On June 9, 2018, the California Department of Forestry and Fire Protection (Cal Fire) determined that Pacific Gas and Electric Company (PG&E), the dominant supplier of electrical and gas services in northern California, was responsible for at least 12 deadly wildfires in 2017 that, combined with numerous others, amounted to one of the deadliest wildfire seasons in the history of California. Collectively these fires, sometimes called the “North Bay” or “Wine Country” fires, caused at least $9.4 billion in damages, killed at least 44 people, and destroyed nearly 9,000 individual structures. Estimates put the cost of these fires to the greater US economy at least $85 billion.1 The 12 fires conclusively determined to be caused by PG&E equipment include fires in Mendocino, Lake, Butte, Sonoma, and Humboldt counties; six fires in Sonoma County, and one fire in Napa county. In essentially every fire, Cal Fire investigators found the cause of the fires to be PG&E equipment coming into contact with vegetation, such as a tree falling onto a power line, or vegetation on the ground coming into contact with power lines.2 Despite these findings, numerous other wildfires—including the Tubbs fire, thought to have been the most destructive—are still under investigation by Cal Fire.
The decision by Cal Fire comes after almost a year of speculation regarding PG&E’s involvement in the fires. Since the very outset, PG&E has both simultaneously denied involvement in the fires, while, at the same time, has incessantly lobbied California politicians (and pursued litigation) designed to insulate it from the effects a finding of its responsibility would carry for its bottom line. After the Cal Fire findings, in late June, 2018, PG&E notes that it will be liable for at least $2.5 billion in damages in connection with these wildfires and is preparing a liability chest of nearly $10 billion.3 PG&E has suggested that its financial liability might even be substantially higher than even its upper estimates as Cal Fire’s investigation unfolds, and reports that it is facing at least 200 individual lawsuits stemming from these fires.4
PG&E’s financial liability from the northern California fires may be only one aspect of penalties flowing from its mismanagement of its infrastructure. California prosecutors are investigating whether PG&E may have violated state laws regarding fire safety, which could impose additional, likely substantial, fines, and even criminal liability on PG&E employees. In 2010, for example, PG&E was fined $1.6 billion, and convicted of six separate felony charges, stemming from its failure to maintain a natural gas pipeline that exploded in San Francisco in 2010, killing 8 people.5 Already, PG&E has been charged with violating state law in at least 8 of the fires it was found to have caused,6 although what exact state laws PG&E may have violated were not specified in the Cal Fire report. The charges, however, likely stem from PG&E’s lack of proper maintenance of vegetation surrounding its power equipment, the noted cause of the majority of the 12 fires document by Cal Fire. Cal Fire, however, is not a prosecuting agency, and it is up to California state prosecutors to follow up on Cal Fire’s recommendations regarding the fires.
PG&E’s corporate history only affirms its continued efforts to shield itself from liability from deadly fires. As has been well-document,7 PG&E has, for decades, refused to comply with California officials in efforts to document areas where PG&E’s infrastructure might pose a risk of fires. After a series of deadly fires in 2007, the California Public Utilities Commission (the PUC) embarked on an ambitious project to create detailed maps showing the location of power infrastructure equipment throughout the state. That such maps were not already in the possession of utility companies such as PG&E is shocking in itself. However, despite a public mandate to produce and create such maps, as of 2017, PG&E had still failed to complete this project. Its resistance to mapping likely stems from the stated goal of the maps, which is to increase the obligation of utility companies to monitor and clear vegetation in areas identified by the maps as being at high risk for contact with vegetation. For obvious reasons involving padding PG&E’s corporate bottom law, PG&E has resisted any legislative or regulatory action that might obligate it to spend additional funds to maintain its power equipment, even if such maintenance would yield appreciable benefits for the general public.
In 2015, the so-called Butte fire (later determined to have been caused by PG&E equipment) began after an unmapped power line came into contact with vegetation. This fire raged nearly eight years after the Utilities Commission’s mapping project to identify exactly such potential areas of danger began. Notably, on October 6, 2017—days before the outbreak of the wine country fires—an administrative law judge assigned to oversee the mapping initiative granted PG&E another in a longstanding series of extensions to produce these maps. The mapping project—once thought to take a single year—now has no clear end in sight.
PG&E’s bristling at California’s regulation initiatives extends well beyond its opposition to identifying the locations of its power infrastructure. In one illustrative example from July, 2017, PG&E publicly responded to a regulation request that would require it to increase the wind force that its power poles could sustain by calling it “arbitrary,” and refusing to comply.8 This of course, despite, months later, PG&E itself arguing that unusually high wind forces on its equipment might have led to the deadly wine country fires.9 PG&E has notably delayed projects that aim to underground powerlines (thought to be the most effective way of preventing deadly fires by running power equipment below ground),10 has diverted funds earmarked for use in vegetation management towards corporate profits,11 has been accused of numerous public safety and related violations regarding its management of power and gas equipment,12 has frequently refused to implement safety standards common even among other California utility providers,13 has obstructed investigators seeking to look into safety violations,14 and has frequently witnessed its own employees going on record complaining of poor training, and lack of overall awareness of the dangers that its poorly maintained power equipment carries.15
Despite PG&E obvious intransigence, it alone is not entirely to blame for the state of California regulatory action and inaction. Far too frequently, and for far too often, California regulations and legislators have acquiesced to the demands of PG&E and other utility companies. For example, shortly after the 2015 Butte fire, California legislators called special hearings to, among other things, determine why the delay in the mapping project had continued. The California senate promulgated new rules requiring utilities to file wildfire mitigation plans, and required the PUC to review such plans. However, despite such legislation, and the ostensibly regulatory oversight of the PUC, PG&E continued to resist producing such plans. It argued, for example, in March, 2017, that identifying vulnerable areas of power infrastructure could present “public safety and security issues.”16 This ironic statement belied the fact that the entire purpose of the regulatory regime is to identify public safety issues in the form of improperly maintained infrastructure, and infrastructure vulnerable to causing wildfires.
Indeed, almost every year has seen new legislative or regulatory action directed at regulating PG&E and other utility companies, to be either neutered when actually enacted—likely due to the vast financial and lobbying interests of PG&E and other utility companies—or simply impossible to actually enact.
Most recently, in 2018, PG&E has supported laws working their way through the California legislature that would create a legislative remedy to the legal concept of “inverse condemnation.” Under this legal precept, PG&E, and other utility companies, are financially responsible for damages stemming from fires caused by the power equipment, even if PG&E was not negligent in its operation of such equipment.
PG&E has championed these bills moving through the California legislature as a way to reduce pressure on homeowners and other customers. It argues that if it is forced to pay for the damages resulting from the fires even when it is or had not been negligent, it will immediately pass these costs on to consumers, raising rates for millions of Californians. If it succeeds in abolishing inverse condemnation, the insurance industry has suggested that it may raise insurance premiums on homeowners in California, or refuse to provide coverage in some areas altogether, knowing that it can no longer rely on PG&E to pay for the results of wildfires caused by its equipment.17 Indeed, removing inverse condemnation might further demographic shifts already well underway in California, forcing residents who live in more remote (but fire prone) areas to move into California’s already incredibly pricey, crowded, and urbanized metropolitan areas. California insurance companies note that as many as one-quarter of currently insured customers might be considered to be in “high risk” areas for wildfires, and see their premiums jump sharply, or possibly be denied coverage entirely. 18
Between the two options presented: passing along the cost of wildfire to PG&E customers in the form of rate increases; or forcing insurance’s companies hands in altering insurance coverage for at-risk homeowners, there is a third, much more obvious option: having PG&E shareholders pay for the damages. Indeed, PG&E is only permitted to pass along rate increases to customers under certain, enumerated circumstances. In the case of wildfires, extant PUC rules would only permit PG&E to increase its rates if the utility company can show that it operated its system consistent with best practices: that is, that it was not legally negligent. If, as Cal Fire investigations increasingly show, PG&E either violated state law in operating its infrastructure, or was legally negligent in doing so, PG&E cannot legally pass along such costs to consumers.19
Of course, PG&E is also actively lobbying legislators and regulators to permit it to more freely pass along rate increases to its customers. This is the explicit (or implicit) purpose of numerous bills working their way through the legislature. PG&E lobbying war chest has been on full display over the last 8 months. It has allegedly spent at least $4 million to lobby officials and influence campaigns,20 and has conducted a media blitz, with opinion pieces appearing in newspapers, journals, and online forums throughout the state arguing for laws that would repeal inverse condemnation. It recently has enlisted the help of the International Brotherhood of Electrical Workers, a large and power union representing the utility’s company’s workers, in further lobbying for favorable PG&E related legislation.21 Such a combination: combining both the corporate finances and might of one of California’s largest companies with one of California’s most powerful labor unions, would create a massively influential coalition fighting for PG&E’s interests.
Luckily, for California residents, Cal Fire’s finding of PG&E’s liability in the 2017 fires will likely sway public and legislative opinion—at least, in the short term— away from giving PG&E what might essentially be a free pass in passing along its liabilities to its consumers. Doubtlessly, however, PG&E is hoping time and its continued, expensive lobbying efforts will pay dividends down the road. PG&E’s financials have rightfully struggled as additional evidence regarding its liability for the fires comes to light. Since the 2017 wildfires, PG&E shares are down almost 42 percent, amounting to billions of dollars lost for its investors, and likely dwarfing the fines and damages it will be forced to pay out for the fires.
As of early 2018, PG&E’s rallying cry when faced with criticism of its management of infrastructure has been that climate changes have resulted in a so-called “new normal” for California residents. 22 That is, California residents should expect more fires, and more deaths and destruction from these fires, due to climate change and other forces that PG&E is unable to control. While climate change has doubtlessly played at least some role in the recent proliferation of deadly fires, likely the only “normal” aspect of the cycle of California wildfires is PG&E’s continued mismanagement of its infrastructure, lack of adherence to California regulations, and continued focus on its bottom line at the cost of customer safety. Until financial or legislative forces break PG&E’s will to resist, deadline California wildfire instigated from companies such as PG&E are likely to torment residents throughout the state.