Uncomfortable truth time: The biggest reason California’s electric rates are rising so fast is that utility companies are spending billions of dollars each year to reduce the risk of catastrophic wildfires.
Does that mean Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric should spend less money trimming trees, burying power lines and funding night-flying Chinook helitankers?
That question is central to a raging debate in Sacramento over how to tame out-of-control utility bills. From 2019 through 2023, Edison, PG&E and SDG&E were collectively authorized to add $27 billion in wildfire-related costs to customer rates, according to the California Public Utilities Commission — 18% of their overall system costs.
Those wildfire-related costs caused bills to rise between 7% and 12% for the average residential customer — $24 per month for homes served by PG&E, $18 for Edison customers and $13 for SDG&E customers.
“The cost of doing nothing is enormous,” Assemblymember Cottie Petrie-Norris (D-Irvine), who chairs the Utilities and Energy Committee, said this month at an oversight hearing on utility wildfire spending.
Before the Eaton and Palisades fires devastated Los Angeles County, there was momentum among lawmakers to reduce bills by steering utilities away from burying electric lines — a surefire but expensive way to avoid ignitions during dry, windy conditions. Burying local distribution lines — which is much less expensive than burying larger-scale, higher-voltage transmission lines — can still cost $3 million to $5 million per mile.
After the recent infernos, though, the political pendulum may swing back toward undergrounding, no matter the costs — even though there are less-expensive, highly effective fire-avoidance tools, such as “fast-trip” technology that shuts off power lines almost instantaneously when its detects the potential for an ignition event.
“Not having any risk from ignition requires an insane amount of spending,” said Matthew Freedman, an attorney for the Utility Reform Network, a ratepayer watchdog group, in an interview.
When the “what if” happens, ADP prepares you for the “what’s next.”
We’ve seen a lot of changes in the work world. But an extra hour added to the day? Now that’s a new one.
Some losses can’t be measured in dollars and cents. Twenty-nine people died in the L.A. County fires.
Does that mean Edison, PG&E and SDG&E should be allowed to spend as much as possible to reduce fire risks — passing along those costs to ratepayers, often with an additional 10% profit margin for their investors?
No, definitely not.
But it does mean lawmakers and regulators face a terribly difficult balancing act as they scramble for solutions to the state’s affordability crisis, even as they look to protect Californians from worsening wildfires.
“This is a fiendishly difficult topic to try to come up with solutions,” Assemblymember Steve Bennett (D-Ventura), who chairs a subcommittee on climate change, said at this month’s oversight hearing.
The fiendishness stems partly from the fact that global warming — fueled by coal, oil and gas combustion — has raised the likelihood of destructive blazes, and partly from the fact that people built so many sprawling cities and towns in parts of California that were prone to wildfire even before climate change.
The situation has reached crisis levels since 2017, with California suffering its nine largest fires and also its four most destructive fires on record. Several of those conflagrations — including the 2018 Camp fire, which killed 85 people and largely destroyed the town of Paradise — were sparked by electrical infrastructure.
Budget-conscious lawmakers have responded by letting Edison, PG&E and SDG&E do most of the heavy lifting of reducing wildfire risk — in effect sticking those utilities’ ratepayers, rather than all taxpayers, with the bill.
Since 2019, the companies have spent roughly $3 billion per year on wildfire prevention. The money goes toward tasks such as inspecting equipment, trimming trees near electrical towers and installing “covered conductors” on power lines that make them less likely to spark if they hit a tree branch during a wind storm.
Edison, PG&E and SDG&E customers benefit from that work. But in many instances, so do millions of Californians who aren’t paying for it, including Los Angeles residents served by the L.A. Department of Water and Power.
One astonishing example: Since 2021, Edison customers have paid more than $100 million to help fund a fleet of state-of-the-art firefighting helicopters for the L.A., Orange and Ventura County fire departments. The helitankers are capable of working through the night and dumping massive amounts of water and retardant.
They’re available for use no matter how a fire started — even outside of Edison’s service territory.
“Even when fires escape initial attack and continue to burn out of control, the [Edison-funded fleet] has had its victories, including during the L.A. fires,” Orange County Fire Chief Brian Fennessy told lawmakers at the recent oversight hearing. The aircraft, he said, “helped save Brentwood live on television.”
Edison isn’t funding the helitankers solely out of the goodness of its heart: The more the utility can do to limit the damage from fires sparked by its equipment, the less damage to its bottom line. Edison executives have been reminded of that reality as the utility confronts dozens of lawsuits over the Eaton fire, which many victims believe was ignited by one of its transmission lines. State and local officials are still investigating the cause.
Regardless, Edison shouldn’t have to keep paying for the helitankers indefinitely — not when the utility’s millions of customers are bearing the costs, and when all Southern Californians are reaping the benefits.
And consider this: Even as Edison, PG&E and SDG&E spend $3 billion per year on fire prevention, state taxpayers as a whole typically spend just a few hundred million dollars per year, according to the Legislative Analyst’s Office. The burden of preventing fires is falling disproportionately on Edison, PG&E and SDG&E ratepayers.
That’s just not fair. Even if you don’t live in an area that’s at high risk of fire, you’re still probably breathing wind-borne smoke that’s terrible for your lungs and heart. You’re still dealing with the consequences of heat-trapping carbon pollution unleashed by burning forests, such as deadlier heat waves and more intense droughts.
And even if state officials want some Californians to pay more for fire prevention, electric rates are a terrible way to divvy up the costs. High utility bills disproportionately burden low-income and middle-class families, eating up a bigger chunk of their monthly budgets. Rising rates have hurt those households most of all.
The results are clear in the data: Nearly one in five Edison, PG&E and SDG&E customers are behind on their bills, according to the Public Utilities Commission. That’s more than 2.2 million customers, owing $769 on average.
The most straightforward solution would be for lawmakers to stop letting utilities do so much wildfire prevention and start paying for more of those projects out of the state budget. That way, the burden would fall on all Golden State taxpayers, not just Edison, PG&E and SDG&E customers — a much more equitable strategy, especially given California’s progressive income tax system, which requires higher earners to pay more.
Mohit Chhabra, a senior analyst for the Natural Resources Defense Council, supports that approach. In a recent report, he encouraged state officials to find funding sources other than electric rates for important programs — not only wildfire prevention, but also energy efficiency incentives and low-income utility bill discounts.
“Of course, it’s easier said than done,” Chhabra acknowledged in an interview.
Indeed, despite an initial $322-billion budget proposal from Gov. Gavin Newsom for next year, the governor and lawmakers face a giant juggling act of competing priorities. And unfortunately, climate rarely seems to rank high on the list, despite its importance to voters — and the existential threat posed by rising temperatures.
That dynamic was on display at the recent oversight hearing, as several lawmakers seemed hesitant to commit to spending more on wildfire prevention. At one point, Assemblymember Diane Papan (D-San Mateo) asked a PG&E executive, “Is there a way we can give some relief for ratepayers without turning to the taxpayers?”
Bennett, too, said he was “not convinced that we’ve made a good case to change things away from the ratepayer doing it.” He expressed encouragement that PG&E has said its rates should stabilize this year, and suggested that perhaps the skyrocketing electric rates of the last few years won’t continue.
“I hope we don’t have a knee-jerk — which is oftentimes what happens in the democratic process — a knee-jerk reaction to one problem, and then create another problem because we’re trying to fight that last thing,” he said.
If you ask me, that’s wishful thinking.
Maybe the last few years were as bad as it’s going to get, with residential rates increasing between 48% and 67% for PG&E, SDG&E and Edison customers from 2019 through 2023. But it’s hard to imagine this problem resolving itself. Not with global warming speeding up. Not with more than 150,000 miles of overhead wires crisscrossing a state home to tens of millions of fire-prone acres — and countless communities spread across those acres.
No, lawmakers and Newsom will have to own this one. Hard decisions lie ahead.
The problem, as Stanford University energy and climate scholar Michael Wara sees it, is that California “wants to spend as little money on wildfires as possible” — when in truth taxpayers are on the hook no matter what.
When I talked with Wara, he had just finished touring the Eaton fire burn zone in Altadena — a gut-wrenching experience. He listed a few of the ways Californians will be paying for the devastation for many years, including rebuilding costs, higher insurance premiums, healthcare for smoke inhalation, taxes that fund Cal Fire and more.
Some lawmakers may not want to burden taxpayers with more spending. But taxpayers are already burdened by the high cost of wildfires. Edison, PG&E and SDG&E ratepayers bear the additional cost of wildfire prevention.
“It’s the same people spending the money,” Wara said. “Taxpayers, ratepayers, insurance premium payers.”
The unavoidable reality is that wildfires are expensive, especially in an era of climate crisis. California will need to keep spending huge sums to lower the risk of ignitions, and to prepare for the fires that inevitably do ignite.
The politically difficult questions are who pays, how much they pay and what exactly they’re paying for. Is burying more power lines the answer? Or are there lower-cost solutions? What if those solutions involve blackouts?
It’s time for lawmakers to grapple with those questions. I’ll have a few suggestions in next Thursday’s column.
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I’ll post Sammy’s suggestions next week.
