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California’s Wild Fires Leave Many Questions Behind

Wildfires burning near Los Angeles, California Photo 7205513 © Qiwoman01 - Dreamstime

Bone dry vegetation and gusty winds combined to turn parts of California into hard to control wildfires in October. It was not the first, nor will it be the last. But what was different this time was that the state’s biggest utility company, Pacific Gas & Electric Company (PG&E) decided to play it safe, rather than sorry, by shutting off power to large numbers of customers to reduce the chance that its lines may cause additional fires, leading to loss of property and life.

The company is understandably nervous. In January 2019 it filed for bankruptcy protection as a result of massive lawsuits following the last 2 years’ devastating fires. Any additional fires even partially caused due to its faulty equipment would make matters worse. But shutting off large numbers of customers and leaving them in the dark for a day, or two, or longer, does not go well with the public, or the politicians.

The initial reaction of the investment community when PG&E filed for bankruptcy protection was mostly positive. The thinking was that the company would get its act together and come out of its ordeal stronger and better managed than before. But the devastating October fires and the extensive power shut offs has scared many investors away as reflected in the title of a 29 Oct article in The New York Times, “Can PG&E Survive the California wildfires?”

It is a question that many are asking now, including Governor Gavin Newsom, who has hinted that he would welcome new investors buying up the utility and fixing its problems – which would not be easy to do. The company’s market value has plunged from $25 billion a year ago to $12.4 billion 6 months ago to as little as $2.5 billion more recently, moving erratically with each passing day. It lost nearly 50% of its value during a recent nerve wrecking week.

In the mean time, politicians have come up with proposals to cave up the company, put its management under the control of a new administrator, etc., none of which address the main issue – which is California’s liability laws that allow large lawsuits even if the utility is only marginally at fault.

Despite cutting power to more than 2.5 million people in late Oct, fires presumably caused by faulty equipment erupted in several areas near San Francisco that were not designated as high risk. Which prompted PG&E’s CEO Andy Vesey to point out, "If we did go into a mode where we wanted to prevent everything from happening then we'd have to shut the whole system down and that's just not acceptable."

Frustrated but with few options, California Gov. Gavin Newsom said, "We're going to investigate all of this and we're going to make determinations as to culpability." What California needs more than anything is some rain and cooler temperatures so that cooler heads can prevail.

But the high winds and extremely dry conditions means that many parts of the state may engulf in flames at any moment again – caused by PG&E power lines or otherwise. The company said it will move forward with its third power outage in a week affecting as many as 3.8 million people in 29 counties. It has been surreal.

Fereidoon P. Sioshansi, Ph.D.'s picture

Thank Fereidoon P. for the Post!

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Matt Chester's picture
Matt Chester on Nov 3, 2019 3:32 pm GMT

none of which address the main issue – which is California’s liability laws that allow large lawsuits even if the utility is only marginally at fault.

Is California alone in these liability laws? Or is it just the combination of the laws and the disaster prone nature of the state that set up this perfect storm?

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