Power Outage Upside: California May Finally Wake Up And Fix Its Grid

The winds blow hard in Northern California about this time every year. Sometimes these “Diablo” winds feed infernos, like the October 1991 Berkeley-Oakland fire, which torched more than 1,000 homes and was considered the worst in California history until last year. The 2018 fires destroyed the town of Paradise, killed more than 100, caused some $30 billion in damage, and sent PG&E into Chapter 11 reorganization. Another bad fire year would likely push the utility into something akin to state receivership. 

For now, PG&E hopes to avoid company-killing conflagrations by abandoning its obligation as a regulated monopoly to provide power to its customers. As of early Thursday morning, the utility had de-energized the powerlines keeping lights on and food refrigerated for more than 600,000 customers. This may be the right move for PG&E’s balance sheet, but it’s not without cost. Michael Wara, a director at the Stanford Woods Institute for the Environment figures that the cost of this voluntary outage could be more than $2 billion per day — costs borne by PG&E customers, not the utility. 

Even if fires don’t break out, there is a nonmonetary cost  to PG&E: the continued erosion of its social contract with Californians. Many recent fires in PG&E territory have been blamed on insufficient efforts by the utility to keep its lines free from tree limbs and other vegetation. This is as much the fault of the company as of state regulators who have proven unwilling or unable to get PG&E to do what needs to be done. 

Californians don’t have to put up with this. Expect a wave of new interest in backup power, either solar+batteries or natural gas generators. But distributed microgrids are not a solution for the millions of Californians who don’t own a standalone home, or can’t afford a generator. 

Sen. Bernie Sanders tweeted his displeasure on Wednesday night:

“Irresponsible corporate greed threatened the health and safety of 800,000 Californians. Meanwhile, PG&E has paid out billions to its shareholders. My Green New Deal will build a 21st centry energy grid that will deliver clean, reliable power to all.”

Indeed, the California grid is not going to go away. So how to fix it? Hugh Wynne, utilities analyst with research outfit SSR, says this outage will increase support among Californians for “grid hardening” efforts. “In ten years time I expect that PG&E will have implemented a program of investment to replace wooden poles with steel or cement ones, insulate power lines in vulnerable areas, underground lines in limited instances, and install remote cameras and weather stations across the grid.” 

Sounds expensive. It can cost $1 million a mile to put power lines underground. Bernie’s deal would cost many billions of dollars that PG&E (or its successors) will try to foist on its ratepayers. Californians already pay an average of 16 cents per kilowatthour for electricity, 60% more than the national average and lower than only Hawaii, Connecticut, Massachusetts and Rhode Island. 

In a sense, Californians themselves are to blame for these outages. When PG&E cuts back vegetation, people complain about hurting the trees. When they clear dead trees and underbrush they’re blamed for hurting the animals. Yet when fires start PG&E gets the blame. 

The upside of this outage, if there is any, is that it will wake up Californians to the reality that if they don’t want to endure this unacceptable inconvenience in the future, they’re going to have to do something about it. Which means that one way or another Californians are going to be paying even more for power in the years to come.