Reduce Wildfire Damage and Lower Energy Bills by Freeing Up Markets

Power electricShortly before wildfires such as the Camp and Woolsey fires ravaged Northern and Southern California, respectively, Gov. Jerry Brown signed a contentious bill making it easier for the state’s investor-owned utilities — primarily, Pacific Gas & Electric, Southern California Edison and San Diego Gas and Electric — to recover wildfire costs from ratepayers, but don’t expect the flames to die down anytime soon.

The legislation arose out of the calamitous wildfires the state has experienced the past couple of years and utilities’ fears about their abilities to cover potentially billions of dollars in damages. PG&E faces a possible $15 billion liability for wildfires that wreaked havoc on Northern California’s wine country last year, and contends that it might be forced into bankruptcy if the California Public Utilities Commission does not allow it to cover the costs with rate increases on consumers. Senate Bill 901, authored by state Sen. Bill Dodd (D-Napa), largely sidestepped the broader reforms Gov. Brown had sought to reduce liability exposure for the utilities.

California law is unusual in that utilities may be held liable for fire damage caused by their equipment even if they were not negligent in maintaining it and followed all safety rules (such as wind blowing a tree down onto power lines and sparking a blaze). SB 901 did, however, direct the CPUC to consider PG&E’s financial status in deciding its liability for the 2017 fires, and may allow the company to pass along costs it cannot financially bear (however that is determined) in the form of bonds to be paid by ratepayers over time.

The legislation also requires utilities to beef up protections of their equipment, and provides some much-needed relaxing of logging restrictions on private land. A greater focus on wildfire prevention efforts such as removing excess fuel through vegetation clearing and controlled burns is also long overdue, and will be funded to the tune of $200 million a year for five years from the state’s cap-and-trade fund. Environmental policies preventing thinning to keep forests in a “natural” state, as well as drought conditions and a bark beetle infestation that have killed millions of trees, have created tinderbox conditions and significantly exacerbated wildfire damage. The money would go a lot farther, though, if the forest-thinning services were competitively bid instead of just doled out to Cal Fire.

In fact, privatization of wildfire services in general would likely substantially reduce costs. Approximately 40 percent of all wildfire services are already provided by the private sector, according to the National Wildfire Suppression Association, which represents more than 250 companies in 27 states employing about 10,000 private firefighters and support personnel.

The state should also stop interfering in insurance markets. An August study prepared for the California Natural Resources Agency by the RAND Corporation and Greenware Tech noted that insurers complain that the California Department of Insurance prevents them from using probabilistic wildfire models to project future losses and has not allowed them to raise homeowners insurance rates high enough to cover the full risk-based cost of policies in high-risk areas, which would discourage building in the most fire-prone locations.

Despite the significant risk to which it exposes investor-owned utilities in the state, strict liability is probably appropriate under the existing regulatory system. It is the same compensatory standard to which governmental agencies are held, and, as the state courts have noted, the eminent domain powers granted to electric utility companies under the Public Utilities Code and the government-protected monopolies under which they operate make them more akin to public agencies than unfettered private companies. Under such a system, where utilities face no competition and property owners cannot opt out if they are targeted for eminent domain action, it makes sense to spread the costs of wildfires among the utilities and their customers, who all share the benefits of the utilities’ electricity generation and transmission infrastructure.

That said, the existing regulatory system is at fault for creating “too big to fail” regional utility monopolies in the first place. A central planning commission that grants monopoly rights and dictates prices and “acceptable” profit levels sounds more characteristic of a socialist or totalitarian state like North Korea or the Soviet Union, but that is the state of energy markets in California.

A better solution would be to open up competition by eliminating regional government-granted energy monopolies with eminent domain powers and treating the provision of electricity like other goods and services. Fully privatizing the energy and insurance markets and eliminating government monopoly protections would do much more to reduce energy costs, increase innovation and reduce losses from wildfire damage than any measures currently being discussed in Sacramento.

esearch fellow at the Oakland based Independent Institute.

This article was originally published by Fox and Hounds Daily

California Burning – How the Greens Turned the Golden State Brown

Thomas FireIn October 2016, in a coordinated act of terrorism that received fleeting attention from the press, environmentalist activists broke into remote flow stations and turned off the valves on pipelines carrying crude oil from Canada into the United States. Working simultaneously in Washington, Montana, Minnesota and North Dakota, the eco-terrorists disrupted pipelines that together transport 2.8 million barrels of oil per day, approximately 15 percent of U.S. consumption. The pretext for this action was to protest the alleged “catastrophe” of global warming.

These are the foot soldiers of environmental extremism. These are the minions whose militancy receives nods and winks from opportunistic politicians and “green” investors who make climate alarmism the currency of their political and commercial success.

More recently, and far more tragic, are the latest round of California wildfires that have consumed nearly a quarter million acres, killed at least 87 people, and caused damages estimated in excess of $10 billion.

Opinions vary regarding how much of this disaster could have been avoided, but nobody disputes that more could have been done. Everyone agrees, for example, that overall, aggressive fire suppression has been a mistake. Most everyone agrees that good prevention measures include forest thinning (especially around power lines), selective logging, controlled burns, and power line upgrades. And everyone agrees that residents in fire prone areas need to create defensible space and fire-harden their homes.

Opinions also vary as to whether or not environmentalists stood in the way of these prevention measures. In a blistering critique published earlier this week on the California-focused Flash Report, investigative journalist Katy Grimes cataloged the negligence resulting from environmentalist overreach.

“For decades,” Grimes notes, “traditional forest management was scientific and successful — that is until ideological, preservationist zealots wormed their way into government and began the overhaul of sound federal forest management through abuse of the Endangered Species Act and the ‘re-wilding, no-use movement.’”

U.S. Representative Tom McClintock, whose Northern California district includes the Yosemite Valley and the Tahoe National Forest, told Grimes that the U.S. Forest Service 40 years ago departed from “well-established and time-tested forest management practices.”

“We replaced these sound management practices with what can only be described as a doctrine of benign neglect,” McClintock explained. “Ponderous, byzantine laws and regulations administered by a growing cadre of ideological zealots in our land management agencies promised to ‘save the environment.’ The advocates of this doctrine have dominated our law, our policies, our courts and our federal agencies ever since.”

Grimes goes on to outline the specific missteps at the federal level that led to America’s forests turning into tinderboxes, starting in the Clinton Administration and made worse, thanks to activist judges, by thwarting reforms attempted by the Bush Administration, and accelerating during the complicit Obama presidency.

All of this lends credence to Interior Secretary Ryan Zinke’s fresh allegations of forest mismanagement. But what really matters is what happens next.

Institutionalized Environmental Extremism

California’s 2018 wildfires have been unusually severe, but they were not historic firsts. This year’s unprecedented level of destruction and deaths are the result of home building in fire prone areas, and not because of wildfires of unprecedented scope. And while the four-year drought that ended in 2016 left a legacy of dead trees and brush, it was forest mismanagement that left those forests overly vulnerable to droughts in the first place.

Based on these facts, smart policy responses would be first to reform forest management regulations to expedite public and privately funded projects to reduce the severity of future wildfires, and second, to streamline the permit process to allow the quick reconstruction of new, fire-hardened homes.

But neither outcome is likely, and the reason should come as no surprise — we are asked to believe that it’s not observable failures in policy and leadership that caused all this destruction and death, it’s “man-made climate change.”

Gov. Jerry Brown is a convenient boogeyman for climate realists, since his climate alarmism is as unrelenting as it is hyperbolic. But Brown is just one of the stars in an out-of-control environmental movement that is institutionalized in California’s legislature, courts, mass media, schools and corporations.

Fighting climate change is the imperative, beyond debate, that justified the Golden State passing laws and regulations such as California Environmental Quality Actthe Global Warming Solutions Act of 2006the Sustainable Communities and Climate Protection Act of 2008, and numerous others at the state and local level. They make it nearly impossible to build affordable homes, develop energy, or construct reservoirs, aqueducts, desalination plants, nuclear power plants, pipelines, freeways, or any other essential infrastructure that requires so much as a scratch in the ground.

Expect tepid progress on new preventive measures, in a state so mired in regulations and litigation that for every dollar spent paying heavy equipment operators and loggers to do real work, twice that much or more will go to pay consultants, attorneys, and public bureaucrats. Expect “climate change” to be used as a pretext for more “smart growth,” which translates into “stack and pack,” whereby people will be herded out of rural areas through punishing financial disincentives and forced into densely populated urban areas, where they can join the scores of thousands of refugees that California is welcoming from all over the world.

Ruling Class Hypocrisy

Never forget, according to the conventional wisdom as prescribed by California’s elites, if you don’t like it, you are a climate change “denier,” a “xenophobe,” and a “racist.”

California’s elites enjoy their gated communities, while the migrants who cut their grass and clean their floors go home to subsidized accessory dwelling units in the backyards of the so-called middle class whose taxes pay for it all. They are hypocrites.

But it is these elites who are the real deniers.

They pretend that natural disasters are “man-made,” so they can drive up the cost of living and reap the profits when the companies they invest in sell fewer products and services for more money in a rationed, anti-competitive environment.

They pretend this is sustainable; that wind farms and solar batteries can supply adequate power to teeming masses crammed into power-sipping, “smart growth” high rises. But they’re tragically wrong.

Here the militant environmentalists offer a reality check. Cutting through their predictable, authoritarian, psychotically intolerant rants that incorporate every leftist shibboleth imaginable, the “Deep Green Resistance” website offers a remarkably lucid and fact-based debunking of “green technology and renewable energy.” Their solution, is to “create a life-centered resistance movement that will dismantle industrial civilization by any means necessary.”

These deep green militants want to “destroy industrial civilization.” At their core, they are misanthropic nihilists—but at least they’re honest. By contrast, California’s stylish elites are driving humanity in slow motion towards this same dire future, cloaked in denial, veiled coercion, and utopian fantasies.

This is the issue that underlies the California wildfires, what causes them and what to do about them. What is a “sustainable” civilization? One that embraces human settlements, has faith in human ingenuity, and aspires to make all humans prosperous enough to care about the environment, everywhere? Or one that demands Draconian limits on human settlement, with no expectation that innovation can provide solutions we can’t currently imagine, and condemns humans to police-state rationing of everything we produce and consume?

That is the stark choice that underlies the current consensus of California’s elites, backed up by dangerous and growing cadres of fanatical militants.

This article originally appeared on the website American Greatness.

Protecting taxpayer interests in the fire liability fight

Thomas FireOne of the most contentious political battles currently being waged in Sacramento during the final two weeks of the legislative session is over the extent to which investor-owned utilities, such as Pacific Gas & Electric, should be held liable and have to compensate property owners for the damage inflicted by the horrendous wildfires that are still burning across the state. Average California taxpayers and homeowners probably sense this is a big deal because of extensive media coverage, but may not know what to think about it.

Here’s what’s going on.

First, there is little dispute that the number of wildfires and their intensity has increased dramatically in recent years. Investor-owned utilities, including PG&E as well as San Diego Gas & Electric, have been forced into big legal settlements because many fires were allegedly caused by electrical wires or other equipment. The utilities, however, have attempted to shift some of the blame to natural causes such as climate change, which they argue produces the conditions for more catastrophic fires. (More recently, blame has also been placed at California’s mismanagement of public lands, which is undoubtedly a contributing cause).

Determining liability for wildfires is such a hot issue — no pun intended — because of the amount of money involved. San Diego Gas & Electric was facing more than 2,500 lawsuits and thus paid $2.4 billion in settlements for its role in three 2007 fires that burned over 1,500 homes, took human lives and burned 368,316 acres in San Diego County. Fires still burning as this column is being written have inflicted even greater damage and loss of life.

These damages have rocked PG&E and SDG&E.  According to a January blog post from the Energy Institute at Hass, California utilities lost $20 billion in market capitalization after last year’s fires.

In an effort to lessen their liability, the utilities say a constitutional doctrine called inverse condemnation has compelled them to settle lawsuits from property owners, firefighting agencies and local governments. They believe the doctrine entitles them to recoup some of the expenses by raising rates, but California’s Public Utility Commission has balked.

Although the utilities’ efforts to offload some of their liability for fire damage is understandable, taxpayer advocates are opposing the shift as it diminishes their own property rights.  The Howard Jarvis Taxpayers Association views limited taxation on property as a natural extension of property rights generally.  For example, following the infamous Kelo v. New London decision by the United States Supreme Court allowing the use of eminent domain for private-to-private transfers of property, HJTA fought for both a state constitutional, as well as statutory, prohibition of those takings.  Other property-rights issues of major concern to taxpayer advocates include the attempt to expand rent control in California and ensuring that just compensation is paid to property owners for traditional exercises of eminent domain, especially for boondoggle projects like California’s High Speed Rail project. …

Click here to read the full article from the Pasadena Star News

PG&E Seeks Protection From Costs of Wildfires They Cause

A wildfire rages in Buck Meadows, in the Yosemite National ParkCalifornia’s three large investor-owned utilities are renewing efforts to allow them to make ratepayers cover the costs of wildfires that authorities blame on utilities’ mistakes or poor maintenance.

Pacific Gas & Electric officials made this clear last week when they announced they expected to have at least $2.5 billion in liabilities from the wildfires that scarred the wine country of Northern California last October. That sum is only for 12 relatively small blazes that the state blames on PG&E’s failure to maintain equipment and clear brush near power lines. Authorities are still looking at what caused the biggest blaze – the Tubbs fire – which torched more than 3,000 homes in Sonoma County and is blamed in the deaths of 22 people.

PG&E CEO-President Geisha Williams used a conference call with analysts to make the case for state legislation to protect electricity utilities from bankruptcy in an era in which huge wildfires – blamed on hotter, drier weather – are more common than ever. PG&E only has an estimated $840 million in insurance coverage to deal with the 200 and counting lawsuits from the wine country conflagrations.

Williams said “flawed” state laws made utilities responsible for fire risks that were beyond their control. But in a decision-making process that began last summer – before the wine country blazes – and ended after they were finally put out, the California Public Utilities Commission rejected a similar argument put forward by San Diego Gas & Electric. In August, CPUC staff recommended that commissioners reject an SDG&E request to pass along to ratepayers $379 million in unrecovered costs from 2007 wildfires that ravaged San Diego County. After three months of wavering, the CPUC board voted unanimously in late November to deny the request.

Williams said negative media coverage of the October fires complicated utilities’ efforts to get help from the California Legislature. But some utility watchdogs are still wary of state lawmakers, whom they see as sending out mixed signals on wildfire liabilities.

On the one hand, the state Senate voted 39-0 in May and an Assembly committee voted 15-0 last week for Senate Bill 819. It would ban the CPUC from allowing utilities to pass along to ratepayers the costs of fines or penalties as well as the cost of damages that were “caused” by a utility’s infrastructure. Only costs the CPUC deems “just and reasonable” can be shifted from shareholders to ratepayers under the legislation. PG&E and Southern California Edison expressed “concerns” about the bill without formally opposing it, according to a legislative analysis.

Benign bill pushing responsibility – or stealth bailout?

But another bill that had similarly lopsided support in the Senate is drawing a very mixed response. Senate Bill 1088 passed the Senate 34-2 in late May and survived an Assembly committee vote last week with eight lawmakers in support, two in opposition and five declining to vote.

It would require utilities “to submit a safety, reliability and resiliency plan to the California Public Utilities Commission every two years.” It would also require the state Office of Emergency Services “to adopt standards for reducing risks from a major event and requires the office to update the standards at least once every two years.”

Supporters – including PG&E, SDG&E, labor unions and some counties hit hard by last year’s blazes – depict the measure as a benign attempt to make sure utilities are prepared to handle their responsibilities.

But critics see the language requiring the state to regularly “update” how it evaluates risks posed by the biggest blazes as potentially giving legal ammunition to the utilities – specifically, to their arguments that emerging, more dangerous conditions should change what costs can be shifted on a “fair and reasonable” basis to ratepayers.

Formal opponents of SB1088 include groups which have standing to challenge utilities’ proposed rate hikes (The Utility Reform Network and the Office of Ratepayer Advocates); business interests (the California Manufacturers and Technology Association, the Western States Petroleum Association and farm groups); and green activists (most notably the California Environmental Justice Alliance).

This article was originally published by CalWatchdog.com