EP: 2 Utilities & Fire

Embark on a harrowing journey through the smoldering consequences of utility mismanagement as Wall Street Journal's Catherine Blunt exposes the stark reality behind California's wildfires. In her eye-opening book, "California Burning," Catherine artfully dissects the catastrophic intersection of natural disasters and the energy sector's aging infrastructure, revealing how the negligence of companies like Pacific Gas and Electric has sparked more than just flames—it's ignited a legal inferno.

With Catherine's expert guidance, we traverse the charred landscapes of Oregon, Maui, and Texas, where utility companies are facing the music—with tune of millions in legal recompense. The conversation takes a turn from tragedy to prevention, as we discuss the urgent adoption of wildfire mitigation strategies such as vegetation management and infrastructure upgrades. This episode isn't just a recount of past disasters; it's a clarion call to utility companies nationwide, demonstrating that without immediate and decisive action, the next headline tragedy could be just a spark away.

Transcript:

Speaker 1: 0:01

If you've read California Burning by Wall Street Journal reporter Catherine Blunt, you're certainly acquainted with the danger that energized power lines represent in a drought-stricken and windy landscape. In her book, blunt chronicles the rise and mismanagement of California utility, pacific Gas and Electric, with a regulatory landscape that rewards new capital investment and ignores maintenance. Perhaps it was inevitable that something as mundane as the failure of a rusted hook, originally purchased in 1921 for 56 cents, could ignite the Butte Camp fire that killed 85 people. In arid locations such as California, utility equipment has been the cause of fire over many decades. In fact, pg&e admitted that its equipment was responsible for more than one fire a day between 2014 and 2017. But the culprit's not always faulty equipment.

Speaker 1: 0:51

Utility systems are huge, with wires running for thousands of energized miles. In rough weather or high winds, things break, so utilities have to be more proactive about de-energizing lines during periods of drought and high winds. California utilities now routinely practice public safety power shutoffs, blacking out huge areas of service territories when the winds come whipping. Pacific Corp apparently didn't learn those lessons and has been battered by jury awards related to the 2020 Labor Day fires in Oregon that burned over 1.2 million acres, destroyed over 5,000 homes and buildings and killed nine people. On the heels of two months of drought, and despite repeated warnings from emergency officials to de-energize their lines, pacific Corp refused at that time to shut down power to any of its 600,000 customers during a high wind event. Juries have now recently ruled against Pacific Corp in numerous cases and according to the Financial Times, the utility has already paid out $735 million. Parent company Berkshire Hathaway now estimates the utility could face up to $8 billion in claims already filed, and in late February the federal government piled on saying it would seek an additional $1 billion in wildfire-related costs. Berkshire estimates wildfire mitigation expenditures will total roughly $1.1 billion over the coming three years to insulate wires, bury some power lines and trim vegetation. The utility may find help from some governments. For example, on March 1, 2024, utah Senate Bill 224 passed out of the legislature and was sent to the governor for signature. Among other things, sb 224 creates a fund for supplemental wildfire coverage and caps damages for related claims.

Speaker 1: 2:37

The extent of the Oregon Blaze complex was extreme, but it did not shock the public the way the raging August 2023 inferno that destroyed Lahaina on Maui did there. Videos showed Hawaiian electric companies' live wires sparking vegetation that likely led to the fire that killed 100 people, destroyed 1,200 buildings and displaced 11,000 residents. While the results of a formal investigation have not yet been released, hiko did acknowledge that the initial fire was caused by equipment failure and hurricane force winds after an intense micro-drought. The utility now faces a dozen different legal actions that, if the experiences of PG&E and Pacific Corp hold any lessons, could lead to hundreds of millions of dollars or more in fines.

Speaker 1: 3:23

Then last month in Texas, fires struck again, with two fires totaling well over a million acres scorching northern Texas during a February heat wave with temperatures reaching the mid-80s, as much as 25 degrees above average for those dates. Add to that decades of fire suppression allowed for the buildup of more flammable brush and low vegetation, and the recipe for trouble was brewing as the front brought high winds to northern Texas and southern Oklahoma. Local utility XL Energy acknowledged the role of its equipment in igniting the larger Smokehouse Creek fire after it received a legal request to examine a wooden pole near the area of initial ignition, and its stock took a big hit. There's a lesson here, and not just for the West Drought and fire is inevitable If you're in a utility C-suite. It doesn't matter where your service territory is If you don't have a top-notch vegetation management program, a plan to harden your infrastructure to make it less fire-prone and proactive, public safety, power shut-off plans, then you're playing with fire.