Industry Greed and Recklessness are Fueling California’s Wildfires

The energy giant at the head of the state’s network of natural gas and power lines is exacerbating California’s wildfires

By Molly Kozlowski

Wildfire

While California’s wildfire season has grown increasingly destructive due to a combination of drier weather and stronger winds, it also has been exacerbated by the actions of Pacific Gas & Electric (PG&E), the energy giant at the head of the state’s network of natural gas and power lines.

This October, California yet again faced a devastating series of wildfires, forcing hundreds of thousands to evacuate their homes and causing an estimated $25.4 billion in damages. PG&E is responsible for equipment that may have started one of the fires and made even more people suffer by cutting the power of millions of customers across the state to avoid liability.

It wasn’t the first time PG&E has been linked to natural disasters. PG&E’s aging infrastructure played a role in sparking the historic Camp fire in 2018 that killed 86 people and destroyed at least 14,000 homes as well as twelve of the 2017 blazes that devastated more than 1.2 million acres across the state

PG&E was also found responsible for a natural gas pipeline explosion in San Bruno in 2010, which killed eight people. The company was later found guilty of violating federal safety rules prior to the incident and served 5 years probation as a “convicted felon”

Now, in addition to filing for bankruptcy in January and facing $30 billion in liabilities, PG&E is now receiving intense criticism from customers who have watched the company evade responsibility for its long history of mismanagement.

The case against PG&E is rooted in a long history of executive greed. While charging some of the highest electricity rates in the country, the utility failed to spend the $246 million it budgeted for power line maintenance over a 15-year period. Instead, these funds were siphoned into $100 million in executive bonuses and $4.5 million in dividends for shareholders over the time frame. Even now amidst bankruptcy and increasing pressure to compensate wildfire victims, PG&E gave $16 million in executive bonuses in 2019 and secured a base salary of $2.5 million for its new CEO Bill Johnson, which is twice the salary of his predecessor.

As wildfires become the “new normal” for many California communities, how will the state both hold PG&E accountable for its negligence and also forge a more sustainable future for California’s energy system?

While PG&E should face the consequences of its actions, the current plans to help the company emerge intact from bankruptcy appear unlikely to hold the company accountable and fully compensate fire victims. PG&E is attempting to cap its liabilities at about $18 billion, which is half of what victims and insurers are owed. Meanwhile, it is predicted that “Bill Johnson could earn up to $110 million if the company’s share prices return to their 2017 peak as a part of the bankruptcy deal.”

California Gov. Gavin Newsom also has floated the idea of billionaire Warren Buffett’s utility company, Berkshire Hathaway Energy, buying PG&E. However, it is unclear whether simply transferring the utility’s ownership to a different corporate entity would correct the systemic problems that initially led to the company’s bad behavior.

Calls for public ownership may present the best path forward for the state’s energy future. Public utilities are government- or customer-owned entities that either operate their own facilities or purchase energy from another source. Unlike private utilities, public ownership creates little pressure to optimize profits for shareholders and allows ratepayers to better hold the utility accountable.

Additionally, a public energy system would be more reliable and sustainable. According to the American Public Power Association, public utilities suffer on average only 74 minutes of outages each year, compared to 136 minutes a year for customers of private utilities. Furthermore, carbon emissions from public power have been reduced by a third since 2005 and 40% of the power generated from these systems in 2017 was created by noncarbon-emitting sources.

Although shifting an electricity giant like PG&E to a public system may seem radical, it is hardly a new concept. Already, 2,000 public utility systems in the U.S. serve one out of seven people, including the California cities of Los Angeles and Sacramento. Even Nebraska, a traditionally conservative state, has been a champion of community ownership, with more than 166 public systems and electricity rates far below the national average.

The latest set of wildfires prompted many local and state leaders in California to conclude that municipalizing their power is the safest way forward. For example, San Francisco recently made PG&E an offer to buy its local power lines for $2.5 billion. San Jose is also considering going public; the city is investigating creating “a city-owned utility to develop independent power systems such as microgrids” to protect the city from more PG&E shutdowns.

However, while a transition to public energy may seem like a promising solution, the distribution of energy costs and infrastructure could aggravate California’s struggle to control its already rampant income and housing inequality problem. The cities pursuing municipalization plans, such as San Francisco, are populated by some of the wealthiest residents and businesses in the state. If these cities remove themselves from the PG&E grid, the costs of maintaining and financing the rest of the state’s power will fall on the shoulders of less populated and lower-income communities that don’t have the same resources.

Tyson Slocum, director of Public Citizen’s Energy Program, suggests that PG&E should become a state entity rather than a municipal one, which would ensure energy equity across California’s socio-economically diverse population.

“It is a travesty that the world’s fifth largest economy doesn’t have reliable electricity service because a corporate owned utility can’t manage its transmission lines,” said Slocum.

State ownership is an idea that even Newsom has slowly begun to show support for, asserting that if the utility fails to reorganize, “the state will prepare itself as backup for a scenario where we do that job” and “is gaming a state plan to address the scale of this moment.”

As California wrestles with how to address its new normal amid the climate crisis, the legacy of PG&E serves as a cautionary tale of the dangers of unregulated and irresponsible private utilities. However, it also presents the chance to generate a change in the way we regulate, manage and source our energy as we enter an era of environmental uncertainty.