The threat to Californians from wildfires is clear, present, and obvious. As I sit here, the Chaparral Fire burns in the distance, less than 50 miles from my house.
As the state grapples with this ongoing and future threat, it is imperative that we move beyond just reacting to wildfires toward mitigating wildfire risk with a proactive strategy that deploys resources and funds smartly and strategically to reduce the most amount of risk possible for the money spent. This is not yet happening.
For their part, electric utilities have rightly turned their focus to investments intended to reduce the risk of wildfires, with proposals for unprecedented spending all ostensibly targeted at wildfire mitigation. Unlike state government, which must allocate resources based on a budget, electric utilities can propose and spend virtually unlimited sums — regardless of the efficacy of a given program — that are tacked on to customer energy bills. Many of their proposals unsurprisingly also include profits for shareholders. Absent strong regulatory oversight, this is problematic from both a safety and affordability perspective — not all spending is created equal and utility infrastructure does not represent all wildfire risk. Since electric bills are highly regressive the wrong kind of spending amounts to an unnecessary, regressive tax on a captive customer base for limited to no safety benefit.
Given utility incentives combined with a lack of any constraint on spending proposals, the siloed nature of California’s approach to wildfires are beginning to show a perverse trend. The three large electric utilities, whose customers comprise around 75% of Californians, are spending more than double the entire state government on wildfire-related activities, including the vast sums spent on fighting fires. The following graphic compares 2020 state spending (in billions) to spending by the three large electric utilities (PG&E, SCE, and SDG&E) on wildfire mitigation.
I expect this gap to widen rather than narrow in the near-term if we continue anywhere near the current trajectory. Based on what I’m seeing at the regulatory level, utility spending is set to significantly outpace the entire state every year for the foreseeable future.
To be clear, some of the additional spending proposed by utilities is absolutely needed, but must be done according to a clear strategy that prioritizes risk reduction and cost effectiveness. This has not been the case for a large amount utility proposals, the topic of a future blog (and reams of prior testimony). But just to give a recent example, the CPUC recently revised a proposed decision to partially grant Southern California Edison’s request for an additional $1 billion to deploy more miles of covered conductor (highly insulated wire), over the $1.5 billion previously determined by a law judge as reasonable because it would have provided 95 percent of the risk reduction benefits of SCE’s (outlandish) proposal. Put another way, based on utility estimates the additional $1 billion investment authorized is expected to reduce wildfire risk at the utility by just 2%.
California Wildfire Risk Cannot be Solved by Utility Ratepayers
The graphic above should be jarring for several reasons. First, utility-caused ignitions are responsible for 10% of historical wildfires, though to be fair many have had devastating impacts that indicates significant risk from these assets. While the truth is that all stakeholders agree ignition risk MUST be reduced significantly by electric utilities, it has to be done cost-effectively because catastrophic wildfires will continue to occur regardless of the burden placed on ratepayers.
Most experts agree that one of the primary mitigations the state needs to lean in to is an activity called “prescribed burns,” — fighting fire with fire to reduce available fuels in the off-season for when wildfires do ignite under risky weather conditions. Defensible space around buildings, fire breaks, and “home hardening” are also key activities to reduce the worst consequences of wildfires and ensure fire suppression can be deployed effectively. Yet while overall funding has increased, it appears an institution set up to fight fires may be difficult to turn towards preventing them. Less than 15% of Cal Fires’ 2020 estimated budget is related to prevention rather than suppression, and prescribed burns — with what appears to be an unprecedented increase in focus — are expected to be funded by the state at an average of just $25 million per year through 2022 as part of the Governor’s Wildfire Resilience package. I’m not sure how many acres this will entail but it is fair to assume these sums are woefully insufficient to substantially reduce risk in the state. And given that a majority of forest land in California is the responsibility of the federal government, there is also responsibility for Washington to kick in here.
Seeing the Forest from the Trees: We Must Analyze Wildfire Risk and Solutions at the State Level
This might seem painfully obvious and long overdue. As the state’s Legislative Analyst Office has stated:
[…]in the absence of high‑quality information about the cost‑effectiveness of different types of risk reduction and response efforts, the state might not effectively balance funding for prevention and mitigation with funding for response capacity.
Accordingly, we recommend that the Legislature require the development of a statewide strategic wildfire plan. The purpose of the plan would be to inform and guide state policymakers regarding the most effective strategies for responding to wildfires and mitigating wildfire risks. In particular, the plan should include guidance on future funding allocations to ensure the highest‑priority and most cost‑effective programs and activities receive funding and that the state achieves an optimal balance of funding for prevention and mitigation activities with demands to increase fire response capacity. Some of the other key elements of the strategic wildfire plan would include (1) establishing risk reduction and response goals as a first step in order for agencies to focus their efforts and measure progress and (2) integrating information on the co‑benefits of different approaches into decision‑making.
This analysis should include the drivers and consequences of ignitions from all perspectives, including utility equipment, as well as potential mitigations and related costs. My bet is that prescribed burns will be the most cost-effective solution to wildfires, and such an analysis will allow the state to target this kind of solution to the most impactful areas. A baseline for this data already exists through the multi-year mapping effort that took place at the CPUC. The state can then seek to ensure utility ratepayers’ share of wildfire mitigation effort does not appreciably exceed its share of risk and the cost-effectiveness of the other tools at the state’s disposal is taken into account.
In the meantime, state representatives should seek to ensure utilities and the CPUC to take a broader view of risk reduction so as not to impose undue regressive taxes on their own constituents. The newly created utility wildfire safety agency should continue to take a proactive role in ensuring utilities are not ripping off consumers in the name of “wildfire safety” by achieving real results. And the CPUC’s commissioners must use the improved risk modeling tools developed by the utilities, in conjunction with the fact-finding nature of Commission proceedings, to make informed decisions that prioritize both safety and affordability. While utilities consistently imply that affordability must be discarded to have a safe system, I have found that this is simply not the case, as in the example cited above.
The large electric utilities in this state seem to think we live in a world of unconstrained resources and wealth, where spending is warranted regardless of its actual impact on safety outcomes. Most of us live in a different place — the real world — where constrained resources should be managed efficiently to produce the greatest possible benefits. One day, the real world will catch up with the imaginary one.
