By Kennedy Maize
Wildfires, always a threat, particularly in the arid western U.S. have been particularly prominent of late. The region has been locked in a drought and the threat of the coming El Niño could make things worse. 
In Texas, the Austin American Statesman this week reported, “Dry weather and extreme heat over the weekend helped fuel wildfires across North-Central Texas. As of Monday, the Texas A&M Forest Service was responding to 17 requests for assistance with wildfires burning in this region.” The fast moving Ross Fire in north Texas had, at that point, burned 80,000 acres and was only 12% contained.
One of the significant elements in wildfires is how they were ignited, and electric utilities are often the culprit. The major source of utility-caused wildfires are power lines and vegetation contact with the power lines.
A 2020 study by the California Public Utilities Commission found, “The most common cause of utility-related ignitions is vegetation contact. In the case of California, utility ignition data reported by the three IOUs for all fires that burned ten acres or more from 2014-2018 show that 53% of ignitions were caused from contact with foreign objects, of which 35% are from contact with vegetation.”
That leads to the question of who should pay for wildfires ignited by utilities. That’s what economist Meredith Fowlie of the University of California’s Energy Institute at Haas examines in a recent blog post. Fowlie’s post is California-centric, but that’s useful given the state’s long and historic encounters with wildfires, utilities, and costs.
The intuitive answer to the question of who should pay, Fowlie notes, is obvious: the utility. This is, she says, “a guiding principle that seems compelling and fair: ‘You break it, you fix it.’” Fowlie adds, “Utilities counter that catastrophic wildfire liabilities can reach tens of billions of dollars, threatening solvency and raising costs for their customers.”
But it’s fundamentally not a zero-sum game, says Fowlie: “The consequences of making utilities ‘own the whole fire’ are more complicated than they first appear. If done right (admittedly a big ‘if’), limiting utility liability could lead to more effective and more affordable risk reduction.”
Fowlie writes, “As the climate changes, fuel loads accumulate, and more people move into high hazard areas, sending electricity along power lines on red flag days is getting much riskier. I think we need to rethink how these risks are shared and paid for.”
Fowlie posits three reasons to limit utility wildfire liability:
- Many factors contribute to wildfire damages
“For a neighborhood to burn in a wildfire, a lot has to go wrong. Most ignitions do not turn into catastrophic fires — that takes wind, heat, abundant fuel, and vulnerable structures in the fire’s path. Utilities control only a subset of the risk mitigating actions we could be deploying to avoid catastrophe. Fuel loads, home hardening, defensible space, building codes, where people choose to live — none of that can be managed by utilities.”
- Power lines are one of many ignition sources
“More than 90 percent of California wildfires — and roughly 70 percent of the most destructive ones — are ignited by something other than utility equipment (lightning, vehicles, machinery, campfires, arson). A neighborhood in a high hazard area that avoids a utility-caused fire today can still burn next year in a fire ignited by another source. Hardening the power grid reduces one source of ignition. Hardening communities, investing in fuel treatments, and building fire breaks can reduce losses no matter where the spark comes from.”
- “Make the utility pay” is not the same as “make shareholders pay.
Socializing costs via utility bills was an original intent of inverse condemnation. It should come as no surprise, then, that a substantial share of wildfire costs – both liability costs and risk mitigation costs – is passed on to utility rate payers. These costs have been the most important driver of rate increases over the past decade.”
California legislators are considering a state-backed insurance plan to make catastrophe insurance more affordable. Fowlie cautions that “it’s important to ask whether a state government can actually bear the risk more efficiently, or simply charge less and ask taxpayers to pay for the rest. Public programs like the National Flood Insurance Program have repeatedly succumbed to political pressure to hold premiums below actuarially sound levels. If California wants to spend taxpayer dollars on wildfire risk management, funds would be better used to support community hardening and fuel treatments rather than subsidizing property insurance premiums.”
The Quad Report, covering energy policy and politics
