California fires bring upheaval to utilities as they face massive liabilities
The worst fires in recorded California history promise to reshape the state’s utilities as Pacific Gas & Electric and Southern California Edison face billions of dollars in potential liabilities and growing calls to overhaul their systems to better prevent wildfires.
Power suppliers in California have faced increasing financial pressure over the last decade as a series of deadly fires has been linked to system malfunctions, usually caused by powerful winds.
But the November fires — which killed at least 71 people in Northern California and at least three in Southern California — have raised larger questions about the utilities’ operations and how much of the costs for fire damage and system improvements will be shouldered by ratepayers.
State regulators say they are investigating not just the fires, but in the case of PG&E, also “the corporate governance, structure, and operation to determine the best path forward.” This has fueled new demands from critics who want the state to break up the utility.
PG&E itself has offered a dire outlook if it is found responsible for the Camp fire in Paradise, Calif., saying it would exceed its insurance coverage.
Investigations into the cause of the Camp and Woolsey fires are continuing, but both utilities have hinted that their distribution system could be a factor in the potential causes.
That prospect sent their stocks tumbling and sparked questions about their exposure because of a gap in a new wildfire mitigation law that the Legislature approved this year to help PG&E deal with massive liabilities from the 2017 wine country fires. PG&E’s stocks recovered a bit Friday as regulators question whether bankruptcy was a certainty.
Silence hangs over Paradise,Calif., after the explosive Camp fire burned through Butte County and claimed 23 lives. Residents have not been allowed back.(Carolyn Cole / Los Angeles Times)
President Donald Trump meets California Gov. Jerry Brown and Gov.-elect Gavin Newsom at Beale Air Force Base on Saturday.(Evan Vucci / Associated Press)
US President Donald Trump views damage from wildfires with Paradise Mayor Jody Jones in Paradise, Calif.(SAUL LOEB / AFP/Getty Images)
President Donald Trump walks with House Majority Leader Kevin McCarthy of Calif., left and FEMA Administrator Brock Long, right, as he visits a neighborhood impacted by the wildfires in Paradise, Calif.(Evan Vucci / AP)
President Donald Trump tours the Woolsey Fire ravaged neighborhood on Dume Drive in Malibu on Saturday.(Genaro Molina / Los Angeles TImes)
President Donald Trump, second from left, tours the Woolsey Fire ravaged neighborhood on Dume Drive in Malibu.(Genaro Molina / Los Angeles TImes)
From left, Johnny Hardin, 15, Madeline Hardin, 13, Donita Hardin and Erik Hardin, 15 months old, get ready to sleep in their car after getting displaced by the Camp fire, at the Walmart parking lot in Chico, Calif.(Marcus Yam / Los Angeles Times)
Alexandria Wilson, 21, kisses her dog Harley, after they both escaped the Camp Fire in Paradise, Calif.(Marcus Yam / Los Angeles Times)
Search and rescue teams inspect the grounds of a house burned by the Camp Fire along Boquest Boulevard in Oroville, Calif.(Kent Nishimura / Los Angeles Times)
Volunteers hand out supplies to fire evacuees near a Walmart in Chico, Calif.(Kent Nishimura / Los Angeles Times)
People go through donated clothes at a Walmart in Chico, Calif.(Kent Nishimura / Los Angeles Times)
A sign warns looters at the site of burned-down properties in Paradise, Calif.(Marcus Yam / Los Angeles Times)
A search and rescue team combs through the debris for possible human remains Friday at Paradise Gardens, in Paradise, Calif.(Marcus Yam / Los Angeles Times)
Alexandria Wilson, 21, consoles her boyfriend, Jacob Golden, 25, as they recount their harrowing escape from the Camp Fire at a relative’s house in Applegate, Calif.(Marcus Yam / Los Angeles Times)
A vanished neighborhood in Paradise.(Carolyn Cole / Los Angeles Times)
A forensic team investigates the site of a Paradise home where remains were found.(Carolyn Cole / Los Angeles Times)
Michael John Ramirez hugs his wife, Charlie Ramirez, after they found her keepsake bracelet while sifting through the remains of their home in Paradise.(Marcus Yam / Los Angeles Times)
Religious figurines sit atop a burned vehicle in Paradise.(Marcus Yam / Los Angeles Times)
Authorities recover the remains of a fire victim from an overturned car alongside Pearson Road in Paradise.(Marcus Yam / Los Angeles Times)
David Neeley hugs his ex-wife, Jeanne Neely, and their daughter, Faith Neeley, 10, in a parking lot in Oroville, where they are staying amid the Camp fire.(Carolyn Cole / Los Angeles Times)
Megan Butler, 26, and her daughter Aurora, 2, are homeless after their house burned down in Concow in the Camp fire.(Carolyn Cole / Los Angeles Times)
Yolo County Animal Services Officer Stephanie Amato holds a chicken she helped rescue in Paradise.(Carolyn Cole / Los Angeles Times)
Smoke fills the sky as the Camp fire continues to burn along the North Fork of the Feather River. It has already burned more than 200,000 square miles.(Carolyn Cole / Los Angeles Times)
A sign in Paradise offers a warning for would-be looters.(Carolyn Cole / Los Angeles Times)
A man rests at a shelter at the Church of the Nazarene in Oroville, Calif.(Carolyn Cole / Los Angeles Times)
Outside of Pulga, Calif., on the North Fork of the Feather River, the Camp fire continues to burn.(Carolyn Cole / Los Angeles Times)
Outside of Pulga, Calif., on the North Fork of the Feather River, where the Camp fire may have started, helicopters do airdrops while ground crews try to keep the fire from spreading.(Carolyn Cole / Los Angeles Times)
Firefighter Brian Carter of Weed, Calif., keeps an eye on the flames along the North Fork of the Feather River.(Carolyn Cole / Los Angeles Times)
Many people don’t want to stay in shelters because they can’t take their dogs inside. This dog waits for his human companion in a parking lot in Oroville.(Carolyn Cole / Los Angeles Times)
Residents of Paradise, Calif., try to get through a roadblock to check on their home but are turned away. People haven’t been allowed to return to the town.(Carolyn Cole / Los Angeles Times)
The Camp fire burns along a ridgetop near Big Bend, Calif., on Saturday.(Noah Berger / AP)
Yuba County sheriff’s officials carry a body away from a burned residence in Paradise.(Josh Edelson / AFP/Getty Images)
A crew from the California Department of Forestry and Fire Protection walks through the rubble of a home while putting out hot spots in Paradise, Calif.(Mason Trinca / For The Times)
Flames and embers, pushed by strong dry winds, set the town of Paradise, Calif., ablaze. Thousands of buildings were destroyed.
(Carolyn Cole / Los Angeles Times)
Brad Weldon, 63, waits for help along Skyway in Paradise, Calif. Weldon was among the residents who stayed and battled the wildfire.(Mason Trinca / For The Times)
Fire crews put out hot spots in Paradise, Calif.(Mason Trinca / For The Times)
Firefighters walk through the rubble of a home in Paradise, Calif.(Mason Trinca / For The Times)
A broader question also lingered on the minds of energy experts and analysts this week: In the state’s volatile wildfire environment, how can these large utilities still run their businesses amid a continued and perhaps existential threat of financial exposure?
“There’s a lot of uncertainty,” said Lucas Davis, a business and technology professor at UC Berkeley, who suggested the costs could reach into the tens of billions of dollars. “The potential liability could force these companies into bankruptcy.”
While utility issues have been linked to some destructive fires in recent years, they are not leading cause of wildfires. Other major causes include lightning, arson and ignition caused by vehicles. Improving the fire resilience of utility lines would help.
Experts say the recent spate of fires has many causes, including climate change — which is bringing higher temperature and drier brush — as well as homes being built on the wildland-urban interface.
Both companies say they are cooperating with the California Department of Forestry and Fire Protection investigation, which could last months. They also said that power incident reports filed with the California Public Utility Commission this week that noted power outages in the vicinity of the fire origins were preliminary and precautionary.
Still, industry experts predict a perilous road ahead for the utilities, especially PG&E, which is still grappling with damages related to a string of destructive wine country blazes last year in which investigators identified power lines as the spark. Its “safety culture” also remains under investigation by regulators, who signaled Thursday that scrutiny would continue.
In the short term, companies such as PG&E must worry about the most recent fires, given that a new law designed to ease the wildfire threat and reduce their financial liability doesn’t take effect until next year.
That’s when regulators would be granted the power to determine whether a utility acted reasonably when its operations were linked to a fire — a major change that could reduce damages.
But it leaves the existing system in place for 2018 and, as a result, leaves utilities vulnerable under the practice of “inverse condemnation,” which says a utility can be forced to pay millions of dollars without a strict finding of bad behavior at the start of a wildfire.
The effort by lawmakers also helped PG&E, in particular, by giving it the ability to ease its cost burden by financing its damages over time — a flexibility that might not exist for the potentially staggering damages this year.
A critical first step for both utilities is the state’s probe into the origin of the wildfires. Investigators were expected to reconstruct the cause and spread in Butte and Ventura counties.
In a filing with the U.S. Securities and Exchange Commission, PG&E notified investors about the risk of “significant liability” related to the Camp fire — exposure that could overwhelm its $1.4-billion wildfire insurance coverage.
Edison filed its own state incident out of “an abundance of caution” about an outage in the vicinity of the Woolsey fire’s suspected origin point.
Experts say those mitigation solutions should include more sensitive monitoring and warning systems.
“It’s in their interest to gold-plate the system,” said Robert McCullough, whose Oregon-based McCullough Research consults with power companies across the nation. “Nobody wants a dangerous situation like we’re in now.”
More sensitive monitoring could be a source of rich data, allowing real-time analysis of potential anomalies — a tree scraping a line, causing a disturbance, for example — that might expose future problems, said Alexandra von Meier, the director of energy grid research at the California Institute for Energy and Environment.
She stressed that the companies should also improve their sharing of data so that outside researchers could apply their own algorithms and machine learning to to improve the system.
Other options, in theory, include the costly and complicated process of burying power lines to protect them from the state’s gusting seasonal winds, and following through with plans to shut off power lines when conditions are likely to spark wildfires.
The companies also must learn to navigate new rules from a recently enacted law that grants regulators more flexibility to assess their culpability in major fires.
“Even if a utility did everything right, even if they were in no way negligent, I don’t think they can ever completely rule out something like this,” said von Meier, also an adjunct engineering professor at UC Berkeley.
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