Lights Out For California : The Indicator from Planet Money PG&E announced it was shutting off power to thousands of Californians to lessen the risk of wildfire. This is costing residents and businesses dearly and PG&E says it will likely be the new normal.

Lights Out For California

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Jason Davenport serves as the general manager of the North Coast Co-op. It's an organic grocery store in Arcata, Calif. - little town of around 18,000 people.

JASON DAVENPORT: We're located in the North Coast of California up in the redwoods. It's really beautiful, actually.

VANEK SMITH: Earlier this week, Jason was working away at the co-op, and he got an alert from the town blog that said the power was going to go out. PG&E, the California power company, was shutting off the power to the whole town to avoid fire risk. Some of PG&E's equipment is old and prone to throwing off sparks. In fact, PG&E has started more than a dozen major fires just like that in the last few years. It is dry and windy in a lot of California right now, so PG&E has been shutting off parts of the power grid to avoid starting fires. But that has meant millions of Californians losing power, sometimes for days, and also businesses like the North Coast Co-op.

How much warning did you have?

DAVENPORT: It's just a few hours.

VANEK SMITH: The power outage was going to mean that all of the meat and dairy and frozen food and prepared food in the whole grocery store was going to go bad, and Jason had three hours to figure something out.

What went through your head when you found out you were going to have to shut off the power?

DAVENPORT: We need to get to work.

VANEK SMITH: This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith. California blackouts - PG&E has said this is one of the major ways it is trying to avoid starting fires and keep itself solvent and in business. Today on the show, how did all of this happen? And what does this mean for California businesses and residents going forward? And of course, what Jason did in the three hours before the blackout in Arcata.

Severin Borenstein directs the Energy Institute at Berkeley's Haas School of Business. His power was just out for two days. And as he was stockpiling food and batteries and making preparations, there was this one thing that kept going through his head.

SEVERIN BORENSTEIN: This is ridiculous, and we shouldn't have gotten here.

VANEK SMITH: But they are here. Severin says one of the major reasons for this is that PG&E did not invest in updating equipment like it should have.

BORENSTEIN: It's - looks like PG&E simply dropped the ball and wasn't doing the maintenance they were supposed to be doing and wasn't doing serious grid monitoring.

VANEK SMITH: Severin says while other power companies across the country were investing in technology to monitor their power grids and immediately alert them when a power line was in distress and even shut off power to those lines, PG&E just didn't. It also didn't invest in keeping shrubs and trees trimmed along its power lines. And PG&E is especially vulnerable to starting fires, says Severin, because it covers so much land, so many square miles, much of them very sparsely populated.

BORENSTEIN: Which means they are covering a lot of rural areas where lines go through a lot of vegetation and where there are not people around to immediately spot the fires. And so there's just a lot more risk that they're going to start fires that can turn into major fires.

VANEK SMITH: At the same time as PG&E's equipment was aging and shrubs were growing over it, Severin says the climate was changing, creating a greater risk of fire. So a spark that probably would've just flamed out in seconds a decade ago might now cause thousands of acres to burn. In fact, that is what happened with the so-called Camp Fire last year. PG&E equipment was blamed for sparking the fire, which killed nearly a hundred people, burned more than 100,000 acres and was a huge chunk of the estimated $30 billion in liabilities that PG&E now owes.

PG&E's best solution for the moment is the blackouts, cutting off power to hundreds of thousands of people and businesses across California. And because the weather and wind can change so quickly, people often receive very little warning, like Jason Davenport, manager of the grocery store in Northern California who suddenly had three hours to save thousands of dollars' worth of produce and prepared food.

So the first thing Jason did - call every employee he had, even the off-duty workers, and asked them to come help. The second thing he did - bring in the trucks.

DAVENPORT: We sourced two refrigerated trailers. They're big, 53-foot trailers.

VANEK SMITH: Like a semi.

DAVENPORT: Yeah. And they run off of diesel fuel, and they have a refrigerated trailer that can keep the product at the appropriate temperature. And then it was the process of boxing up and moving all of that product by forklift and by hand into those trailers so that it could be saved. It's almost like a - it turns into a warehouse operation.

VANEK SMITH: Everything that couldn't be saved got a huge markdown - so 50% off of hot soup, frozen pizzas, sushi platters. Of course, all of this costs money - a lot of money - and the grocery store business is known for operating on very thin margins. Jason says the costs were pretty formidable, but all of that food going to waste would have been much worse.

DAVENPORT: If you're looking at it purely by the numbers, it makes sense to get the trailers because replacing all of that product would be far more expensive.

VANEK SMITH: And Jason says everybody at the store chipped in. His bakery staff even figured out that they could use a gas stove to boil water and make hot coffee.

DAVENPORT: Cup of coffee's real valuable when you don't have power. So being able to have things like that - and we could be like a community center for people to talk and sort of develop plans for.

VANEK SMITH: Oh, did people, like, drop by and hang out?

DAVENPORT: Oh, yeah. Yeah. We had a whole group of people that were, you know, sitting, doing just that - talking about the outage, having coffee.

VANEK SMITH: I mean, did the whole town shut down with the blackout?

DAVENPORT: Oh, my gosh. Yeah. We had people driving all the way up to Oregon, as far as the middle of the state, to purchase a generator.

VANEK SMITH: Wow. Well, I mean, I guess if your business is at stake or something like that, you know, yeah, you drive to Oregon.

DAVENPORT: Exactly. And beyond the business part of it is - there's - you know, we have a lot of retirees in our area, and they have things like oxygen tanks, refrigerated insulin. And then it's been cold at night. You know, it's been, like, 30, 40 degrees at night, so there's heating concerns, as well. And not everybody has a wood stove.

VANEK SMITH: Meanwhile, PG&E is telling everyone to expect more blackouts. That is its plan. And now a lot of people are speculating that PG&E won't survive this.

Severin Borenstein says he thinks the company could survive this. He points out that PG&E is still making money on a day-to-day basis. But he says the whole business model of running a utility in California has forever changed, especially given the state's ambitious environmental goals.

BORENSTEIN: There are new liabilities associated with the entire business that nobody has figured out how to pay for. And so we are going to have drastically higher costs. There's a question of how we're going to pay for those. And I think that there - this is going to be a very active debate because California is also trying to get - reduce greenhouse gases. And the main mechanism for that is electrification, is the idea that we're going to have...


BORENSTEIN: ...A green grid with wind and solar...

VANEK SMITH: Electric cars - yeah.

BORENSTEIN: We're going to have electric cars, electric space heating, electric water heating. But you're not going to do that if you have very high electricity prices. And we're - if we end up just loading all of these costs of grid maintenance, of compensation for people hurt in the fires and so forth into retail rates, what you're going to do is kill off the movement towards greater electrification. So California's in a real tough spot.

VANEK SMITH: There's a lot of talk now about having the government take over the power grid, and Severin that has its drawbacks, too. He says he hopes people will talk about solutions after California's fire season, when the panic is over and cooler minds can prevail.

Jason Davenport, meanwhile, is basically planning to do the same thing. He says the cost of renting refrigerated semis is OK for an emergency situation. They can handle it for now. But if this is the new normal, he says, he is going to need a long-term plan, especially if PG&E's announcement this week was right that California can expect a decade of this.

DAVENPORT: I can't imagine that - right? - like, 10 years. But we're going to bring in a electrician, an engineer. I'm just talking about ideas at this point.


DAVENPORT: We'll need to develop proposals, and we'll have to look at that in terms of our business and our capital expenses and what we can afford and not afford. So it's going to take some real effort to figure out, but we're going to have to do something because it's not sustainable to continue to do this all the time.

VANEK SMITH: And you said there's another one expected. Did you say - does - did I hear you right?

DAVENPORT: Yeah, you did. So we're going to be losing power again tonight at 9 p.m.

VANEK SMITH: Thank you so much for talking with me. I feel like I need to let you go. You have a lot to do.

DAVENPORT: (Laughter).

VANEK SMITH: This episode of THE INDICATOR was produced by Leena Sanzgiri. Our intern is Nadia Lewis. Our editor is Paddy Hirsch, and THE INDICATOR is a production of NPR.

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