Addressing the Social Costs of De-Energizing Power Lines to Reduce Wildfire Risk

October 8, 2020

Derek Nong

Derek is an undergraduate in the Vagelos Integrated Program for Energy Research at the University of Pennsylvania, majoring in Electrical Engineering and Physics.

In order to minimize wildfire risk, California’s electric utilities will sometimes de-energize lines in high risk conditions. Called Public Safety Power Shutoffs (PSPS), electricity is preemptively cut to customers, thereby preventing the risk of electric equipment failure igniting a catastrophic wildfire. This drastic risk reduction measure is taken because if a wildfire were to occur as a result of their equipment, utilities would be held strictly liable for all damages caused by the wildfire, even if they were not negligent in their operations, due to the principle of inverse condemnation. With climate change exacerbating wildfire risk for the foreseeable future, PSPS events will continue to be a staple in the wildfire risk mitigation toolbox.

Last year, PSPS drew national attention as the three largest Californian utilities (Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric) de-energized power to hundreds of thousands of customers for multiple days throughout the September to December wildfire season. (See here and here for examples). While understood to be in the public interest by mitigating wildfire risk, the widespread severity (4.3 million total customer hours) and botched communications (75,000+ customers de-energized without prior notice) led to general frustration and even gunshots fired at utility line workers. Despite the public outrage, all three of those utilities planned to continue executing PSPS events in their 2020-2022 wildfire mitigation plans. Understanding the costs and benefits associated with PSPS events can help both utilities and the general public adapt to the increased wildfire risk environment.

The total costs of a PSPS event are not limited to the amount spent by the executing utility; they also encompass the societal harm that comes from losing electricity, which is more challenging to quantify. For residential customers, costs could come from replacing spoiled food, losing AC (particularly for vulnerable populations), emotional distress, etc. For commercial and industrial customers, the main cost comes from lost revenue and production, but also includes the costs of installing backup power. Hospitals may rely on backup generation, and municipal governments might have to coordinate responses without power. When choosing to de-energize, the utility is choosing to create a controlled “disaster” in lieu of risking a larger, uncontrollable line-sparked wildfire, for which they would be liable. These conflicting interests between individual customers, public safety, and fiscal solvency have forced utilities to make difficult choices beyond those typically expected for an electric company. This blog post will show how 1) addressing the large social cost of PSPS events can provide opportunities for utilities to improve community mitigation efforts, and 2) despite not being liable for the complete social costs, utilities are making investments to address them.

Direct Cost to the Utility

The first step of accounting for the cost of a PSPS event is looking at the investment spent by the utility. In their proposed budgets, the three largest utilities, serving 73% of Californian customers, expect to spend a combined $1.27 billion dollars over the next 3 years in order to better perform PSPS with less customers impacted. The majority of this money will be spent on infrastructure upgrades, which is independent of the number of PSPS events that actually occur. An example of this is increased circuit sectionalization, which would allow utilities to more granularly de-energize customers in high risk areas. Compared to the infrastructure investment, a relatively small amount of money is spent on a per-event basis, which depends on the number of events called. This per-event cost includes things such as sending notifications to customers, installing temporary generation, or setting up community resource centers (CRCs). When a PSPS event is forecasted, utilities rely on the year-round infrastructure upgrades to accurately predict and mitigate the impact to customers.

Broader Societal Cost

The societal cost of an interruption in electricity, referred to in academic literature as the Value of Lost Load, can be complex to calculate. One simple methodology is to use the price of electricity as a proxy for the economic cost of the lost load, although this will substantially underestimate the total social cost. Utilizing reported PSPS affected customer-hours, the utility average customer load, and price of electricity, the cost of the 2019 PSPS season for each of the 3 utilities can be calculated with this approach. An alternative methodology for estimating the value of electricity is dividing California’s GDP by the amount of electricity it consumed, giving the value of $15.6/kWh. This is a more commonly used method (see here and here), since it ties economic output to power consumption. The huge range of these 2 approaches can be seen in Table 1, where the estimated cost varies by orders of magnitude across the methods. This variability is also present in other more detailed methodologies for calculating the Value of Lost Load, such as contingent valuation or blackout case studies.

Table 1: Estimated Societal Cost of 2019 PSPS events

Utility Total Lost Load (MWh) Price of Electricity ($/MWh) Total Cost (000s) California GDP/MWh

($/MWh)

Total Cost (000s)
PG&E 144,040 $206.70 $29,773 $15,600 $2,247,035
SCE 40,296 $150.50 $6,064 $15,600 $628,628
SDG&E 1586 $233.90 $370 $15,600 $24,742

(Table 1 shows different methodologies of calculating the societal cost, or Value of Lost Load, from the 2019 PSPS season. Source: EIA, 2020-2022 Utility Wildfire Mitigation Plans)

Value of Lost Load studies (for example, here and here) have shown that the amount of advance notice before an outage has a significant impact on how costly a shutoff event is. This makes sense — people can plan around shutoffs better if given advance notice. This finding suggests that perhaps some of the negative public reaction could be averted through better warnings and outreach. Other factors which impact the Value of Lost Load include customer segment, shutoff timing, and shutoff duration, and are already being addressed through PSPS investments, such as to microgrid pilots and circuit segmentation.

Benefits of PSPS Events

Sizeable utility investments are being made to support PSPS events, but what about their risk reduction benefits? The risk reduction benefits of a range of wildfire mitigation measures are typically calculated through a series of wildfire ignition probability and wildfire consequence models that rely on historical ignition data, vegetation maps, housing prices, expert judgements, and other factors. These benefits are weighed against the monetary costs spent by the utility into a Risk Spend Efficiency (RSE) metric. The RSE metric works well to compare non-PSPS risk mitigation measures taken, but because many of the costs of PSPS events are external to the utility, the RSE value does not capture the full societal costs of PSPS events.

Nonetheless, utilities appear to be cognizant of these social costs and working to minimize the use of PSPS events as witnessed by utility investments in other risk mitigating measures that might reduce the use of de-energization. Looking only at the RSE, these other mitigation measures appear more expensive to the utility than PSPS, but utilities are still funding them. For example, Pacific Gas & Electric (PG&E) alone anticipates spending $2.6 billion on vegetation management, and $657 million on installing high wind speed resistant poles over the next 3 years. These investments will ultimately allow the grid to withstand harsher weather conditions without the risk of igniting a wildfire, and hence reduce the frequency and severity of PSPS events. Laws and regulation have, at least partially, internalized the broader societal costs of PSPS events into utility operations.

Future Considerations

On June 11th 2020, the California Public Utilities Commission (CPUC) approved Wildfire Safety Advisory Board (WSAB) recommendations on the 2020-2022 Wildfire Mitigation Plans, which noted the ineffectiveness of RSE to evaluate PSPS events. Among the recommendations for the 2021 Wildfire Mitigation Plans was to include the cost to customers when evaluating the risk reduction benefits of PSPS. This is an important first step to identifying the complete impact of PSPS events on both the customer and utility. Due to the huge range in potential valuations, the devil will be in the details of how exactly the cost to communities will be quantified. Value of Lost Load studies can provide a baseline foundation for utilities to begin evaluating and mitigating the cost of PSPS events.

Even if social impacts are not included in RSE calculations, they can dictate work prioritization. The majority of utility-side PSPS costs come from capital investments, like circuit sectionalization or enhanced weather monitoring, which requires prioritization of where to complete work first. Utilities have already identified critical facilities like hospitals or water treatment plants, which incur a higher cost from de-energization. It’s easy to understand why critical facilities should be prioritized, but the challenge comes when prioritizing between other types of load. Should sectionalization in commercial areas be prioritized over residential areas? Or poorer communities over wealthy ones? These are questions which the utility is already forced to answer — whether explicitly or implicitly, because work has to be sequentially planned. This issue should not be addressed by the utilities alone, because the effects are directly felt by the communities they served.

Providing clarity on work prioritization and the potential for PSPS events is a form of community engagement which can help strengthen ties and build trust. The WSAB recommendations noted: “State and local municipalities will be able to help determine the highest priority line sections to target for future PSPS avoidance”. Utility organized community education and municipal stakeholder meetings have only just begun, but they can empower local organizations by providing stability for an inherently uncertain event. Such work can be meshed with establishing clearer and more reliable methods of customer notification, all to help mitigate the effect of PSPS events. As much as utilities are focused on electricity’s delivery, PSPS events have now shown that they need to focus on its end use as well.

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