Five years and 2,500 miles apart, fires devastated thriving communities — and major U.S. utility companies stood at the center of the infernos.
It’s a story increasingly familiar in the energy industry: Some utility companies don’t properly assess the risks wildfires pose to their operations. A failure to mitigate these risks can have disastrous consequences for both fire victims and utility investors.
Through interviews with experts and a review of public records, CNBC found evidence of safety shortcomings in the utility sector and a lack of state oversight.
Those factors are part of what exacerbated wildfires in Paradise, California, in 2018.
Michelle Glogovac lost her childhood home, though her parents were able to escape safely.
“It’s completely devastating to see what Paradise looks like now,” Glogovac said. “We were up there a year ago and literally drove past almost the street that I grew up on because there are no landmarks to recognize. The trees are all gone.”
The Paradise blaze burned for two weeks, displaced tens of thousands of residents and closed schools and offices as far away as the Bay Area, more than 150 miles south.
Utility giant PG&E later pleaded guilty to 84 counts of involuntary manslaughter and one count of unlawfully starting a fire in relation to the Paradise fire.
The company in 2019 settled a $13.5 billion lawsuit alleging its infrastructure caused several deadly wildfires. It ultimately filed for bankruptcy, emerging in June 2020.
Glogovac’s parents were fortunate that they had fire insurance on their home and were able to rebuild. But many PG&E fire victims are still waiting for relief. PG&E established a Fire Victim Trust after bankruptcy to compensate victims. To date, the trust has disbursed $11.11 billion to fire victims, but victims have received less than 60% of their total claims and are still waiting on payouts.
PG&E declined an interview for this story but said in a statement that since 2017 it has reduced wildfire risk from its equipment by 94% through measures such as burying power lines, vegetation management and, as a last resort, power shut-offs.
Mitigating wildfire risk
The experts CNBC spoke with said wildfire mitigation efforts can include a power shut-off plan — a predetermined course of action outlining when and how utility companies will intentionally cut off electricity to specific areas. The primary purpose is to prevent power lines from igniting a wildfire during periods of high fire danger. Such a fire could be triggered by factors such as strong winds, low humidity and dry vegetation.
In addition to power shut-off plans, utility companies can enhance wildfire mitigation efforts through measures such as burying power lines underground, clearing vegetation around their infrastructure to reduce fire ignition risks, and conducting regular inspections and replacements of aging infrastructure.
Those or similar efforts could have helped quell fires in Lahaina, Hawaii, last year, according to wildfire experts interviewed by CNBC. The flames were the most destructive and deadly human-made disaster in Hawaii history. By the afternoon of Aug. 8, intense winds had knocked down approximately 30 utility poles throughout Maui. The fires burned over 3,000 acres and caused an estimated $5.5 billion in damage, according to Maui County.
Laurie Allen, a Lahaina resident, ran through a burning field to escape the fire. She had found evacuation roads blocked by flames and a fallen tree, so she escaped by foot, according to an account from her nephew, Brent Jones. Allen spent 53 days in the hospital with 70% of her body burned before she died, becoming the 98th victim of the fire.
“There were a lot of days that were really very difficult,” Jones told CNBC. “She was in extreme amounts of pain.”
The cause of the Hawaii wildfire has yet to be determined by local, state, and federal officials, but Maui County says utility company Hawaiian Electric is responsible. The county filed a lawsuit, alleging the utility “knew that their electrical infrastructure was inadequate, aging, and/or vulnerable to foreseeable and known weather conditions” and had a “responsibility to maintain and continuously upkeep” that infrastructure.
The lawsuit also alleges the company “inexcusably kept their power lines energized during the forecasted high-fire danger conditions.” Hawaiian Electric has said that the fire that began at 6:30 a.m. Aug. 8 “appears to have been caused by power lines that fell in high winds.” However, it says, this first fire was contained and a second, afternoon fire — the cause of which is unknown — is what devastated Lahaina.
Hawaiian Electric’s 2023 wildfire mitigation plan did not include a predetermined strategy for power shut-offs. That was partly in light of word from California, which does implement that mitigation strategy, that the shut-offs upset customers, according to Michael Wara, director of the Climate and Energy Policy Program at Stanford University and an expert in wildfire mitigation plans.
Hawaiian Electric’s plans said that PG&E’s practice of shutting off the power preemptively was “not well-received by certain customers affected by the preemptive outages.” And when Hawaiian Electric CEO Shelee Kimura testified before Congress in September, she said the company decided that shutting down power as a predetermined precaution during high-risk conditions was not an “appropriate fit.”
Hawaiian Electric declined an interview with CNBC for this story, but in response to the lawsuit said that the company’s power lines to Lahaina had been de-energized in cooperation with state utility commissions for more than six hours when the afternoon fire that spread to Lahaina broke out.
The company further said in a statement to CNBC that it is evaluating whether to implement a public safety power shut-off program as a “tool of last resort,” pointing out that shutting off the power for a community can present its challenges in emergency situations, such as traffic signal outages or reduced digital access to emergency updates.
Protecting profits
The failure to assess and mitigate wildfire risk across the utility industry boils down to protecting profits, according to David Pomerantz, executive director of the Energy and Policy Institute — a watchdog of utility companies that is funded by philanthropic foundations that support climate actions, environmental conservation and environmental justice.
Utility companies make money by building new infrastructure, such as putting power lines underground, for example, and baking that cost into customers’ bills over time, pursuant to regulations, Pomerantz said.
Trimming back trees or getting rid of dry, dangerous grasses near power lines doesn’t make money for the companies or their shareholders, and utilities might be less motivated to spend on such expenses as a result, Pomerantz said.
In a statement to CNBC, Hawaiian Electric said that from 2018 to 2022 it spent $950 million on grid improvement and a separate $110 million on vegetation management efforts.
In November, PG&E got approval to bury 1,230 miles of power lines underground between 2023 and 2026 as a way of reducing ignitions due to severe weather and downed wires. In an interview on CNBC in December, PG&E CEO Patti Poppe called the project the “ultimate” way to minimize risk.
It’s also a massive capital investment for the utility, costing about $3 million per mile, according to a PG&E press release. PG&E estimates the plan will increase customers’ monthly bills by approximately 12.8% in 2024 and 1.8% in 2025, and then lower their bills by 2.8% in 2026.
But utilities are protecting profits in another way, according to Pomerantz: leaning on regulators that could ultimately help maintain favorable policies. In many states, utilities are the largest donor to politicians, he said.
“They are able to take all this money from ratepayers and use it to fund these incredibly powerful political machines,” he said.
There are no federal or state laws that prohibit a utility company from making political contributions. CNBC looked at hundreds of legal political contributions made by public utilities and their CEOs since 2016 and found millions of dollars in donations to candidates, parties and political action committees.
In one instance, NV Energy, the big Nevada utility and a subsidiary of Warren Buffett’s Berkshire Hathaway Energy, contributed over $63 million to defeat a ballot measure that would prevent the utility company from having a monopoly over the state.
The failed ballot measure would have added Nevada to a list of states that have deregulated their energy markets at least partially, allowing customers to choose their energy provider. Instead, residents must get their energy from the utility that serves the area where they reside.
The monopolistic nature of the industry dates back to the 19th century, when state governments decided to have only one set of poles and wires to deliver energy, according to Stanford’s Wara.
The lack of competition, he said, has made utilities less nimble in responding to challenges and risks.
It also means that if customers such as Glogovac, whose childhood home in Paradise, California, went up in flames, are dissatisfied with their utility, they are left with no other options.
“We don’t have a choice. It’s PG&E or nothing here,” Glogovac said.
Lack of state oversight
Utility companies are regulated by state public utility commissions. These commissions are state regulatory bodies that enforce rules, oversee rates and make key energy decisions.
To understand how many utility-caused wildfires have occurred in the last 10 years, CNBC reached out to public utility commissions for relevant data in 10 states that wildfire trackers have identified as particularly prone to ignite — Arizona, California, Colorado, Hawaii, Montana, Nevada, New Mexico, Oregon, Utah and Washington.
CNBC requested information on the number of wildfires since 2013, the location of the fires, the total acreage affected, any deaths or injuries that occurred as a result, and the estimated cost of the damage.
Only one state of the 10 CNBC reviewed — California — publishes this wildfire data annually on a government-run website.
Public utility commissions for Arizona, New Mexico and Washington told CNBC they do not track utility-caused wildfire data and recommended asking other state departments or the utility companies directly.
Other states, such as Nevada and Utah, have some of the requested data scattered in utility companies’ wildfire mitigation plans or incident reports, but do not track and publish the data in one compiled location that members of the public can easily access.
The Energy and Policy Institute’s Pomerantz said he finds the lack of oversight by public utility commissions to be troubling.
“These public utility commissions are really the first and only line of defense that we have to make sure that electric utilities are keeping us safe, that their infrastructure isn’t causing these terrible fires,” he said. “The fact that they’re not even keeping track of that problem in many cases — that should be really concerning and a sign that they have a long way to go.”
CNBC also reached out to state fire marshals, forestry departments and natural resources departments for wildfire incident data. Several of those agencies track statewide wildfire information, but most did not keep track of the names of utility companies associated with wildfire incidents.
Fires were indicated as “powerline-caused” or “equipment failures” but did not include more detail on whether the cause was a company’s faulty infrastructure or an external factor, such as a bird flying into a power line.
Paying out to victims
In instances where a utility company’s role in a wildfire is clear, or even suspected, publicly traded companies can find themselves the subject of complex litigation.
Hawaiian Electric, in addition to the lawsuit brought by Maui County for the August fires, faces a separate lawsuit, brought by investors, which claims the company made “misleading statements” about its wildfire prevention and safety protocols, calling them “inadequate.” As a result, the investors said they have “suffered significant losses and damages.”
After the 2021 Marshall Fire in Colorado, Xcel Energy faces a pending lawsuit alleging it “failed to take any measures to reduce the risk of a fire igniting from its equipment.” The fire destroyed more homes than any wildfire in Colorado state history, according to the National Oceanic and Atmospheric Administration, which provides data and information on climate science, adaptation and mitigation.
And following wildfires in Oregon in 2020, Pacificorp in December reached a $299 million settlement agreement with wildfire victims, on top of $87 million the company owed a separate group of property owners.
Among the largest settlements CNBC found: San Diego Gas and Electric paid out $2.4 billion to resolve allegations it caused a series of 2007 wildfires that killed 10 people and destroyed more than 1,500 homes.
Victims funds and settlement payouts, while a potential lifeline for those affected, can come with strings attached.
In November, Hawaii Gov. Josh Green announced a $150 million recovery fund for victims who lost family members or were injured in the Lahaina wildfire. Those affected can receive money as soon as this year, but to receive the money, victims must waive their right to sue the parties paying into the fund for wrongful death or severe personal injury.
That includes the state of Hawaii, Maui County and Hawaiian Electric, which has vowed to contribute $75 million toward the fund.
Source: Business - cnbc.com
