Tuesday morning, Newsom said he urged the California Public Utilities Commission to advance an ongoing investigation into PG&E’s rollout of the shutoffs.
“You’re going to see a hell of a lot more being done, and you’re going to see much more accountability,” Newsom said. “And if I don’t see more things take shape, we’re going to get new folks in that can actually do that job.”