California Fires and Blackouts: Blame, Lessons and Going Forward (EP.178)

Wildfire

Introduction

The raging fires and continuing power blackouts in California, the richest state in the world’s richest nation, are clearly tragic. Are they largely avoidable?

That is the subject of today’s 10-minute episode.

Continuing

California’s continuing wildfires and power blackouts have caught national and international attention. In just one example, more than 2 million Californians were recently left without power after the state’s largest utility, Pacific Gas and Electric (PG&E)–which filed for bankruptcy earlier this year–preemptively shut down transmission lines in the fear that they might spark fires during periods of high autumn winds. Some small businesses lost tens of thousands of dollars, threatening the livelihood of the owners and their employees. People who are dependent on electricity-powered home-based, life-sustaining devices are in danger. Modern phones, e.g., the ones offered with bundled services, need power to work. Even some cell towers are inoperative when the power is off, and the cell phones themselves will eventually need to be recharged.

Power outages cause schools to close, and hospitals to run on emergency power. School homework does not get done (you can read by candlelight, but most schools require computers and Internet access for homework), and people working from home get very little accomplished. 

The fires are burning tens of thousands of acres, and destroying thousands of people’s homes. Last year alone PG&E, California’s largest utility serving 16 million Californians, admitted to being the cause of the Camp Fire, which virtually destroyed Paradise, CA, a town of 26,000 people, and cost 85 lives. And drove PG&E into bankruptcy. My son and his family live in nearby Chico, where firefighters had to do a preventative backburn right up to the edge of his city. 

Consumers blame the state for poor forest management, including not cleaning up dead trees and brush, along with the utility companies for not updating their ossified equipment. The power companies, including PG&E, in turn fault the state for over-regulating utilities to the point they had no resources available to modernize their grids.

PG&E recently went on record as saying this would be the new normal for 10 years or so. California Governor Gavin Newsome has also gone on record, blaming PG&E, citing “dog-eat-dog” capitalism as the root cause. The city of San Jose is leading an effort to take over the investor-owned PG&E, and make it consumer-owned. 

What’s the core issue? Answer: You can’t have your cake and eat it, too. In WWII, the FDR administration knew that we had to cut back at home in order to fund a winning effort in the war. Private cars were not available as the automobile factories switched to building military vehicles and airplanes. Everything was rationed, including tires. People were encouraged to save things like kitchen grease (it contains glycerin which is used in making explosives) and trade it with their local grocery store for extra ration coupons. There were constant rallies and other encouragements for citizens to buy war bonds. Rosie the Riveter went to work in the factory, while the men went to war.

President Johnson, a proponent of the Vietnam War, promised something very different; he claimed that we could prosecute the war in Vietnam with no sacrifices needed at home. He famously promised, “We can have guns and butter.” FDR knew better. Johnson should have known better. No entity, including affluent California, can have guns and butter. No entity can have its cake and eat it too.

If California wants to continue with green energy initiatives, which at least initially will cost large sums of money, and at the same time it wants to protect its citizens by upgrading its ancient and dangerous power grid, then its leaders need to tell the people in the state what that will cost. And who will pay for it.

PG&E is an investor-owned utility, heavily regulated by the California Public Utilities Commission (CPUC). In turn, the CPUC has 5 members, appointed by the Governor, and approved by the state senate. In its push to wrest control from the investors and make PG&E consumer-owned, the city of San Jose is citing the amounts of money that goes to dividends as well as PG&E mis-management. Utility stocks are typically owned by risk-averse investors. The stock prices are not as volatile as the rest of the market; investors rely on dividends to see a return on their cash. Making the utility consumer-owned would indeed save those dividends, likely wiping out the investors’ equity as well. 

If California is going to have its version of guns and butter, the political leaders must–must–tell the citizens what it will cost, and who will pay. After decades of dangerously deferred maintenance, the cost of upgrading the grid is likely in the many tens of billions of dollars. More if time is of the essence. And, at least for now, green energy is more expensive than fossil fuel energy. In California, that would add about $3B-$5B a year. More if the state wants to accelerate its plans in this area. At the moment, there are 3 entities who might pay the combined repair and green energy bill: PG&E investors, rate payers (PG&E customers) and taxpayers if subsidies are involved. 

Who would pay if PG&E becomes customer-owned? The current PG&E investors would lose most and likely all of their equity. This will hit individuals, general investment funds and pension funds everywhere. On an on-going basis, that would leave ratepayers and taxpayers with the bill. California’s electrical rates are already almost double that of their West Coast neighbors, Oregon and Washington, so there might not be much left to pick up there. And that brings us to the taxpayers. If San Jose is to push their plan to take over PG&E, it needs to present a detailed and realistic plan about how that will work, how that will be better than the mess that is currently in place. And be specific about how much, if any, taxpayer money will be needed in the form of subsidies. Taxpayer subsidies that I believe will be necessary if the already high utility rates are not to rise dramatically, and if the guns and butter strategy, the simultaneous repair and upgrade along with supporting green energy strategy, is to be pursued.

California is not alone in facing this predicament. Many states, and our nation, America, is staring in the face of similar predicaments. Individuals and governments mortgage their futures when they defer needed maintenance while still overspending. Both major national parties ignore vital areas like infrastructure and education, while still spending excessively–threatening the future that our children and grandchildren will face. Politicians on both sides of the aisle propose spending vast amounts of money, saying little more than, “I have a plan.” or simply, “Trust me.” It is time that the voters in Colorado, California, in the US and the other 48 states, start demanding more details, discipline, and honesty from our political leaders. California, as it often does, has the opportunity to lead the way here. 

Remember; it all starts with us: We will never get better candidates and better office holders until we become better voters.

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Will Luden, coming to you from 7,200’ in Colorado Springs.

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Will Luden

I am your host, Will Luden, former long-time high-tech CEO and Board Chair. I had no idea when I started this podcast that it would become the highest calling of my professional career. Lincoln famously hoped that a government, “…of the people, by the people and for the people…”, would not perish from this earth. My hope, the reason for Revolution 2.0 ”A Booster Shot”, is that a government based on common goals, achieved by applying non agenda-based reasoning to core facts, will allow us to continue to build on our mutual inheritance of a legacy of dedication to seemingly impossible ideals, a legacy that also includes a history of achieving them.
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2 Responses

  1. Charles Reply

    Very true. I feel the state taking over and making is “consumer” owned is not good, as it will result in bureaucratic control with no accountability. We all know how well the government runs other programs. California must reduce it’s regulatory structure with the agreement that PGE will reinvest the savings into power structure upgrades. It’s a huge mess!

  2. Mike Trout Reply

    Will,

    For 10 years I worked with a man who went on to become a part of the public relations department at the Edison Company in Southern California. About 3 weeks ago he posted the following on his Facebook page:

    Five things you learn when your utility turns off your power for three days

    Pacific Gas & Electric, California’s largest electricity provider and the power source for our home and most of Northern California, turned out the lights three days ago for two million of us. They are still out. Why would a company do that? Well, the company didn’t do it, at least not alone. PG&E is heavily regulated by the state and federal government and is managed, day-to-day, by a bankruptcy judge. The reason a court manages its affairs has to do with $20 billion in financial claims that its equipment was solely responsible for several horrific 2018 wildfires. In one case, an entire California town, Paradise, was lost.

    As a result, PG&E and those who oversee its operation are trying something new to avoid a repeat of last year’s nightmare – massive, precautionary blackouts during high wind, low humidity weather events. By the way, when I suggest this was a joint decision of management, regulators and the court, I do so having previously served as a senior communications representative for the state’s second largest electricity provider – Southern California Edison. Utilities don’t ignore state and federal officials and a bankruptcy judge. Quite the opposite.

    So the lights are out and here are a few things we are learning.

    1. Electricity is, as we say, indispensable

    I realize we think we know this. But experiencing powerless days and nights is a rude awakening to what it actually means to be powerless. I’m not referring just to the obvious necessities of life – the refrigerator, the lights, the clothes washer and dryer, the microwave, the TV, the computer, the iPhone charger, the igniter in the stove. A blackout can impact elements of life even more basic.

    I love living in the country. This is my first time. I like the fact that our water comes from an aquifer 200 feet below four lovely acres. It is pumped into a well house (photo background) where a second electrical pump creates the water pressure that serves my home. I rather like it when that water flows freely. And once I have finished using my lovely well water (if you get my drift) it is pumped into a septic leach field. I also like the fact that it freely leaves the house. Electricity and the utilities that provide it create this flow.

    2. Generators are amazing

    Forgive my naiveté, but this lifelong city boy finds it somewhat awe inspiring that a relatively small piece of technology can churn out enough power to temporarily run an entire country property. One exception is my microwave that, for reasons it can’t explain, does not like my generator. The first time I fired up my 3,650-watt Husky beauty and the houselights flickered back on I was pretty sure I had invented electricity.

    3. Generators are as noisy and needy as a baby

    My unit, though outside, can be heard from one end of my home to the other. And I am not fond of Husky’s 3 a.m. feeding.

    4. Good family and good neighbors are more indispensable than electricity

    Thank you son-in-law Mitch for always being there when I can’t figure out stuff. And thank you daughter Lanise for your continuous texts, “Everything OK over there?” “Yes, how about over there?” And thank you heavy machine operator neighbor Thomas and firefighter neighbor Jonathan for offering this city slicker answers to my endless machinery and “defensible space” questions. I promise to continue the return flow of homemade crusty bread and apple butter.

    5. Finally, one instinct of some government leaders doesn’t help – over-simplifying serious problems and name calling for personal benefit

    Our newspaper is reporting, “Amid widespread power cuts, California Gov. Gavin Newsom slammed the giant bankrupt power company Pacific Gas & Electric on Thursday, criticizing it for ‘greed’ and ‘mismanagement’ and pledging to ‘get this utility into the 21st century’ as it reorganizes.”

    Again, speaking as a former communicator for a similar utility, that statement is absurd. If we are, in fact, powerless today because PG&E has acted greedily then numerous state and federal regulatory agencies that set all the utility’s rates and approve all compensation programs knowingly condone greed. Actually, the opposite is often true. Regulators are sometimes overzealous in their duty – protecting the public.

    So who or what is responsible for the noisy generator outside my window this Oct. 11 at 3:27 a.m.? Disregard any answer to that question that does not begin “It’s complex.”
    Thus endeth my early morning electricity homily. All rise for the new day.

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