Now months after the California wildfires of 2017, residents and businesses are still struggling to rebuild after one of the most devastating wildfire seasons in California history. PG&E, the northern California utility company now widely seen as responsible for many of these fires (and, particularly, for the so-called Wine Country fires around northern California), has continually denied responsibility for the fires, despite mounting evidence to the contrary. The Wine Country fires killed 45 people in 2017, and destroyed thousands of acres of land, including entire neighborhoods in Santa Rosa. Although CalFire and other state officials have yet to official apportion blame for a majority of the fires, no other evidence has, as of yet, suggested another cause beyond faulty and poorly maintained PG&E equipment. If proven, estimates suggest that PG&E may be liable for more than $10 billion of fines and damages, a substantial portion of which will likely be paid out to home and business owners impacted by the disaster.
CalFire is traditionally slow and methodical in its investigations, and a final, definitive statement apportioning blame may be months, or even years, away. However, numerous independent investigations have suggested that the pattern of fires—specifically, multiple blazes that broke out in a short period of time, across a wide geographical area, and that later combined into larger, deadly blazes—is typical of either multiple lightning strikes, or power lines blasted by high winds. There were no lightning strikes, or evidence of lightning activity, around the time of the fires, or near the location of the fires. For its part, PG&E has only, at best, suggested that the power lines that may have caused the fires were not actually owned or operated by PG&E, and also repeatedly notes that the CalFire investigation is ongoing.
CalFire’s pending investigation has not prevented cities, counties, and individual home and business owners from pursuing their own legal action against PG&E. In fact, there are already hundreds of lawsuits in various stages of litigation against PG&E, and doubtlessly hundreds, if not thousands, of similar suits have yet to be filed. PG&E has suspended its traditional dividend to shareholders in anticipation that its massive cash reserves may be required to defend against an influx of legal action.
Recent investigation into PG&E’s finances has revealed yet another layer of PG&E’s mismanagement and negligence. An obvious remedy to the issue of downed power equipment (widely believed to be the cause of the fires), is to install power equipment underground, where it cannot be impacted by winds and cannot come into contact with vegetation. This process is known as “undergrounding” (taking existing above ground power lines and putting them underground) and has been seen as desirable by local and state officials in many years. In 2017, for example, California regulators approved spending at least $60 million to move existing power lines underground. PG&E ultimately spent less than half of this money—approximately $28.3 million—in furtherance of this task and, instead, diverted the rest of the funds elsewhere. California authorities are still uncertain as to where the remainder of these funds went.
Similarly, in 2016, PG&E spent only approximately $31 million out of an allocated amount of $75 million to this task. In fact, in the last two decades, with few exceptions, PG&E has almost never spent the entire amount of money allocated to it to underground power equipment activities, despite fairly sizeable allocations each year. Even were PG&E to spend the appropriate amount of money allocated on a yearly basis to undergrounding, officials estimate that this is only sufficient to underground approximately 30 miles of cabling per year—an almost insignificant amount, compared to the thousands of miles of cabling running throughout California, most of which runs through rural or forested areas that can create the greatest risk of fires.
City and state officials frequently describe the process of undergrounding power equipment via PG&E as infuriatingly slow. A project in San Leandro, for example, first proposed in 2003 to underground its power cables, had yet to break ground as of late 2017. Because PG&E maintains exclusive control of its power equipment, local officials who desire undergrounding can only ask PG&E to underground its equipment, and then wait until PG&E determines that it desires to do this. Furthermore, PG&E lacks financial incentives to bury underground power equipment, as the cost of running underground lines can be as much as three times as the cost of building aboveground equipment, yet PG&E will receive the same revenue from the use of such equipment. PG&E openly states that it has around a half dozen individuals devoted to undergrounding, despite having a payroll of approximately 20,000 total employees.
PG&E’s inactions in undergrounding are in stark contrast to other utility companies, even within California. For example, San Diego Gas & Electric Company, servicing the San Diego area, has made placing power lines underground a very high priority, mostly as a means to protect against high winds and dry vegetation in southern California that can lead to fires. As a result, almost 65% of SDG&E’s electrical distribution lines, both within cities and rurally, run underground. SDG&E has publicly committed to continuing the undergrounding process as a way to safeguard against future potential fires, while PG&E has dragged its feet for the past two decades, likely in an attempt to maximize profits at the expense of public safety.
Officials throughout California have, and are currently investigating, numerous means to speed up this process, including by permitting certain cities to amass utility credits that can then be “traded” for the cost of undergrounding power lines. PG&E has over 100 projects that have been or could be paid for by theses municipal credits, but, as noted, many of them have yet to break ground for reasons that remain unclear. Other proposals call for power lines to be built in conjunction with broadband telecom cables, many of which are also being placed underground. Despites this, some California officials believe that more fundamental changes may need to be made to incentivize PG&E to prioritize undergrounding, which, to many officials and residents, seems an obvious means of mitigating the risk of wildfires.
PG&E’s incentives are unlike many utility companies in other states. Because PG&E is a publicly traded entity, owned by shareholders and the general public, its directors and officers have fiduciary duties to theses shareholders to maximize company profits. Maximizing corporate profit is often at odds with its other ostensibly duty: to protect the public from the dangers inherent in operating a utility company in one of the country’s largest and most populous states. Thus, although PG&E is legally mandated to follow relevant California laws governing its conduct, its corporate officials have a duty to follow such laws only to the minimum extent required to prevent it from being fined or penalized by the government. Such a circumstance does not, to say the lease, instill confidence that PG&E would put forth additional money or effort to protect consumers without any hope of financial benefit.
As a result of this paradigm, and due to PG&E’s repeated and pronounced history of poor maintenance—including not adequately monitoring vegetation near power equipment, not updating PG&E equipment to modern standards, and not adequately training its employees and contractors to identify risk areas—local, state, and even federal officials have begun seriously investigating ways to better protect consumers against the damages that PG&E and similar companies can unleash through legal means.
Senate Bill 819, introduced by California Democratic senator Jerry Hill, would prohibit utility companies such as PG&E from passing along any fines or penalties to ratepayers, if the utility company was found to be at fault for the disaster. The bill therefore addresses what PG&E is currently attempting to do: that is, increase rates to cover the fines, damages, and increased insurance premiums it will be forced to pay as a result of its bad actions. PG&E’s current attempted actions in “passing on” the cost of fines and damages essentially would absolve it of any financial responsibility for wrongdoing: instead, it consumers would pay for PG&E’s transgressions, while PG&E continues to reap the same amount of profit from each transaction. Although PG&E has largely been prevented from doing this course of action by extant California law and, sometimes, on a city-by-city basis, SB 819 would more strongly codify and prohibit such actions in the future.
Similarly, Senate Bill 901, from California Democratic senator Bill Dodd, would require electric utility companies, like PG&E, to draft wildfire contingency plans that detail when these utility companies must de-energize power lines during high winds or other risky conditions. In the Wine Country fires, PG&E has been openly criticized for failing to cut off electricity to power equipment that was obviously damaged or in contact with vegetation. Eyewitness reports suggest that power was flowing through PG&E equipment despite it being on the ground, in contact with homes, tress, bushes, and other easily flammable material. PG&E has continually refused to adopt automated disconnect equipment that would disconnect electrical service in the event its equipment is damaged or downed by a storm, citing the high cost of such equipment. Indeed, although PG&E is statutorily mandated to maintain a wildfire contingency plan, the efficacy of this plan is quite obviously hugely limited, as, despite having such a plan in place for the last several decades, numerous fires have been, or will likely shortly be, proven to have been caused by PG&E’s actions and inactions.
Beyond penalizing PG&E and other bad actors, numerous pieces of legislation are hoping to help consumers to more quickly recover from the fires. One example of such an effort is Senate Bill 897, sponsored by California Democratic senator Mike McGuire. SB 897 would force California insurance companies to pay out no less than 80% of the policy limits of a homeowner’s insurance policy upon a claim by the homeowner as a result of a catastrophic fire, even if that homeowner does not have an itemized list of items lost in the fire. The bill addresses a major issue that homeowners now face when dealing with insurance companies: specifically that insurance companies require a detailed list of possessions lost prior to reimbursing homeowners for such possessions. Quite obviously, due to the nature of many fires, homeowners lack a detailed inventory of all personal possessions that may be destroyed or damaged in the fires. SB 897 would make this process significantly easier.
A plethora of similar bills also hope to address another pressing concern of homeowners: specifically that a homeowner’s insurance coverage may be insufficient to cover the cost of rebuilding homes. Many California homeowners were shocked to find that, after their homes were destroyed (or functionally destroyed) during the fires, their insurance coverage did not cover the so-called “replacement” cost of their homes (the cost to rebuild their home as it was)—that is, their policy did not contain sufficient coverage to rebuild the entire home. These California bills would, among other issues, mandate home insurance providers to automatically change their coverage as the cost of rebuilding increases, and to cover the replacement cost of homes in the event of substantial natural disasters.
The Wine Country fires, and similar fires that raged across California in late 2017, will likely not be the last fires that cause death and destruction in California. Sadly, it seems almost certain that PG&E’s lackluster record of protecting California consumers will continue. However, the work of California whistleblowers, investigators, lawmakers, and the general public, in pursuing legal action against PG&E when relevant, will hopefully result in both a safer California, and result in a better and more equitable system of recovery for those injured in such fires.