The state’s top power provider, Pacific Gas & Electric, is in bankruptcy. The utility’s systems need millions of dollars in upgrades. And the outages appear to have failed to achieve their main mission — preventing PG&E’s equipment from sparking new fires.
Experts and political leaders see a range of possible futures for PG&E and its power delivery system — but none that can guarantee Californians won’t be suffering through widespread outages for years to come.
“PG&E doesn’t have the ability to stop wildfires, just as the Florida utilities don’t have the ability to stop hurricanes and the northeast utilities don’t have the ability to stop snowstorms,” said Travis Miller, a utilities analyst for Morningstar Equity Research. “There’s no amount of money that PG&E could put into its system to stop the risk of wildfires.”
PG&E CEO Bill Johnson put a further sober view about the utility’s future during testimony before the California Public Utilities Commission (CPUC) in October. It could take a decade for necessary anti-wildfire system upgrades and practices to be installed across the company’s vast, remote and often rugged territory, Johnson said. In time, he added, those changes could mean that widespread preemptive power shutdowns won’t be needed at all.
While gradual and steady reductions in the need for major planned power outages are expected as improvements are made, Johnson told the CPUC, “This is probably a 10-year timeline to get to a point where it’s ratcheted down significantly. The risk is significant.”
California Gov. Gavin Newsom announced last week that a newly-appointed “energy czar” will oversee the state’s utilities. He also indicated the state could take over PG&E if it doesn’t get its act together.
“The entire system needs to be reimagined,” Newsom said. “If PG&E is unable to secure its own future … then the state will prepare itself as backup for a scenario where we do that job for them. We are gaming a state plan to address the scale of this moment.”
Earlier in the week, state Sen. Brian Dahle said he wants the Legislature to begin working on new laws to more tightly regulate PG&E.
Dahle, a Republican who represents most of California’s northernmost inland counties, said he sent a letter to Newsom in late October, asking the governor to call the Legislature back into immediate special session to start addressing the issues surrounding PG&E’s preventative shutoffs.
If the Legislature does not come back in session early, it won’t be able to begin tackling wildfire issues until the normal session begins Jan. 6.
For now, residents should expect “preemptive power safety shutoffs” to continue for the rest of the current fire season, which still has about eight weeks to go, said Philip Smyth, a utilities and power industry analyst at Fitch Ratings.
These are some of the strategies that financial, consumer and other experts are recommending as fixes for PG&E’s power woes.
Sell off PG&E’s local operations to cities
In October, San Jose proposed to buy out PG&E’s operations in the city and convert them into the country’s largest customer-owned utility. In September, San Francisco made a $2.5 billion offer to take over PG&E’s power lines serving its boundaries.
PG&E, the state’s largest utility company, declared Chapter 11 bankruptcy protection from its creditors in late January because the company is facing billions of dollars in liability for wildfires that have been linked to its equipment.
That means the bankruptcy court, as well as state regulators, have some say in any such sales.
“The first thing is PG&E has to resolve its financial status by exiting bankruptcy,” said Miller, the Morningstar analyst. “As long as it is in bankruptcy and can’t access the financial markets, it won’t be able to make any of the improvements that are needed to protect from future wildfires and power shutoffs.”
Extracting a significant number of big-city customers out of PG&E as part of a buyout “would substantially raise rates for all other PG&E customers,” Miller says.
“If San Francisco were to buy out PG&E and, all of a sudden, PG&E’s system no longer has those million-plus customers in San Francisco to help subsidize effectively and help spread the cost of the rural area system, then the rates for the rural areas are going to go way up,” Miller said.
Since industry regulator CPUC is obligated to keep an eye on costs for utility customers, Miller added, “It’s tough to imagine regulators would approve a transaction that ultimately would raise customer rates for a large number of people.”
There is also the danger of creating communities of ‘haves and have nots’ when it comes to electricity services, according to Steven Weissman, a former administrative law judge at the CPUC and now a lecturer at the University of California, Berkeley, School of Law.
Communities that provide affordable, reliable power would be at an advantage compared to cities remaining with PG&E that are subject to preventive electricity shutoffs and higher power rates, Weissman said.
And, given the upgrades needed, such a purchase might be like buying a fixer-upper house.
Said Smyth, of Fitch Ratings: “You’re going to be left with the same dynamics. Any owner is going to have challenges rectifying the system.”
Institute a state takeover of PG&E
Tyson Slocum, energy program director for the public advocacy group Public Citizen, said he believes the best ownership model would be “to have the state declare an emergency, condemn PG&E’s assets and have the state create a new agency to manage and own PG&E’s assets.”
While acknowledging his plan “sounds sort of radical,” Slocum said PG&E’s public safety power shutoffs in October created “a pretty unsustainable situation.”
A state-run utility isn’t guaranteed to be better managed than the current PG&E, which is investor-owned, Slocum said. But a state-run utility would not be obligated to provide a financial return to investors and could instead focus deeply on maintaining and upgrading its infrastructure and providing reliable service, Slocum said.Slocum is not alone in advocating a public takeover of PG&E.
Mindy Spatt, a spokeswoman for The Utility Reform Network, also known as TURN, said since PG&E is so poorly managed and in such bad shape, it should be either broken up into smaller companies or taken over by another entity.
But state officials haven’t gone that far — yet, at least.
While hinting at a takeover, Newsom has said he wants tighter regulation of the utility and greater accountability for company executives and managers.
“I want to see the CPUC launch a total reform of power shutoff rules and regulations,” Newsom said. “Utilities must be held accountable and be aggressively penalized for their over-reliance on (public safety power shutoffs) and the product of this investigation must be new rules and regulations to do that.”
Place outside experts on PG&E’s board of directors
Rather than an all-out takeover, PG&E could benefit from having outside operations and safety experts embedded in its management, said Weissman, the UC Berkeley School of Law lecturer.
“You normally don’t have that level of micromanagement. But in this case where they are having trouble getting their sea legs, it might be necessary,” Weissman said.
Compel major upgrades to PG&E’s grid
One proposal is getting a lot of attention: replacing “bare” transmission lines with ones that have special coatings or burying power lines underground. Both methods are designed to make power lines less likely to cause wildfires.
Those upgrades come with a cost.
PG&E has estimated a price tag of as much as $3 million per mile to lay underground power distribution lines. That’s nearly triple the $800,000-per-mile cost of typical overhead power lines. Whatever the choice, customers would shoulder the bill.
California has 25,526 miles of higher voltage transmission lines, and 239,557 miles of distribution lines, two-thirds of which are overhead, according to CPUC. Less than 100 miles per year are moved underground, meaning it would take more than 1,000 years to bury all the lines at the current rate, according to reporting by the USA TODAY Network-California.
Another potential measure includes sectioning off areas of the existing oversized grid into smaller portions, so power shutoffs can be targeted precisely to problem areas and fewer PG&E customers would be inconvenienced during any one event.
As the cost of solar power and battery storage declines, some communities also are considering setting up their own backup generating facilities using solar arrays and battery storage. In a recent opinion piece, Weissman wrote that using so-called “microgrids” can supply power and battery storage “to interconnected customers even when the traditional grid is out of service.”
However, as in the case of municipal utilities that serve only specific geographies, creating energy generation and storage microgrids also raises the issue of economic access — whether neighborhoods with limited funds could afford the services or if they’d be left out, Weissman said.
There’s also talk of replacing wooden poles that now hold power lines with ones that are made of metal or concrete, as has been done in some cities that face hurricanes.
Other potential changes include more thoroughly trimming back trees and underbrush that could threaten power lines or adding surveillance cameras in wildfire-prone areas as a way to spot trouble earlier.
“I think over time, they’ll make refinements to the process, which hopefully will make it somewhat less disruptive over the longer term while they invest in their system to make it more resilient against wildfires,” said Smyth, the Fitch Ratings analyst.