California Burning

1. The Peril of Monopoly and Deregulation

"The big cities of the East are finding out that regulation, and not competition, is the best and only way to deal with public-service corporations."

Monopoly's allure. Pacific Gas and Electric (PG&E) was forged from a century of consolidation, absorbing rivals like Great Western Power to become a vast, regulated monopoly. This model, once championed as efficient for capital-intensive infrastructure, promised stable service and guaranteed profits under regulatory oversight. Early pioneers believed it was the only way to deliver essential services across a growing state.

Deregulation's promise. By the 1990s, California's high electricity prices spurred a push for deregulation, aiming to introduce competition and lower costs. However, the hastily designed market, coupled with manipulative trading practices by firms like Enron, led to the devastating 2000-2001 energy crisis. This period of artificial scarcity and price gouging forced PG&E into its first bankruptcy, demonstrating the inherent risks of an imperfectly competitive market for a critical commodity.

A flawed experiment. The crisis revealed that while competition might work for some industries, electricity's unique demands—constant supply-demand equilibrium and complex infrastructure—made it vulnerable. The state's attempt to dismantle the utility's integrated structure ultimately backfired, leaving PG&E financially crippled and highlighting the delicate balance between market forces and public good.

2. Prioritizing Profit Over Safety

"Safety is not your number one thing. You could have spent more money to cut those trees."

Shareholder-first strategy. Following its first bankruptcy, PG&E, under CEO Peter Darbee, embarked on a "Business Transformation" to become a "modern utility" focused on maximizing shareholder returns. This involved aggressive cost-cutting, particularly in maintenance and operations, to free up capital for investments that yielded higher regulated profits. The company's internal documents revealed a stark prioritization: "8 percent EPS growth" was "not up for debate," while "safety" and "reliability" were.

Deferred maintenance. This relentless pursuit of profit led to a systemic neglect of critical infrastructure. Engineers faced immense pressure to defer safety projects and cut budgets, even when they knew it compromised pipeline and power line integrity. The company's reliance on outdated records and inadequate inspection methods further masked the deteriorating state of its vast network.

A ticking time bomb. The consequences of this strategy became tragically clear. The 2010 San Bruno pipeline explosion, caused by a faulty weld on a poorly documented pipe, killed eight people. Internal emails showed engineers' frustration with budget constraints and their awareness of the growing risks, culminating in a former employee's stark assessment: the problem was the "near criminal fault of all the financial people running the show."

3. Aging Infrastructure Meets Climate Change

"The tinder dryness of the chaparral in California, that’s all it takes to start a fire. High wind. Trees. Power lines. Seventeen wildfires. Twenty-two people killed. One month. October."

A deadly convergence. California's natural wet-dry cycles, exacerbated by climate change, created a perfect storm for catastrophic wildfires. Prolonged droughts killed millions of trees, turning vast forests into tinderboxes. When fierce, dry winds—like the Diablo and Santa Ana winds—swept through, they transformed small sparks into infernos.

Neglected network. PG&E's aging electric grid, much of it over a century old and built with experimental materials, was ill-equipped for these new realities. Decades of deferred maintenance, particularly on remote transmission lines, meant worn-out components and insufficient vegetation clearance. The company's own engineers had warned of "imminent failure" on lines like the Caribou-Palermo, which later sparked the Camp Fire.

Unseen hazards. Inspections, often reduced to "flybys" from helicopters, failed to detect critical flaws like the deeply grooved hook that caused the Camp Fire. This combination of a vulnerable, neglected system and a rapidly changing, fire-prone environment set the stage for unprecedented destruction and loss of life.

4. Regulatory Blind Spots and Ineffectiveness

"What keeps me awake in the early hours is not emails. It’s the slow erosion of our safety programs."

Focus on green, not grid. The California Public Utilities Commission (CPUC), the state's primary utility regulator, became deeply focused on ambitious renewable energy mandates under governors like Arnold Schwarzenegger and Jerry Brown. While laudable, this emphasis often overshadowed its core responsibility: ensuring utility safety. The commission approved expensive renewable contracts, passing costs to consumers, but paid less attention to the deteriorating grid.

Understaffed and outmaneuvered. The CPUC's safety division was chronically underfunded and understaffed, relying heavily on utility self-reporting rather than proactive field inspections. This left it ill-equipped to monitor PG&E's vast and complex infrastructure. A consultant's report explicitly stated that safety was "off the radar screen" for most commissioners and legislators.

Cozy relationships. The problem was compounded by a "cozy" relationship between some CPUC commissioners and PG&E executives, revealed through incriminating emails. This back-channel communication raised questions about the agency's impartiality and its ability to hold the utility accountable, further eroding public trust and allowing systemic safety issues to persist undetected.

5. The Burden of Inverse Condemnation

"Even if a utility has followed all the rules and, in essence, has not done anything wrong, [it is liable]."

Strict liability in California. California operates under a unique legal doctrine called "inverse condemnation," which holds utilities strictly liable for property damage caused by their equipment, regardless of negligence. This means if a power line sparks a fire, the utility is responsible for all damages, even if it followed every rule and acted reasonably. This legal framework amplified PG&E's financial exposure to wildfires.

Financial devastation. The 2007 Witch Fire, sparked by San Diego Gas & Electric, foreshadowed the immense financial burden. When PG&E's equipment was implicated in the 2017 North Bay fires and the 2018 Camp Fire, the estimated liabilities soared into the tens of billions of dollars, far exceeding the company's insurance coverage and market value.

A unique challenge. This strict liability, combined with California's escalating wildfire risk, created an untenable situation for PG&E. It meant that every spark, regardless of the company's efforts, could trigger a financial catastrophe, making it nearly impossible to attract long-term investors and fund necessary safety upgrades.

6. The Cycle of Catastrophe and Bankruptcy

"PG&E would start the Chapter 11 process again, nearly fifteen years after wrapping up its first bankruptcy. Observers snidely dubbed it 'Chapter 22.'"

A recurring nightmare. PG&E's second bankruptcy filing in 2019, following the devastating 2017 and 2018 wildfires, underscored a pattern of systemic failure. The first bankruptcy stemmed from the energy crisis; the second, from the wildfire crisis. Both revealed a utility unable to adapt to changing circumstances and manage its inherent risks.

Massive liabilities. The estimated $30 billion in wildfire liabilities dwarfed the company's market value, forcing it to seek court protection. This created a complex battle between fire victims, insurance companies, and various investor groups (shareholders vs. bondholders), all vying for compensation from a limited pool of assets.

Wall Street's influence. Hedge funds, known for betting on distressed companies, acquired significant stakes in PG&E's debt and equity, pushing their own restructuring plans. The eventual settlement, which compensated victims partly with company stock, reflected the immense power of these financial players, often at the expense of those who had lost everything.

7. The Controversial "Public Safety Power Shutoffs"

"This current operation is unacceptable. The current conditions and circumstances are unacceptable."

A drastic measure. Faced with the impossible choice between sparking deadly fires and cutting power, PG&E implemented widespread "public safety power shutoffs" (PSPS) during high-wind events. This unprecedented tactic, meant to prevent ignition, plunged millions of Californians into darkness, often for days.

Chaos and outrage. The blackouts, particularly in October 2019, caused widespread chaos:

• Traffic lights out, hospitals scrambling, nursing home residents at risk.
• Spoiled groceries, closed businesses, and faltering cell service.
• Economic losses estimated in the billions.
  Governor Gavin Newsom publicly condemned PG&E's "unacceptable" neglect and lack of preparedness.

A no-win situation. While the shutoffs prevented some fires, they exposed PG&E's inability to deliver both safe and reliable service simultaneously. The company admitted it was unprepared for the scale of the outages, highlighting its systemic weaknesses and the profound societal dependence on a fragile grid.

8. Corporate Accountability: Symbolic vs. Systemic Change

"We made history, but we didn’t change a fucking thing."

Criminal convictions. PG&E faced criminal charges for both the San Bruno explosion and the Camp Fire. In 2016, it was convicted of six federal felonies for pipeline safety violations and obstruction. In 2020, it pleaded guilty to 84 counts of involuntary manslaughter for the Camp Fire, marking the deadliest corporate crime in U.S. history.

Limited penalties. Despite these convictions, the financial penalties were relatively small ($3 million for San Bruno, $3.48 million for Camp Fire), amounting to little more than a "rounding error" for a company of PG&E's size. This highlighted the inherent difficulty in penalizing corporate criminals, as fines often fail to deter or truly punish.

Frustration with the system. Prosecutors, like Marc Noel, expressed profound frustration that while they "made history," they "didn't change a fucking thing." The legal system, designed to punish individuals, struggled to force systemic reform within a large, complex corporation. The concept of a "Watson murder" warning for executives, suggesting future murder charges for repeat offenses, underscored the depth of this frustration.

9. The Human Cost of Corporate Neglect

"I’ve seen firsthand the destruction that hurricane force winds can bring to a community, but this was like nothing I’ve ever seen."

Lives shattered. Beyond the financial figures and legal battles, PG&E's failures had a devastating human toll. The San Bruno explosion killed eight people and destroyed a neighborhood. The 2017 and 2018 wildfires killed over a hundred, razed entire towns like Paradise, and left thousands homeless.

Personal anguish. Victims like Will Abrams, who fled his burning home with his screaming children, endured profound trauma, panic attacks, and years of limbo in rental housing. Kirk Trostle, whose entire town of Paradise was destroyed, described the anguish of not knowing if his family had survived.

Lingering uncertainty. Even after settlements, many victims received compensation partly in company stock, tying their recovery to the volatile performance of the very company that destroyed their lives. This left them exposed to future risks, prolonging their suffering and highlighting the deep inequities in the bankruptcy process.

10. A Fragile Future: The Search for a New Utility Model

"We know that we have long argued that undergrounding was too expensive. This is where we say it’s too expensive not to underground."

The climate imperative. The Dixie Fire in 2021, sparked by a PG&E distribution line, consumed nearly a million acres, underscoring that the crisis was far from over. With climate change accelerating, extreme weather events—droughts, heatwaves, and storms—are increasingly stressing grids nationwide, making the need for adaptation urgent.

A radical shift. Under new CEO Patti Poppe, PG&E announced a stunning reversal: a commitment to bury 10,000 miles of distribution lines, an unprecedented and immensely expensive undertaking. This "undergrounding" strategy, while complex and costly (estimated at $20 billion), is seen as the only way to eliminate fire risk on those circuits and reduce the need for future blackouts.

The price of resilience. This massive investment, along with other necessary upgrades, will inevitably lead to higher customer bills. PG&E's journey reflects a broader national challenge: how to balance shareholder interests, customer affordability, and the critical need to modernize aging infrastructure for a rapidly changing climate. The cost of inaction, as California has learned, is far greater.

Last updated: August 13, 2025