PD Editorial: It’s time to consider the future of state’s utilities
California lawmakers looked backward in 2018, seeking a solution for utility companies facing claims totaling billions of dollars for homes and other property destroyed in the year before.
They settled on a mechanism — spreading those costs that could break an investor-owned utility — that already failed its first test.
PG&E, its market value evaporating and facing $30 billion in wildfire damages, plans to file for bankruptcy protection by the end of the month.
It isn’t up to state lawmakers to protect PG&E or any other utility company. But if they’re going to protect California residents — and that is their job — they need to look ahead.
Past performance may not guarantee future results, as they say on Wall Street, but California can bank on three things: People will live in fire-prone areas, they will expect utility service, and there will be more big wildfires. Three of the five most destructive fires in state history have occurred since 2015. Two of them burned parts of Sonoma County.
Last year’s Mendocino Complex fire was the largest in state history, burning almost 460,000 acres. Fortunately, it was mostly remote, uninhabited areas. But more than 20,000 homes burned in California wildfires in 2017 and 2018.
Utilities aren’t responsible for every major fire — sparks from a vehicle ignited the Carr fire in Shasta County last summer — but some of the most destructive infernos in recent years have been caused by utility equipment. And damages are beginning to outstrip insurance coverage.
San Diego Gas & Electric is facing a $379 million hit after the state Public Utilities Commission denied its application to pass on excess costs from a 2007 fire. In announcing its bankruptcy plans, PG&E said potential wildfire damages exceed its insurance and assets.
The state’s third large investor-owned utility, Southern California Edison, notified the Securities and Exchange Commission that it expects to incur losses from the Thomas fire, which destroyed hundreds of homes in 2017. Edison also notified the PUC of an equipment malfunction near ground zero for last fall’s Woolsey fire.
So even if a PG&E bankruptcy is somehow avoided, investors will be wary of California’s utilities.
The risk isn’t limited to corporate utilities. Publicly owned utilities, such as the Northern California Power Agency, whose members include Healdsburg and Ukiah, don’t have investors to fall back on, so damage costs from a wildfire probably would fall on ratepayers/taxpayers.
Fire damage isn’t the only cost concern. Fire prevention is expensive, too. One example: There are an estimated 120 million trees to keep trimmed in PG&E’s service area alone.
There isn’t a crisis — yet. PG&E will keep delivering power after it files for bankruptcy, and there is no shortage of electricity or natural gas anywhere in California.
Before that can change, state lawmakers should conduct a comprehensive review of the state’s power generation and distribution system — how they work, how they’re regulated, their fire prevention efforts and how damages are apportioned. Is the current approach still the best one? Is it sustainable?
San Diego Gas & Electric is considering getting out of the business of buying and selling electricity, narrowing its focus to distribution, according to a San Diego Union Tribune report. With the rise of community choice aggregation systems, including Sonoma Clean Power, is that a potential model for PG&E’s 70,000 square-mile service area?
The time to answer these questions is now — before California has one catastrophe too many.
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