At last count, the death toll from the California wildfires stood at 26. With heat and high winds affecting the state, PG&E, the state’s largest electric utility, is again resorting to preemptive power shutoffs—a policy the company initiated last year to prevent its equipment from starting more fires.
The most recent PG&E shutoff affected 22 counties, stretching from Sonoma County south of Santa Rosa to the Sierra Nevada, covering some 200,000 households and businesses. PG&E claims that these Public Safety Power Shutoffs are the most cost-effective approach to reducing wildfire risk from its equipment, as well as the only viable alternative until the company upgrades its transmission and distribution systems.
A detailed analysis suggests otherwise, however. The impetus for preemptive shutoffs arose from the 2018 Camp Fire that destroyed the towns of Paradise and Concow and killed 85 people. The Camp Fire was caused by a defective support on a nearly 100-year-old transmission line. In June, PG&E pleaded guilty to 84 counts of involuntary manslaughter and promised to do better.
In its June 30 Risk Management and Assessment Report to the California Public Utilities Commission, PG&E estimated that preemptive shutoffs would cost it $525 million between 2020 and 2022. In reaching this conclusion, though, the company ignored the costs to its customers, left without power for days. Those costs include spoiled food, lost work, and health effects on individuals who rely on home medical equipment.
A Manhattan Institute report I coauthored found that the costs to PG&E customers exceed the benefits from reduced wildfire risk. We estimated that the shutoff in October 2019 cost 750,000 customers between about $850 million and $1.7 billion. As for the benefits: even considering all of PG&E’s service territory, not just the affected counties where the power was shut off; and even assuming that every piece of PG&E equipment was in poor condition and thus much more likely to fail, the expected benefits were just over $500 million—less than one-third the estimated costs imposed on PG&E customers. When looking only at the counties affected by the shutdown, we found that the expected benefits fall to just over $100 million.
In other words, even the low end of the range of costs PG&E imposed on its customers was eight times larger than the expected benefits from reduced wildfire risk. And, even if one assumes that, without the shut-offs, a wildfire would have resulted, its expected costs would still be less than the costs imposed on those 750,000 customers.
The destructive wildfires in PG&E’s service territory have resulted from multiple causes, including poor forest management, which leaves dead and diseased trees untouched and thus provides more fuel for wildfires to develop. Deferred maintenance along power lines has also increased the likelihood that PG&E’s equipment will cause problems. PG&E claims that its preemptive shutdowns will reduce the number of customers affected and restore power more quickly. The company also intends to spend billions of dollars to upgrade its system and reduce wildfire risk, which will push its rates—already 50 percent higher than the U.S. average—higher still.
Wildfires are a fact of life in California and have been for centuries. But decades of fire suppression, environmentalists’ objections to logging, grazing, and thinning, and more people living in wildfire-prone areas have worsened the destruction. Coupled with the recent blackouts in the state—caused by inadequate supplies of electricity, thanks to California’s growing reliance on intermittent wind and solar power—PG&E’s customers seem destined to suffer for the foreseeable future, paying exorbitant prices for unreliable electricity supplies while enduring prolonged power shutoffs.
One hopes that California policymakers and regulators will take action to avoid this dystopian future. But the political winds aren’t blowing in that direction.
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