PG&E’s $6 Billion Plan to Prevent Wildfires Is in Peril
A big bet by CEO Patti Poppe to put thousand of miles of power lines underground risks rejection by regulators
Patti Poppe has staked her legacy at California utility PG&E PCG -0.92%decrease; red down pointing triangle on a pledge to bury power lines to reduce wildfire risk. Now, her plan is in jeopardy.
Poppe, who became chief executive in 2021 following a series of deadly wildfires ignited by the company’s equipment, said PG&E would bury 10,000 miles of power lines to stem the risk of them sparking wildfires.
She began appearing on TV commercials and social media to make the case that spending billions of dollars on the effort was necessary.
Two years later, California regulators are likely to significantly restrict the number of power lines PG&E can bury in the coming years in favor of other ways to reduce fire risk. They argue that the burial process, known as undergrounding, is too expensive when customers are paying larger bills as a result of inflation and other investments to bolster the power grid.
Poppe is making a last-minute effort to save her pledge, openly challenging regulators weeks before they are expected to make a final decision on the company’s proposed undergrounding investment, which it says would add, on average, $3.40 to a typical residential bill each month through 2026.
“I made a promise: We’re going to make it safe,” Poppe said in an interview. “There are lots of places where we can and will work on affordability, but having a compromise on safety and a willingness to accept risk at a $3.40-a-month cost seems dangerous to me.”
In total, PG&E has proposed spending $5.9 billion to bury roughly 2,000 miles of power lines between 2023 and 2026, the first step in Poppe’s broader plan. Underground lines pose almost no fire risk. Burying 2,000 miles of lines would reduce wildfire risk in high-threat areas by up to 20%, the company says.
But the California Public Utilities Commission is considering two modified proposals that would reduce costs, allowing the company to bury either 200 miles or 973 miles of lines between 2023 and 2026. Each proposal directs the company to insulate the remainder with material that would reduce, but not eliminate, the risk of them sparking wildfires. If approved, the proposals would imperil the 10,000-mile goal.
PG&E’s spending plan, all of which would be paid for by customers, is part of a larger proposal by the company that would add, on average, a total of $44.26 to residential bills each month over the four-year period. The CPUC proposals seek broad cost-cutting in the spending plan.
PG&E’s request comes as utilities across the country propose record capital investments to replace aging equipment, prepare for a surge in power demand driven by electric-vehicle adoption and strengthen their systems to withstand severe weather linked to climate change. Edison Electric Institute, an industry trade group, expects that utilities will invest roughly $168 billion in 2023 and $167 billion in 2024, more than any year since 2000, when the group began tracking the data.
The sharp increase in spending has sowed concern among regulators about customers’ ability to foot the bill as the prices of other goods and services escalate. The pressure is particularly acute in California—where utility rates are among the highest in the country—as the state pursues ambitious carbon-reduction targets that require substantial investments.
“We really feel that both of the proposals prioritize the investments that California needs,” said CPUC Executive Director Rachel Peterson. “There’s a lot in there that will aid in the overall decarbonization that California is on the path to accomplish. Both also set out a pathway for the long-term critical investments in PG&E’s system.”
Neither proposal pending before the CPUC would prevent PG&E from seeking to bury more lines in the future, and the agency is working to establish a program to expedite undergrounding efforts as part of a state law implemented last year. But both proposals would likely result in PG&E burying far fewer than 10,000 miles in total, because some of the lines it seeks to bury would instead be insulated, and a narrower scope of undergrounding work could affect its ability to scale the program.
The Utility Reform Network, a consumer advocacy group known as TURN, has argued in support of the plan that allows PG&E to bury 200 miles of power lines and insulate the remaining 1,800 at an estimated cost of about $2.1 billion. The group contends that insulating a mile costs about $800,000, while burying a mile costs about $3.3 million.
TURN has argued that by using insulation in conjunction with other technologies, the company can reduce fire risk at a similar level to what it outlined in its undergrounding proposal.
“Undergrounding has been laid out as a solution because, I will admit, it reduces a lot of wildfire risk,” said Katy Morsony, a staff attorney for the group. “However, it also comes with an extraordinary price tag, and we have to look at what customers are already facing in their utility rates.”
PG&E, like many other utilities, once considered undergrounding prohibitively expensive. It now argues that undergrounding, though expensive upfront, is the most cost-effective means of risk reduction long term because it will allow the company to spend less on maintenance and trimming or removing trees that could strike power lines. Burying 2,000 miles of conductor would ultimately save nearly $5.7 billion, the company says.
“I did it myself as a utility executive—we told everyone it was too expensive,” Poppe said. “We have to unteach them, and show them how the map has changed because the conditions have changed.”
The company says undergrounding will also curb power outages by reducing the need for technology that causes power lines to shut off on contact with trees and other objects, as well as proactive shut-offs when winds pick up, which creates higher fire risk.
After more than a decade at General Motors, Poppe headed a Michigan utility before becoming CEO at PG&E in January 2021. The company was in turmoil following wildfires that killed more than 100 people and destroyed more than 15,000 homes in Northern California, including the 2018 Camp Fire, which killed 84 people and destroyed the town of Paradise.
PG&E emerged from bankruptcy court months before Poppe’s arrival with a reorganization plan that involved paying $25.5 billion in wildfire-related claims.
In July 2021, a tree fell on a small power line not far from Paradise, igniting what became the second-largest wildfire in California history. It was then that Poppe made an executive decision. She traveled to Butte County, where the fire was blazing, and announced the company’s 10,000-mile plan.
It was a big bet: The company hadn’t yet had a substantive conversation with CPUC about its change in strategy. Weeks earlier, the company had submitted a spending plan to the agency that proposed burying only 200 miles of lines between 2023 and 2026.
Regulators have expressed doubt about PG&E’s ability to complete the undergrounding work at the speed and scale it has proposed, as well as its ability to significantly cut costs. The company is targeting roughly $2.8 million per mile by 2026.
Poppe says PG&E needs to invest heavily up front to line up labor and achieve economies of scale necessary to hit the 10,000-mile goal. The CPUC’s spending proposals, she said, reflect a “fundamental misunderstanding” of the long-term affordability of the plan.
“I have never publicly spoken out against a regulator like this, ever,” Poppe said. “There is so much at stake.”