Is PG&E a threat to California?

Utility’s alleged missteps reveal the cost of doing business in fire-prone state

Despite handing out millions in executive bonuses this year, PG&E says liability claims from last year’s wine country fires would push it into bankruptcy.

Despite handing out millions in executive bonuses this year, PG&E says liability claims from last year’s wine country fires would push it into bankruptcy.

Illustration by Maria Ratinova

Raheem F. Hosseini contributed to this report.

The Governor’s Office of Emergency Services recently hosted the annual California Day of Preparedness, an event in Old Sacramento State Historic Park encouraging residents to be ready for cataclysmic earthquakes, floods, tsunamis and volcanic eruptions. But here’s the irony:

It was sponsored in part by Pacific Gas and Electric Co., the utility giant with a recent history of causing disasters. Wildfires, specifically.

On September 11, a downed PG&E power line allegedly sparked a 150-acre brush fire that forced some residents of Lagunitas to evacuate. Marin County firefighters contained the relatively small blaze quickly, but all fires start small, and they have a way of getting out of control.

Cal Fire has tied PG&E’s equipment to 12 fires in Northern California that killed 18 people and caused billions in damages last October. Among the victims were Greg and Christina Wilson, who watched as the Tubbs Fire, the most destructive wildfire in state history, burned their Santa Rosa home to the ground. They barely escaped. Greg, for one, is still shaken up.

“You get these moments where you think, ’Man, did we really go through that?’ You think back to that night and ask yourself how the hell we came out the other side,” he told SN&R. “Sometimes it sounds crazy.”

Though the cause of the Tubbs Fire is still under investigation, there’s a chance it started like many of the others that night—by downed power lines and exploding transformers alleged to be improperly maintained by PG&E. Despite the recent flurry of state legislation related to wildfires and who’s responsible for them, count the Wilsons among the survivors who believe the utility isn’t being held accountable for its role in the North Bay wine country fires.

“I’m totally pissed off,” he said, “especially after hearing there’s been negligence on [PG&E’s] part. … It infuriates me that this is going on.”

The San Francisco energy giant is grappling with the same planetary crisis as the rest of humanity. Thanks to climate change, wildfires in the West are bigger, hotter and harder to contain than ever before, and pose a greater risk to public safety as California’s population encroaches deeper into the woods. Revamping the state’s energy-delivery system to increasingly extreme weather and keeping their customers safe is a logistical challenge of mind-boggling proportions—and an expensive one, too. The perspective of the state’s utilities is, why should they foot the bill alone?

“We must all do more to keep our communities safe,” said Christopher Capra, a spokesman for Sacramento Municipal Utilities District, in an email. “We encourage the state and federal government to implement more robust fire and forest management practices.”

Publicly owned utilities such as SMUD don’t have shareholders to help bear the costs of damages inflicted by a catastrophic fire; PG&E is investor-owned, so it foots the bill. Which is a reason why some are skeptical when PG&E says paying for the damages of the wine country fires would force bankruptcy.

The other reason is PG&E’s history of deceiving the public about stuff like this. At this point, the company has a serious credibility problem. And that’s why there’s an uproar over controversial new legislation characterized by some as a bailout for the state’s utilities—one that could take the heat off PG&E.

Since 2007, Cal Fire has assessed fire hazards in locally controlled counties and cities, calling attention to where homes are built.


From destruction to bailouts

PG&E is facing hundreds of lawsuits and the prospect of paying out billions in damages. Under state law, utilities are responsible for fires traced to their equipment whether or not they are complying with regulations. That means they’re on the hook even when they act responsibly and meet all safety standards, but something out of their control happens, like a tree limb falling from outside their right-of-way and knocking down a power line that starts a wildfire.

PG&E announced a loss of nearly $1 billion due to wildfire claims in July, and could face billions more in potential liability if its equipment is blamed for the Tubbs Fire.

Despite handing out millions in executive bonuses this year, the company says the additional liability would push it into bankruptcy, crippling efforts to meet the state’s renewable energy goals and jacking up everybody’s energy bills. (This wouldn’t be unprecedented; PG&E declared bankruptcy during the 2000-01 California electricity crisis, when it was squeezed by soaring energy prices on the wholesale market and a statewide freeze on retail rates.) As a response, the utility has lobbied heavily to shift the blame for the wildfires on climate change and shift liability to consumers, spending some $1.7 million on greasing the proper palms in the Legislature.

Enter Senate Bill 901, the granddaddy of this year’s package of wildfire bills. According to one of the measure’s co-authors, state Sen. Bill Dodd, the bill started out as an effort to encourage PG&E to adopt protocols for shutting down the grid during storms. But Gov. Jerry Brown pushed for a wider-reaching iteration of the bill, so it would also help utilities pay for wildfire damages and address longstanding forest-management practices that overstock the woodland fuel load.

SB 901 passed 29-to-4 in the Senate and 45-to-10 in the Assembly, with the final vote held just hours before the midnight deadline on August 31. Dodd, a Napa Democrat whose district burned in the wine country fires, told SN&R that lawmakers moved quickly because of the urgency and severity of the problem.

“In the past 12 months, we’ve had more acreage burned in the state of California than probably any 12-month period in recorded history,” he said. “The moment is here and it’s time to act. People are looking to us to make our grid safer, to make our rural areas safer, to really look at our rules and regulations on how we promote forest health.”

The measure authorizes a five-year, $1-billion effort to reduce forest density—a primary driver of the state’s rampant wildfires, along with climate change—through tree and brush thinning programs and prescribed fires.

If the bill is signed by Brown, regulators would determine liability based on whether equipment was reasonably maintained and operated, and allow investor-owned utilities such as PG&E to issue cost-recovery bonds and repay them by charging more on customers’ electricity bills.

This, clearly, is a favorable result for the state’s utilities. SN&R’s request for comment from PG&E drew a written response from spokesman James Noonan: “Senate Bill 901 is a common-sense solution that puts the needs of wildfire victims first, better equips California to prevent and respond to wildfires, protects electric customers and preserves progress toward California’s clean energy goals.”

But it has outraged consumer advocates such as Mark Toney. As executive director of The Utility Reform Network, Toney fights for lower electricity bills and sustainable energy practices.

“This is a bailout worth billions for PG&E because it sets a cap on how much they can pay [for wildfire damages] at one time,” he said. “Everything over the cap, including fines and penalties for negligent behavior, is going to be paid by ratepayers. That is an absolutely stunning precedent.”

A record of choosing profit over safety

That’s not the way Dodd sees it.

“Some of the papers have been saying this is a utility bailout,” he said. “I would say it’s the exact opposite. … Let me tell you, if PG&E goes bankrupt as the result of inaction on this, it’s going to cost our ratepayers a lot more than this plan ever would.”

Frank Pitre is a lead counsel for North Bay wildfire victims in a class action lawsuit against PG&E. He’s calling for a top-down audit of the company’s risk-management practices specific to its electrical infrastructure. He cited a similar audit mandated of PG&E’s gas-transmission system following the San Bruno disaster.

“They tried to determine whether PG&E was adequately devoting resources to safety,” he said. “The report was pretty scathing. It determined that PG&E really had no safety culture.”

Pitre would also urge auditors to take a hard look at PG&E’s budget for electrical upgrades. The company failed to spend $93.5 million it was allocated for gas line improvements in the decades leading up to the deadly 2010 explosion in San Bruno, according to the California Public Utilities Commission. The commission noted in a May 2011 letter that PG&E’s spending on its pipelines fluctuated because “utilities have flexibility and discretion to reprioritize spending according to the needs of their infrastructure and systems,” according to the Mercury News.

A federal jury in 2016 found PG&E guilty on five felony counts of failing to properly inspect its gas pipelines.

“They would routinely request money for one purpose, and then not spend it on that purpose,” Pitre said. “If the money was earmarked to conduct replacement of a gas transmission line in a certain area because their data suggested there was a hazard, they would say, ’Wait a minute, that won’t allow us to get our 8 percent return rate to shareholders, so we’ll kick that project down the road another year.’”

And as Pitre knows all too well, deferred maintenance can have devastating consequences. Among his clients are the Wilsons, the married couple who lost their home in Santa Rosa.

Greg and Christina Wilson’s house in Santa Rosa was one of thousands of structures destroyed in the Tubbs Fire, which burned for 23 days last October.

Photo courtesy of Greg Wilson

A dream home in a perfect firestorm

Christina and Greg moved into their house in December 2005. They were sold on the seclusion of the dead-end street and thick tree coverage that blocked views of the neighbors’ house.

The Wilsons often sat with their neighbors at the end of the street and talked about how much they all enjoyed living somewhere that “felt far away but was close to Santa Rosa,” Greg said. They also talked about how the heavily forested neighborhood would probably go off like a torch in a wildfire, but Greg said he and his wife never received any warning from Cal Fire or any other entity about wildfire hazards prior to or during the purchase of their home.

Two years after the Wilsons moved in, Cal Fire began evaluating fire hazards in locally controlled jurisdictions, such as cities and counties. Using a model developed by the UC Berkeley Center for Fire Research and Outreach, the state agency would assign a hazard rating based on potential “flame and ember intrusion from adjacent wildlands and from flammable vegetation in the urban area,” it states on Cal Fire’s website. Once Cal Fire recommends a city be classified as a “very high fire hazard severity” zone, local officials have 120 days to adopt ordinances classifying it as such. The designation essentially can restrict where construction occurs, what building materials are used and requires the clearance of vegetation 100 feet around dwellings.

To date, Cal Fire has assigned this most hazardous rating to 190 cities in 31 counties, including Santa Rosa in Sonoma County, where the Wilsons had moved. Sacramento and Yolo counties don’t have any cities on the list, but Butte, El Dorado and Placer counties have two cities apiece that have been deemed the most vulnerable to fire.

For the Wilsons, the worst-case scenario arose late in the evening of October 7, 2017. A friend called to warn that a wildfire was in the area, but Greg didn’t want to abandon their home prematurely. They knew they were in trouble when the power went out. They got in the car with their dog and an assortment of cherished possessions, but it was too late: From the end of their driveway, they saw houses downhill engulfed in flames.

“I said, ’Christina, we have to haul back and jump in the pool,’” Greg said. “We hugged each other and said our goodbyes to our house in that pool. There wasn’t much to do but watch everything burn.”

All 63 houses in the neighborhood were incinerated. Many homeowners later reported that the water in their pools had evaporated due to the extreme heat of the fire. That didn’t happen to the Wilsons’ pool, and that’s the only reason they survived. They stayed mostly submerged for three hours, coming up for gasps of smoke-filled air, before being rescued by a Cal Fire firefighter and transported to UC San Francisco Medical Center.

The couple stayed in intensive care for 10 days to receive treatment for burns and smoke inhalation. Greg developed a chronic cough that persists to this day.

“Obviously, we want some compensation for the pain and suffering we went through, but the other thing is to make sure PG&E is held accountable,” he said. “We need to put measures in place to make sure this kind of crap doesn’t happen again. It sounds like these fires were preventable just by doing the regular work they’re supposed to do.”

Pitre, the lawyer, believes there’s only one way to make PG&E do the work they’re supposed to—lawsuits.

“The only thing that seems to really hold these guys accountable is hitting them in the pocketbook,” he said. “I don’t understand it.”