Nearly 1 million Californians may find themselves without power this week as a result of pre-emptive blackouts imposed by electric utilities Pacific Gas and Electric and Southern California Edison in an attempt to mitigate wildfire risk. But neither denying power to consumers whenever it is dry and windy nor throwing more money at the problem, which appears to be the state legislature’s preferred solution, represent satisfactory long-term solutions. What is really needed is less government interference in the energy and housing markets.
Beginning today, PG&E announced that as many as 800,000 electricity customers in Northern and Central California, including about 250,000 in the Bay Area, could find themselves subject to the pre-emptive blackouts. Edison followed suit announcing that more than 173,000 Southern California residents could be affected by a similar action.
The blackouts come on the heels of the passage in July of Assembly Bill 1054, which will direct an additional $26 billion over 15 years toward utility safety improvements and financial backstops for the utilities in the event of particularly costly fires, and last year’s Senate Bill 901, another sweeping wildfire measure.
AB 1054 calls for $10.5 billion to come from ratepayers through the extension of a $2.50 charge on their monthly bills that dates back to the 2000-01 energy crisis and was scheduled to expire next year. These funds will serve as a secondary insurance policy for utilities when wildfire costs exceed their regular coverage. PG&E, Edison, and San Diego Gas and Electric will contribute another $10.5 billion in exchange for limits on their liability.
The utilities must invest an additional $5 billion in maintenance and safety measures, and satisfy other conditions, to obtain a safety certification, which would put the onus on wildfire victims to prove that utilities were negligent in maintaining equipment responsible for starting a fire.
To begin to truly solve the underlying problem, however, lawmakers and regulatory policymakers must recognize how government intervention has made things worse.
Let us start with forest and wildland management. Over the years, California has shifted more of its focus and resources from mundane, but effective, preventative measures such as controlled burns, fuel breaks and forest thinning to more reactive, yet heroic, fire suppression (i.e., actually putting down fires once they have started). This has been encouraged by environmental interests who prefer “natural,” untamed growth, though it has brought catastrophic consequences. As the Little Hoover Commission noted in a February 2018 report, this policy has led to dangerous amounts of overgrowth, which has not only provided more kindling for fires, but also less fire-resistant forests, as greater competition for resources among trees makes them more susceptible to drought and beetle infestations (and leads to more dead trees).
Another big factor is the state-protected monopoly status conferred on the “big three” regional utilities: PG&E, Edison and SDG&E. By shielding these companies from competition while dictating “acceptable” prices, profit levels, energy sources and other business practices, California has reduced consumer choice and drastically diminished the incentives to keep prices low while making prudent investments in innovation and safety. In a free energy market, there would likely be a greater number of smaller energy companies, just as there was before collusion between “utilities” and state governments led to protectionism and severe over-regulation, and companies would compete for customers based on price, service quality, and (especially given recent history) safety records.
One of the main reasons we have seen an increase in the destructiveness of wildfires is that more people have been moving to riskier areas. The state and local governments have encouraged this through policies that increase the cost of housing and drive people to cheaper exurban and rural areas. High development fees, restrictive zoning ordinances, lengthy and litigious planning and environmental review processes, prevailing (union) wage laws for construction, rent control and “affordable housing” mandates that make building homes less profitable and less attractive, and unnecessary building standards and environmental regulations (such as the solar roof mandate that will add $10,000 to $20,000 to the cost of a new home starting next year) all serve to suppress the supply of housing and drive up costs significantly. This has pushed many people out of city centers into more fire-prone areas in search of cheaper housing.
The common thread that makes things worse in each of these varied policy areas is government intervention. This is why the Independent Institute just bestowed its most recent California Golden Fleece Award – a dubious honor given to the state and local government agencies or programs that exemplify waste or a breach of the public’s trust – to Cal Fire and other agencies responsible for wildfire policy in the state. The report also makes 26 recommendations to improve wildfire policy and safety.
Since the wildfire issue touches on such a variety of issues, it will take a number of reforms to provide a comprehensive solution. These include taking a more proactive approach to wildland management; protecting private property rights and allowing greater use of brush clearing, fire breaks and logging; freeing markets to allow for more truly affordable housing in less fire-prone urban and suburban areas; and allowing real competition in energy markets so that providers have the greatest incentives to keep prices low and safety standards high.
Such solutions may not sound as exciting or headline-grabbing as legislation calling for taking billions of dollars from taxpayers’ pockets, but a holistic approach that respects both personal and economic liberty would do far more to reduce the harm of wildfires than more bureaucracy and government micromanagement.