California Faces Warming & Fire Risks With A Bankrupt, Despised Company Providing Their Electricity
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The company that would become PG&E was founded in 1852, when gas was used not for heat but for light. A series of mergers moved the growing company into the new electricity business as well, culminating in the 1905 union of California Gas & Electric and San Francisco Gas & Electric. The resulting utility was a hydropower pioneer, generating electricity from the snow-fed rivers of the Sierra Nevada and bringing it down to San Francisco and the Sacramento Valley’s fertile farmland. In the years after World War II, the utility built a 500-mile pipeline to bring in natural gas from Texas. Like other utilities, PG&E was long seen as a reliable widows-and-orphans investment, a government-regulated monopoly whose dividend was supplied by the payments on gas and electricity bills. In the mid-1990s, to combat high electricity prices, the California Legislature and the CPUC decided to break up the state’s three big utilities. PG&E, Southern California Edison, and San Diego Gas & Electric were required to sell most of their power plants to independent electricity providers, then begin buying electricity from these suppliers on a specially created exchange. They were also forbidden, for a few years, from raising the rates they charged their customers.
Then, in the summer of 2000, a combination of factors—among them a heat wave that caused air-conditioning usage to spike and a drought in the hydropower-reliant neighboring states from which California usually bought some of its power—created an electricity shortage, driving wholesale prices up. Thanks in part to the poor design of the state’s new electricity market, suppliers discovered they could make more money by withholding power, exacerbating the shortage and further increasing wholesale prices—energy traders at the soon-to-be notorious (and defunct) Enron Corp. proved particularly creative and unscrupulous in this regard. With retail prices capped, utilities began hemorrhaging money. There were statewide rolling blackouts, and the mess helped lead to an unprecedented recall of the state’s governor, Gray Davis, and the election of Arnold Schwarzenegger. PG&E declared bankruptcy in April 2001, claiming debts of $18.4 billion—money its customers helped pay off when, as part of its reorganization, the company was allowed to raise its rates.
Over the past decade, the utility has been shadowed by deadlier disasters. On Christmas Eve 2008, a PG&E gas line explosion outside Sacramento killed a man and injured five members of his family. The evening of Sept. 9, 2010, another PG&E pipeline exploded in San Bruno, 12 miles south of San Francisco. The blast sent a 28-foot section of pipe skyward, and the resulting fireball destroyed 38 homes and killed eight people. Gas continued to flow out of the crater and feed the fire for an hour and a half, until two off-duty PG&E mechanics who’d heard about it on the news arrived and manually closed the valves.
An investigation into the explosion by the National Transportation Safety Board, whose remit includes accidents involving the transport of hazardous materials, was damning. PG&E’s protocols for ensuring the mechanical integrity of its pipelines, the agency’s report read, were “deficient and ineffective”—the pipe that blew up had been misclassified for decades and, as a result, only cursorily inspected—as was its fumbling response to the disaster. The CPUC imposed a record $1.6 billion penalty, and in 2016 the jury in a federal criminal trial found PG&E guilty of six felony counts of violating pipeline safety regulations and obstructing the NTSB investigation. The judge fined the utility $3 million and sentenced it to probation, complete with community service for its executives and a requirement to pay for national media ads to “publicize its criminal conduct.” A monitor was assigned specifically to oversee the safety of the company’s gas system.
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https://www.bloomberg.com/news/features/2019-02-28/pg-e-fanned-the-flames-that-made-california-burn