Do California's Blackouts Make Sense?

A Jack in the Box drive-thru closed for a blackout in Santa Rosa, Calif., Oct. 10. Photo: josh edelson/Agence France-Presse/Getty Images

When Federal Reserve Chairman Jay Powell isn’t worried about trade wars, he can now worry about substantial chunks of gross domestic product going offline for days at a time thanks to California’s intentional electricity blackouts.

As a last resort, some two million people were without power in the past few days to prevent accidental sparks from causing wildfires. Yet the real issue behind these cutoffs isn’t fire risk, which exists and is a fact of California life, but who pays.

Listen to many California homeowners quoted in the media: They would rather live with the fire hazard (for each homeowner, relatively small) than with blackouts of unpredictable duration and frequency. They are not necessarily irrational to think so. But the choice is out of their hands. The blackouts are aimed at helping the state’s poorly regulated power companies, not making the best trade-off for customers.

The current crisis, in fact, has more than circumstantial echoes of California’s last blackout crisis, in the early 2000s. Then as now, there was no actual shortage of power, only a financial snafu at the utilities that the state allowed to be assuaged with rolling power cuts.

Voters may never really have understood what was going on, but they turned the state’s politics upside down, even briefly resurrecting the Republican Party. Arnold Schwarzenegger surfed a wave of resentment into the governor’s office.

The big difference this time: There’s no trigger the state can quickly pull to escape its now-commitment to cut power to large swaths of the public every time the fire-warning “red flag” is raised.

Gov. Gavin Newsom played to the confused Thursday, even letting global warming off the hook for a change. The blackouts, he explained, are not a “climate-change story so much as a story of greed and neglect.”

He’s partly right. Weather is variable. California is prone to dry spells, Santa Ana winds and fires. The restless expansion of housing into areas the state designates as “very high fire risk” is a bigger factor by far than climate change.

But blaming the utilities, even the widely reviled and now bankrupt Pacific Gas & Electric, is a bit of a dodge. Public utilities are largely socialist enterprises, and California particularly socializes development in fire-prone areas by making its utilities responsible for fires related to their equipment even if they weren’t negligent. The state has done so, it’s now apparent, without setting rates high enough to cover these risks or reduce them.

Though PG&E’s estimates might be taken with a grain of salt, it told its bankruptcy judge that eliminating trees and vegetation from around its power lines would cost up to $150 billion and require 650,000 employees. PG&E’s customers already pay twice the national average for electricity. An alternative plan would be to radically decentralize its system so power cutoffs could be more “surgical.” This would also be expensive and, in PG&E’s sprawling territory, would still mean widespread blackouts.

More equitable solutions are easy to envision, if only they were politically acceptable. Utilities could be relieved of their blanket fire liability, transferring the risk to homeowners and insurance markets. Utilities could be allowed to charge higher rates for customers in fire-prone districts. They could be allowed to refuse to extend their networks into such areas.

The least rational outcome is also the most likely. Households will continue to be sheltered from the financial consequences of building in wildfire areas. The costs will be opaquely divided between ratepayers and the state’s taxpayers, amid much rhetoric about the evils of climate change and corporate greed. Here’s the kicker: The imposed blackouts then will be able to stop even though the fire risk remains unchanged.

In fact, missing is any data showing that today’s blackouts meaningfully or cost effectively reduce the public’s risks.

After all, 90% of fires, according to the California Public Utilities Commission, are caused by something other than power lines. Power outages can only impede fighting these fires or alerting neighbors to their existence. Thousands of dubiously competent homeowners will be firing up gas-powered generators in tinder-dry areas at the moment of maximum risk. How is this helping? When the lights go dark, the candles come out—a major source of house fires. Then there are the thousands of citizens dependent on home medical devices that stop working when the power goes off.

Whether the cure is worse than the disease is a question not asked because the answer is irrelevant to the real problem: California’s utilities cannot financially withstand the obligation imposed on them to subsidize development in fire-prone areas. The blackouts are to protect the power companies and their regulators, not the public.

The California assembly passed legislation on September 11, 2019, that would reclassify hundreds of thousands of contractors working in the gig economy, for companies such as Uber and Lyft, into employees. Image: Getty / Bloomberg / Composite: Brad Howard

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