California’s Power Outages Are About Wildfires—but Also Money

The red wind started to blow again this week—hot, dry gusts up to 75 miles per hour in some parts of Northern California. Usually, their arrival means wildfires are on the way, a recurring threat to life and property thanks to climate change and urban sprawl.

This time was a little different, though. As the New York Times points out, five out of the 10 most destructive wildfires in California history were at least in part the fault of equipment belonging to Pacific Gas & Electric, the utility company that delivers power to 16 million people in the top half of the state. In part because of liability claims from victims of past fires, $8.4 billion worth, PG&E is in the midst of bankruptcy. So this time, when the red wind started to blow, PG&E turned off the power.

Did they do it out of an overabundance of caution and concern for safety? Definitely. But at least one expert suspects another set of priorities at work: PG&E’s ongoing bankruptcy negotiations.

A core function of bankruptcy is to let a business continue to operate while it figures out what it owes, and to whom. PG&E has spent hundreds of millions of dollars to figure that out. “If the assumptions in your analysis turn out to be wrong, your whole strategy can blow up and be immensely costly, and delay your bankruptcy,” says Jared Ellias, an expert in bankruptcy law at the University of California Hastings College of the Law. So you try to do it fast, and with minimal chaos.

A wildfire would definitely qualify as chaos. In large part, that’s because of the damages PG&E is on the hook for. Expenses incurred during a bankruptcy take precedence over the ones from before the bankruptcy. The bills are, in the language of the law, “senior.” Ellias says that while damages are supposed to get paid out of a common pot, claims from victims of a fire in 2019 could in this case supersede those of earlier victims.

The rules are more complicated than that. This summer California passed a law called AB 1054, which set terms for how PG&E will pay out claims for previous fires and established a $20 billion insurance fund to pay future claims. That carefully negotiated, controversial plan didn’t take into account what would happen if a massive fire happened right now. “Of greater significance to PG&E is the fact that it cannot access the ‘insurance’ fund established by AB 1054 for fires this season,” writes Mark Danko, a lawyer representing fire victims, in an email. “Those funds would be available to PG&E for fires beginning in 2020, at the earliest. Another reason for PG&E to protect itself at the expense of the ratepayers by turning off power, even if not really necessary.”

So a fire in 2019 would be a mess. “If you’re well-advised by great lawyers, which they are, as much as you always don’t want a fire to happen, you really don’t want one right now,” Ellias says. “Imagine how ugly it would get if you had a competition between bankruptcy fire victims and pre-bankruptcy fire victims. That would be ugly, ugly, ugly—ugly for the people involved, ugly for the representatives in Sacramento.”

PG&E then looks, let’s say, highly incentivized. In mid-October 2018, it shut off power over a wide swath of the North Bay and Sierras in advance of a predicted wind event. On November 6, 2018, PG&E warned 70,000 customers that it might do it again, but then did not. Two days later, a tower on PG&E’s Caribou-Palermo transmission line caught fire, sparking the Camp Fire, which destroyed the town of Paradise and killed 88 people, making it the deadliest wildfire in the US in a century.

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