CALIFORNIANS PAY BILLIONS FOR POWER COMPANIES' WILDFIRE PREVENTION EFFORTS. ARE THEY COST-EFFECTIVE?

By Alejandro Lazo, CalMatters

CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters

Photo:  contractors with PG&E work in a trench to lay underground electric cables in Placer County on Oct. 17, 2024. Burying lines and other wildfire prevention projects have raised the price of electricity in California. Photo by Miguel Gutierrez Jr., CalMatters

December 16, 2024 (San Diego) - Diane Moss lost her home in the Santa Monica Mountains after power lines ignited the apocalyptic Woolsey Fire in 2018. Since then, she’s pressed for a safer electric grid in California.

Customers have shouldered a hefty price for wildfire safety measures. From 2019 through 2023, the California Public Utilities Commission authorized the three largest utilities to collect $27 billion in wildfire prevention and insurance costs from ratepayers, according to a report to the Legislature.

 

And the costs are projected to keep rising: The three companies — Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric — continue to seek billions more from customers for wildfire prevention spending. Rates are expected to continue outpacing inflation through 2027.

 

Fire safety projects are a big part of the reason that Californians pay the highest electric rates in the nation, outside of Hawaii. Other reasons include rooftop solar incentives, new transmission systems and upgrades for electric vehicles.

 

High electric bills have helped fuel a statewide affordability crisis alongside soaring housing prices, expensive groceries and costly gasoline. Small businesses are feeling the burden, along with the state’s poorest residents: One in three low-income households served by the three utilities fell behind in paying their power bills this year.

 

California’s three investor-owned utilities are regulated monopolies, so when they spend money on costs related to wildfires, they recover it through customers’ bills.

 

The price of electricity has ignited debate about how much California families should bear for the cost of wildfire prevention, whether utilities are balancing risk and affordability and whether the money is being spent wisely.

 

Loretta Lynch, a former head of the state utilities commission, said lack of oversight is a problem, with the commission “rubber-stamping outrageous costs” and allowing the companies to “address wildfires in the most expensive, least effective way possible.”

 

One of the biggest controversies is whether the utilities should be spending so much on burying power lines, an extremely costly and slow process.

 

Last year, a state audit concluded that the utilities commission and the state’s advocates office must do more to verify whether utilities were completing the work they sought payment for.

 

The three companies say the billions of dollars in spending is necessary as climate change worsens wildfires across the state. Utility equipment has caused less than 10% of the state’s fires but nearly half of its most destructive fires, according to the utilities commission.

 

PG&E, which a few years ago came out of bankruptcy triggered by its liability for several deadly, destructive fires, has adopted the stance that “catastrophic wildfires shall stop.” The company, which serves the most high-risk areas in California, is the state’s largest spender on wildfire prevention.

 

PG&E plans to bury 10,000 miles of power lines in its highest-risk areas — work that is highly contentious because it is costly and slow. The company has buried 800 miles since 2021, with each mile costing between $3 and $4 million. Last year, the commission approved a $3.7 billion plan for PG&E to bury 1,230 miles of lines through 2026.

 

Sumeet Singh, PG&E’s chief operating officer, told CalMatters that the utility is concerned about rates, too. He said the company is “very committed to stabilizing our customer rates as we go forward without compromising safety. I think that’s clear, that it’s a non-negotiable….There’s a pretty robust process, and oversight, that we are under.”

 

Kevin Geraghty, chief operating officer of SDG&E, called the wildfire spending process “the most highly-scrutinized, regulatory utility process I have ever been involved in, in my life.”

 

Gov. Gavin Newsom issued an executive order in October aimed at tackling the high costs of electricity, asking state agencies to evaluate their oversight of wildfire projects and ensure that the utilities are focused on “cost-effective” measures. He is seeking proposals for changes in rules or laws by Jan. 1.

 

Reduced to ash

 

The spark for the increased spending came seven years ago, after California suffered one of its worst droughts and a series of devastating wildfires in 2017 and 2018, many ignited by utility equipment.

 

Sixteen fires were caused by PG&E equipment during a rash of October 2017 fires that decimated Napa, Sonoma and other Northern California counties. That December, the Thomas Fire, sparked by Southern California Edison equipment, engulfed parts of Ventura and Santa Barbara counties.

 

But the devastation of 2017 was only a prelude to an even graver year. On Nov. 8, 2018, the Camp Fire leveled the town of Paradise, killing 85 people, making it the deadliest wildfire in state history.

 

The Camp Fire was caused by the failure of an old metal hook attached to a PG&E transmission tower. An intense wind event pushed the fire at a rate of roughly 80 football fields per minute at its peak. The company in 2020 pleaded guilty to 84 counts of involuntary manslaughter for its role in the disaster.

 

The same day as the destruction in Paradise, another fire ignited some 470 miles south. In the Simi Hills of Ventura County, Southern California Edison wires in two separate locations made contact with others, triggering “arc” flashes that rained hot metal fragments and sparks onto the dry brush below. These triggered two blazes, which soon merged to form the Woolsey Fire.

 

Santa Ana winds spread the conflagration across parched terrain, with swaths of the nationally protected Santa Monica Mountains reduced to ash.

 

Moss, the clean energy advocate, evacuated her home with her son that day. Her husband, clinging to hope, stayed until the blaze threatened to swallow him whole. Their neighborhood near Malibu, with its heavily wooded surroundings, was no match for the inferno. 

 

“My husband stayed until the last minute, when it just — it looked like it could cost him his life,” Moss said. “Everybody else left, and just about all of us lost.”  

 

Three people died. Moss’ home was gone, reduced to a hollowed out structure and charred rubble, along with about 100,000 acres of parkland and wilderness, more than any other fire in recorded history for that area. 

 

In 2019, downed PG&E lines ignited Sonoma County’s Kincade Fire. Then two years later, the Dixie Fire, also caused by PG&E equipment, became the second largest wildfire in California history, burning 963,000 acres north of Chico.

 

The 2021 Dixie Fire, which claimed one life and destroyed 1,311 structures, was the last catastrophic wildfire in California confirmed to be caused by utility equipment.

 

‘It just takes the wrong ignition’

 

The number of fires triggered by the companies’ equipment fluctuates from year to year, driven by the huge variability in California’s weather. But data from 2014 through 2023 indicate there were substantially fewer fires last year than in other recent years. SDG&E equipment caused 16 fires after its high of 32 fires in 2015, Southern California Edison had 90 fires, compared to a 2021 high of 173, and PG&E reported 374 fires after a high of 510 in 2020.

 

PG&E also reported that fires in its highest-risk areas trended down every month of 2023 compared to the same months in previous years. But that progress reversed this year, with 62 fires reported by August in high-risk areas, compared to 65 in all of 2023. (PG&E would not provide 2024 fire data to CalMatters.)

 

Caroline Thomas Jacobs, inaugural director of the state Office of Energy Infrastructure Safety, established in 2021 to oversee utility safety, said progress can be hard to measure. Nevertheless, she said she has seen a cultural shift at electric companies in recent years, with a more focused approach in high-risk areas and an environment that empowers workers to prioritize safety. 

 

“It just takes the wrong ignition … under the right conditions, to have a catastrophic fire,” Thomas Jacobs said. “But are we in a better place? The numbers seem to indicate we’re moving in the right direction.”

 

PG&E has installed more than 1,500 weather stations and 600 AI-enabled cameras to detect severe weather and ignitions, Singh said. Enhanced safety systems now cut power to lines within a tenth of a second. The utility also has cleared vegetation, ordered power shutoffs during high-risk times, insulated lines and buried some lines underground.

 

“Where do we see the greatest risk?” Singh said the company asks itself, and “what is the most cost-effective way to be able to reduce that risk for every dollar that’s spent?”

 

Southern California Edison said since its investments began in 2019, the risk of catastrophic wildfire in its system has dropped between 85 and 90%. The company plans to bury 600 miles of lines in high-risk areas but it is relying much more on less-expensive insulating technology, which already has been used on more than 6,000 miles of lines.

 

SDG&E began prioritizing wildfire prevention, including underground and insulated lines, a decade ahead of the other two utilities, after its lines sparked three major fires in 2007. The company has avoided a catastrophic fire since 2007, despite operating in one of the nation’s most fire-prone regions.

 

“We continue to double down, and do and do more tomorrow than we did yesterday,” said Brian D’Agostino, the utility’s vice president of wildfire and climate science. “We don’t take a single day without a fire for granted.”

 

Wildfire spending — ‘an odd system’

 

Critics say the scramble to address the wildfire crisis has left the state vulnerable to overspending by utilities.

 

About two months before the Camp and Woolsey fires, outgoing Gov. Jerry Brown in 2018 signed a $1 billion plan to thin forests and clear out the tinderbox of California’s dead and dying trees. That measure came too late to prevent the devastation. 

 

But it opened the door to increased spending by utilities beyond limits set in the highly deliberative process known as their general rate cases, which determine what Californians pay.

 

Newsom and the Legislature in 2019 created a $21 billion wildfire fund paid for by Wall Street investors and California ratepayers to help PG&E exit bankruptcy and protect utilities from being financially threatened by the wildfires they cause. The utilities cannot access the state’s $21 billion fund unless their wildfire plans are approved by the energy safety office.

 

 

One problem, critics say, is that the safety plans are approved by one government entity while the spending to carry them out is approved by another.

 

“We now have this very odd system,” said Lynch, who served on the utilities commission from 2000 through 2004. “The Office of Energy Infrastructure Safety reviews the plans, puts out guidelines, but then the (commission) still has to ratify the plans, so that the utilities can take money from their ratepayers.”

 

Wildfire safety goes underground

 

On a temperate, clear morning in the Sierra Nevada foothills east of Placerville in October, a PG&E construction crew donned yellow jackets and safety helmets and went about the work of burying power lines along a narrow, wooded road. Overhead lines snaked through thick trees in this area — prime fire risk territory. The workers buried the lines in a trench that had been dug using a heavy piece of equipment designed to cut hard concrete and soil. 

 

Once those power lines are buried and activated, their risk of fires are all but eliminated.

 

Burying lines in high-risk areas improves reliability amid rising wildfire risks and extreme weather, PG&E’s Singh said. Though it’s pricier up front, it eliminates the yearly expense of trimming trees and vegetation, which makes it a better, long-run value for customers, he said.

 

“Underground is a no-brainer when you look at it from that lens,” Singh said.

 

But the high cost and the time it takes to do the work has left some skeptical. The company has buried 800 miles of wires underground since 2021, and plans to bury more than 1,600 by the end of 2026. It aims to get the cost per mile down to $2.8 million by the end of 2026 from $3 million at the end of 2023. 

 

Michael Campbell, assistant deputy director of energy for the public advocates office, a state entity that represents utility customers, said PG&E should consider other means of preventing wildfire, like insulated wires, otherwise known as “covered conductors.” This can be deployed more quickly and at a lower cost, he said, and is effective when combined with operational techniques like fast trip settings and power safety shutoffs.

 

“In some areas, (burying power lines) really is the correct approach to minimize risk. But it’s also very slow and very expensive, and so there’s a need to address safety in as many miles as quickly as possible, to reduce overall risk,” Campbell said.

 

The utilities commission has taken a proof-of-concept approach: The commission scaled back PG&E’s plan to bury 2,000 miles through 2026 to 1,230. The commission approved installing covered conductors, or insulated power lines, over 778 miles.

 

Lynch is skeptical of utilities and their big projects because they can profit from them, and Mark Toney, executive director of The Utility Reform Network, says too much spending is going unchecked. 

 

The sense of urgency following fires paved the way for the multi-billion surge in spending. The commission authorized PG&E, for instance, to spend $4.66 billion on wildfire costs from 2020 through 2022, but the company ultimately spent $11.7 billion and is seeking payment through utility bills, according to The Utility Reform Network. 

 

Photo, left:  PG&E employees and contractors stand next to a trench that was dug in Placer County so that electric cables can be buried to prevent wildfires. Burying lines costs PG&E ratepayers between $3 million and $4 million per mile. Photo by Miguel Gutierrez Jr., CalMatters

 

Audits of nearly $2.5 billion in 2019 and 2020 wildfire spending found some costs from PG&E, Southern California Edison and SDG&E may already have been covered by previously approved rates, or more documentation was needed to confirm they had not been covered.

 

The utilities challenged many of the findings, saying they didn’t plan to claim some of the costs, and disputed the auditor’s conclusions as well as some of their calculations. In interviews with CalMatters, representatives for all three utilities said the process in place to oversee wildfire spending at the utilities commission was robust and thorough. 

 

Geraghty, of SDG&E, said the process is transparent, with public comment periods and hearings. Regarding critics who say wildfire prevention should be cheaper and faster, “every one of them had that voice, had that say, had that transparency through this entire process,” he said.

 

Some expenses, such as operating costs, have an immediate impact on how much people pay in their bills. But other costs, such as long-term investments in insulating or burying power lines, are stretched out over years, meaning they add to bills for decades to come.

 

Over time, these capital costs are growing due to factors like depreciation and the returns utilities are allowed to generate. This creates a compounding effect, meaning wildfire-related capital costs will take up an increasing share of what California customers are charged in the future.

 

Feeling the pinch in Oakland, the fear near Malibu

 

The burden of the rising bills is hitting many Californians hard. Roshonda Wilson, of Oakland, couldn’t afford to pay her power bill even though she said she watches television only after sunset, refrains from running unnecessary appliances and is hyper-aware of every energy-consuming action in her household. At one point PG&E turned her power off this year. “I couldn’t catch up,” she said. 

 

On the other hand, Moss — who has weathered not just the trauma of losing her home near Malibu but also the difficult process of rebuilding — says the expensive wildfire prevention work is critical to prevent more tragedies.

 

“Even though (burying power lines) is costly and time-consuming, the cost and time of not doing it is starting to seem more devastating to a broader swath of people,” Moss said.

 

Nevertheless, the rate hikes have alarmed climate activists who fear rising power bills in California may trigger a backlash against the state’s effort to switch to renewable energy, and influence other states, too.

 

“The state, we fear, will start to lose the political will to keep pushing on,” said Mohit Chhabra, a senior scientist with the Natural Resources Defense Council. “The problem with that is not that California will be a few years late — we can handle that. But the impact on all the other states who are looking at California.”

 

Natasha Uzcátegui-Liggett and Miguel Gutierrez Jr. contributed to this report.

 

This story was corrected on Dec. 3 to say that Californians pay the highest electric rates, not bills. Average bills in California are lower than in other states, but its rates per unit used are the highest except for Hawaii.

CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters