Large-scale fire-prevention power outages are becoming the new normal in California — and Californians are becoming increasingly unwilling to trust bankrupt utility Pacific Gas & Electric to maintain control over them. 

Over the weekend, as the Kincade Fire drove nearly 200,000 Sonoma County residents to evacuate their homes, PG&E instituted its biggest power outage yet. An estimated 3 million people, or 965,000 customer accounts, from the Central Coast to the Sierra Nevada foothills and across the San Francisco Bay Area, were left to rely on backup generators or their own resources to keep food frozen and medical devices running, as well as maintaining other critical services. Another 100,000 customers lost power due to winds knocking down power poles and other damage, PG&E reported. 

According to early reports, the weekend outage didn’t feature the same easily avoidable communications breakdowns of PG&E’s massive and poorly managed public safety power shutoff (PSPS) of an estimated 2 million people at the start of October. But with record-high winds coinciding with dangerously dry and fuel-rich fire conditions, PG&E is now warning that it could be forced to shut off power again as early as Tuesday — meaning that some customers not yet restored from the weekend’s outage could be facing five to seven days without power. 

The same weather conditions forced the state’s other investor-owned utilities to issue their own PSPS events over the weekend. But San Diego Gas & Electric and Southern California Edison were able to keep the scope of outages in the tens of thousands of customer accounts, even as firefighters battled blazes in SCE territory.  

PG&E, however, stands accused by California’s political leaders of squandering on shareholder dividends the money it could have spent on inspecting and reinforcing its transmission lines, sectionalizing its distribution circuits, and otherwise preventing its system from causing the fires that drove it into bankruptcy in January.

Because PG&E’s efforts to emerge from bankruptcy rely on it avoiding any new wildfire liabilities, it has a strong incentive to use PSPS events as broadly as possible. At the same time, it doesn’t have to pay for the millions of dollars spent by cities and counties in response to the emergencies caused by its outages or the estimated billions of dollars in lost economic productivity. 

What’s worse, PG&E reported that a transmission line in the vicinity of the Kincade Fire suffered an equipment failure on Wednesday evening, minutes before the reported start of the fire. State fire investigators are still at work, and the PG&E equipment failure has not been linked to the fire’s cause.

Still, the company’s share price has fallen to record lows in the days since, to stand at just under $4 per share as of midday Monday trading.

The public option

PG&E has never been a popular utility. But the events of the past years and months have raised the stakes for cities and counties across its service territory. While climate change, poor forest management decisions, and ever-increasing human encroachment on California’s “wildland-urban interface” all play a part in the state’s current wildfire emergency, PG&E stands out for its safety failures, including those surrounding the 2010 San Bruno gas pipeline explosion, which led to the company’s criminal conviction in federal court. 

PG&E has promised the California Public Utilities Commission that it will improve its communications and coordination with state and local emergency responders, as well as limiting the scope and duration of outages. But in a letter to the CPUC last week, representatives of the counties of Mendocino, Napa, San Luis Obispo, Santa Barbara and Sonoma and the city of Santa Rosa, which have been the hardest hit by the fire-prevention outages, excoriated the utility for failing to address their repeated attempts to prepare for future outages this year, casting its future efforts into doubt. 

“While PG&E's failure to take the advice and resources it was repeatedly offered is disheartening, particularly in light of the chaos the utility has inflicted on its customers and communities as a result, the Joint Local Governments hope that PG&E's stated determination to change is sincere, and is not simply a tale full of sound and fury, signifying nothing.” 

PG&E’s descent into bankruptcy has increased the pace and stridency of calls from the public to consider a different option for the utility than remaining a publicly traded company, if and when it emerges from insolvency next year. 

Already, nearly half of PG&E’s electric customer accounts buy their electricity from generation resources owned or contracted for through a community-choice aggregator rather than the utility. The California Community Choice Association and its members have proposed to the CPUC that it transform PG&E into a “wires-only” electricity distribution provider, putting it out of the generation procurement and retail energy businesses entirely. 

In a coincident but somewhat contradictory trend, several public entities, including the City of San Francisco and the South San Joaquin Irrigation District, are demanding an opportunity to buy PG&E’s “wires” grid infrastructure within their territories. Many of these efforts predate PG&E’s bankruptcy and wildfire challenges, but this month’s emergency has spurred more cities to take a look at this option. 

Last week, San Jose Mayor Sam Liccardo asked the city council to consider joining a broader effort that could lead to even more drastic changes to PG&E’s structure. Beyond assessing the city’s exposure to blackout-related risks and costs, ways to boost microgrids and energy resilience, and the potential for municipalizing its grid, Liccardo’s memo considers the possibility of “mutualization,” or turning all of PG&E into a customer-owned cooperative. 

While more than 900 utility cooperatives serve about 19 million customers across the U.S., most are small providers, and even the largest, with more than a billion dollars in annual revenues, serve almost entirely rural areas. No cooperative exists that serves such a large urban customer base, not to mention one that’s home to the world’s top-tier technology companies. 

PG&E has rebuffed all proposals to sell its assets and would doubtless resist a push to end its history as a publicly traded company. Proponents of the idea have said the CPUC could use its authority to veto a PG&E bankruptcy reorganization plan that fails to protect the public interest, in order to override those objections.

According to Liccardo and other proponents of a public takeover of PG&E, it may well be the more financially viable alternative.

“Creating a customer-owned utility will realign PG&E’s orientation because customers will be represented on the board overseeing the company’s management and its decision-making. It will also dramatically reduce PG&E’s cost of capital when it emerges from bankruptcy — by about half — because a utility cooperative would not have to pay dividends to shareholders, nor taxes to the federal or state government,” Liccardo wrote.

Such a radical reorganization of California's largest utility may have been unthinkable just a year, or even a month, ago. But as Liccardo wrote, “we need to see the company’s financial interests better aligned with the public interest. We also need to ensure that the post-bankruptcy company can access capital markets at a low cost, because all of the experts agree that we will only achieve resilience with large capital investments.”