Fires will drive price hikes for electricity and broadband

by Steve Blum • , , , ,

Pacific Gas and Electric and, to a somewhat lesser extent, Southern California Edison face the potential of billions of dollars of liability for 1. this year’s wildfires, 2. last year’s wildfires and 3. preventing next year’s wildfires. Someone will have to pay the tab that fires have already run up in California. Under state law, if a utility is even partly to blame it has to bear the full burden, generally. But utilities, even highly regulated ones like privately owned electric companies, can pass some or all of those costs on to their customers.

So we all face the possibility of paying for the damage done, and preventing damage yet to be.

In the final hours of its session, the California legislature passed a law – senate bill 901 – that makes it easier for utilities to increase electric rates to pay for fire liability in 2017, and from 2019 on. But not this year. With PG&E potentially on the hook for the deadliest and most destructive fire in California history, the one-year gap in the law puts a huge cloud over its future. Bankruptcy is a possibility.

One solution is to change the law, which assemblyman Chris Holden (D – Los Angeles) is considering. He’s currently the chair of the assembly’s utilities and energy committee (committee and leadership assignments will be changed to one extent or another when the next legislative session begins next month). According to a story on Bloomberg, his chief consultant is working on a new bill…

Kellie Smith, an adviser to assemblyman Chris Holden, said she is drafting legislation that could be introduced as early as Dec. 3. It may serve as a framework for lawmakers to consider relief for PG&E from the billions of dollars it faces in potential liability for death and property damage in Northern California’s Camp Fire, the deadliest in state history.

“He is concerned about the instability of the utility and the adverse effect it could have on ratepayers, and the ability to deliver services at a reasonable cost,” Smith said by telephone Monday.

A utility bailout bill will face opposition, so there is no guarantee it’ll pass. Senator Jerry Hill’s (D – San Mateo) reaction to Holden’s proposal was “what a sad day this is for California”. He might be PG&E’s most vocal critic in Sacramento, but he’s not the only one by far.

Looking ahead, utility rates – for electricity, broadband and anything else that runs on wires attached to poles – will continue to rise with or without more fires. Before these most recent fires, SCE told the California Public Utilities Commission that it expects to spend $670 million on grid safety over the next three years, and wants to add it to electric bills, raising the average bill by 1%. PG&E and San Diego Gas and Electric have to do the same math, and the equations are likely to change as the causes of the Camp and Woolsey fires are assessed and new rules come into effect.

SDG&E might point the way forward for PG&E and SCE. It aggressively shut off power to 24,000 homes during this latest siege, and has not been implicated in any wildfires. It’s also buried more of its lines – 60% of its route miles are underground, compared to 25% of PG&E’s, according to a story on CalMatters by Julie Cart.

But undergrounding is neither cheap or easy. It costs $3 million per mile on the average, according to PG&E, and can go even higher in urban areas. Any large scale wildland underground program is also likely to face opposition – California environmental law allows pretty much anyone to endlessly challenge any construction project. The prospect of sending bulldozers and backhoes through hundreds of miles of California’s backcountry will spark a rush that makes courthouses look like a Walmart on Black Friday.

Broadband companies share the cost of maintaining pole routes and building underground infrastructure. And sometimes even share the liability for fire damage.