Electric utilities face billions in wildfire liability with aging power lines risking another catastrophe

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Electrical workers repair power lines leading into the fire ravaged town of Lahaina on the island of Maui in Hawaii, August 15, 2023.

Mike Blake | Reuters

Electric companies in the western U.S. are facing mounting lawsuits alleging that their failure to prepare for extreme weather has resulted in repeated, catastrophic wildfires that have taken scores of lives and caused billions of dollars in damages.

Hawaiian Electric is the latest utility to face allegations of negligence. Maui County sued the power company for damages on Thursday over its alleged role in the devastating wildfires on Maui this month that have killed more than 100 people and burned the historic town of Lahaina to the ground.

The Maui County complaint is the 12th lawsuit filed against Hawaiian Electric. The suits allege that downed power lines operated by the company contributed to the deadliest U.S. wildfire in more than a century.

The suits accuse the utility of negligence for failing to shut off power even after the National Weather Service had issued a “red flag” warning of an increased fire risk due to high winds from Hurricane Dora and drought conditions on the island.

Hawaii Electric pushed back against some of those claims in a statement Sunday.

The credit agency Fitch has said the litigation could pose an existential threat to the company. Pacific Gas & Electric in California filed for bankruptcy in 2019 when facing billions of dollars in liability for wildfires.

The allegations leveled against Hawaiian Electric echo lawsuits brought against PG&E in California over the 2018 Camp Fire, Berkshire Hathaway’s PacifiCorp in Oregon over the 2020 Labor Day wildfires and Xcel Energy in Colorado over the 2021 Marshall Fire.

Before all these catastrophic wildfires, the companies did not shut the power off despite high winds that can knock down power lines and combine with dry or outright drought conditions to create a high fire risk.

The wildfire risk posed by aboveground power lines is well documented. More than 32,000 wildfires were ignited by transmission and distribution lines in the U.S. from 1992 to 2020, according to U.S. Forest Service data.

Paul Starita, an attorney who represents Lahaina residents in one of the suits against Hawaiian Electric, said utilities are not doing enough to harden their infrastructure against extreme weather and clear brush to prevent catastrophic fires.

“They’re just not doing it,” said Starita, senior counsel at Singleton Schreiber, a law firm that has represented 12,000 victims in fires caused by utilities. “And when you know the system has a problem — shut down the power,” he said.

The industry suffers from a culture that is slow to change and has historically had a financial incentive to not overspend on infrastructure because their performance has been judged on how much money they save their customers, said Alexandra von Meier, an electric grid expert.

“The industry just is changing more slowly than the climate is,” said von Meier, an independent consultant and former professor at the University of California, Berkeley. “The industry needs different standard practices today than they needed 10 years ago. They just haven’t adapted yet. “

The failure to adapt swiftly to climate change has had catastrophic consequences in lives lost, homes destroyed and increasingly for the utilities’ own business interests.

Lives lost, billions in damages

The Maui fires have killed at least 115 people with hundreds still missing. The town of Lahaina is destroyed. Moody’s estimates the wildfires have caused up to $6 billion in economic losses.

Fitch, Moody’s and S&P recently downgraded Hawaiian Electric’s credit rating to junk status, with Fitch warning that the company faces more than $3.8 billion in potential liability for the Maui wildfires.

Though the lawsuits point the finger at Hawaiian Electric, the authorities are still investigating the cause of the Maui wildfires. The Bureau of Alcohol, Tobacco, Firearms and Explosives has deployed a team with an electrical engineer to assist Maui County fire officials in determining the origins of the blazes.

Just two months before the Maui fires, Colorado law enforcement officials found that a power line operated by the Minnesota-based utility Xcel Energy likely caused one of the two initial fires that led to the 2021 Marshall Fire in Boulder County. The line had become unmoored from its pole during high winds.

The Marshall Fire killed two people, destroyed more than 1,000 homes and dozens of commercial buildings, and burned 6,000 acres of land. Colorado’s insurance commissioner has put the total property losses at more than $2 billion, making it the costliest wildfire in state history.

Boulder County District Attorney Michael Dougherty said during a news conference in June that criminal charges were not brought against Xcel because there was no evidence of worn materials, shoddy construction and substandard conditions in its power line.

Xcel CEO Bob Frenzel said the company strongly disagrees with the investigation’s conclusion that the power line likely contributed to the blaze. He said Xcel will vigorously defend itself in court against mounting lawsuits.

The company said it is aware of eight lawsuits representing at least 586 plaintiffs and expects further complaints, according to its latest quarterly financial filing. If Xcel is found liable for the Marshall Fire, the total damages could exceed the company’s insurance coverage of $500 million, according to the filing.

Days after Boulder County released its Marshall Fire findings, a jury in Oregon found that Berkshire Hathaway‘s PacifiCorp was to blame for four of the 2020 Labor Day wildfires and ordered the company to pay $90 million in damages to 17 homeowners.

PacifiCorp said the damages sought in the various lawsuits, complaints and demands filed in Oregon over the wildfires total more than $7 billion, according to the company’s latest financial filing. The utility has already incurred probable losses from the fires of more than $1 billion, according to the filing.

The Labor Day wildfires in Oregon killed nine people, destroyed more than 5,000 homes and burned 1.2 million acres of land in the most destructive multiple-fire event in the state’s history.

Though the official cause of the fires is still under investigation, homeowners in the class-action lawsuit said downed power lines operated by PacifiCorp triggered the fires. They accused the company of acting negligently by failing to shut the power off. PacifiCorp has said it will appeal the June jury verdict, which could take years.

The company said in its latest financial filing that government agencies have informed the company that they are contemplating actions in connection with some of the 2020 wildfires.

These catastrophes came years after the devastating 2018 Camp Fire in California that should have served as an urgent, tragic warning to the industry.

The Camp Fire killed 85 people, destroyed more than 18,000 buildings and burned over 153,000 acres of land. The town of Paradise, like Lahaina in the Maui fires, was almost completely destroyed by the inferno.

The Camp Fire was ignited by a power line that PG&E failed to maintain with components dating back to 1921. The company was indicted and ultimately pleaded guilty to 84 counts of involuntary manslaughter.

PG&E filed for bankruptcy protection in 2019 in the face of $30 billion in wildfire liability. The company reached a $13.5 billion settlement with victims and emerged from bankruptcy in 2020.

Aging power lines

The century-old infrastructure that led to the 2018 Camp Fire, though particularly egregious, is not an isolated problem. Most of the transmission and distribution lines in the U.S. have reached or surpassed their 50-year intended lifespan, according to the American Society of Civil Engineers.

And this aging infrastructure is running up against an accelerating number of disasters due to climate change, according to ASCE. Maui County has alleged Hawaiian Electric operated wood utility poles that were severely damaged by decay, putting them at increased risk of toppling during a high wind event.

And even if a utility perfectly maintains and operates its equipment, it is next to impossible to guarantee there will never be a spark with aboveground transmission and distribution infrastructure, von Meier said.

The smartest solution is to install the transmission lines, switchgear and transformers underground, she said. The problem is that this is expensive. It costs about 10 times as much to install electrical infrastructure underground compared with aboveground, von Meier said.

“To really reinforce the infrastructure, both to make it reliable in the face of extreme weather and to keep it from causing fires, is going to be very, very expensive,” von Meier said. The U.S. is facing an investment shortfall of $338 billion in electric infrastructure through to 2039, according to ASCE.

The Edison Electric Institute, the trade association that represents investor-owned electric companies, said the industry has invested $1 trillion over the past decade in upgrading and maintaining infrastructure and is on track to invest more than $167 billion in 2023.

“Substantial investments in adaptation, hardening, and resilience are being made to help mitigate risk,” said Scott Aaronson, EEI’s head of security and preparedness.

“Unfortunately, there is no such thing as zero risk, which is why we are working to drive down that risk and ensure we are prepared to respond safely and efficiently when incidents do occur,” Aaronson said.

Joseph Mitchell, a scientist who has served as an expert on wildfires for the California Public Utilities Commission, said electric companies in the Golden State are moving to install their lines below ground to mitigate the risk.

But Mitchell said insulating aboveground power lines with a protective covering is also an effective solution that is cheaper and can be rolled out more quickly. There is also technology coming to market that can de-energize power lines automatically when there’s a problem, he said.

Power shut-offs

The utilities all failed to shut the power off before these wildfires. Hawaiian Electric CEO Shelee Kimura said during a news conference earlier this month that cutting power would have jeopardized Lahaina’s water supply and people who rely on specialized medical equipment.

“The electricity powers the pumps that provide the water, and so that was also a critical need during that time,” Kimura said.

“There are choices that need to be made and all of those factors play into it,” Kimura said. “So every utility will look at that differently depending on the situation. “

Hawaiian Electric subsequently said downed power lines appear to have caused a morning brush fire in Lahaina, but the power was off when a second fire broke out that afternoon. The cause of the second fire is still under investigation.

Von Meier and Mitchell both said that a decision to shut off power is not an easy one. It comes with risks that can also potentially put lives in jeopardy, but Mitchell said it is the right decision when lines are going to be pushed to their limit during high winds in potential fire conditions.

“You’re talking about potential criminal liability here. The financial liability is going to be humungous for these fires,” said Mitchell, who founded a wildfire consulting firm called M-bar Technologies.

Von Meier said the risks of shutting power off underlines a deeper planning and resilience problem in U.S. infrastructure. Drinking water should not be in jeopardy if the grid goes out, she said, and people with specialized medical equipment should be provided with reliable solar-powered backup batteries.

“Nobody in an electric utility should be in a situation where their decision to shut the power off means that life-sustaining equipment will fail,” she said.

Kimura also said Hawaiian Electric had no program in place for a power shutdown. The utilities need to learn the lesson that clear guidelines need to be in place for when power should be cut, von Meier said.

“It’s sort of the same story every time — people don’t think it can happen there,” Mitchell said of wildfires ignited by power lines. “Everybody has to learn the hard way. Hopefully, this is the last time and people will come up with contingency plans. “