The long, sordid (ongoing) tale of California's biggest utility

In this episode, Wall Street Journal reporter Katherine Blunt discusses her new book, California Burning: The Fall of Pacific Gas & Electric — and What It Means for America's Power Grid, in which she details PG&E’s decades of setbacks and missteps.

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David Roberts

Reporter Katherine Blunt was still new to The Wall Street Journal when 2018’s devastating Camp Fire broke out in California and she was swept into the biggest story of her career. Alongside colleagues Russell Gold and Rebecca Smith, she wrote a series of pieces on the ongoing travails of Pacific Gas & Electric, or PG&E, the utility whose power lines had started at the Camp Fire.

The Journal's coverage was a finalist for the 2020 Pulitzer Prize, and Blunt has now expanded it into a new book: California Burning: The Fall of Pacific Gas & Electric — and What It Means for America's Power Grid. It is a rollicking tour through PG&E’s decades-long series of disasters and their roots in the early 20th century.

I am a longtime critic of utilities, but even I was stunned to see all of PG&E’s incompetence and malfeasance gathered together in one place, alongside its well-meaning but serially failed attempts to put things right. It’s a story of failure and redemption, except the redemption keeps being interrupted by more failure.

I couldn't put the book down, so I am eager to talk to Blunt about how the utility’s travails began, why is has struggled so mightily to take control of its fate, and what might come next for the electricity sector’s favorite punching bag.

So, without further ado, Katherine Blunt. Welcome to Volts. Thanks so much for coming.

Katherine Blunt

Thank you so much for having me.

David Roberts

This book, Katherine, is a bit of a mindblower. I mean, I probably, because of my job, followed this stuff as it was happening, closer than the average Joe or Jane, but it is still stunning to see it all put in one place. As far as I can tell, for the entirety of the 21st century, PG&E has been in one of three states: either a) causing some disaster that kills a bunch of people, b) dealing with the blowback and lawsuits that come as a result of the disaster that killed a bunch of people, or c) implementing an ultimately failed and useless attempt to mitigate the disasters that killed a bunch of people and prevent future disasters.

There has not been a period of just normal operation of PG&E for decades now. It's all its perpetual crisis. How how much of that did you appreciate going into this story? How much of that? I mean, it's just such a dumpster fire. I can't believe I wasn't more aware of it. And I can't believe, like, the public's not more aware of it. How aware were you going in?

Katherine Blunt

Yeah, it's totally true. These last 20 years have been just exceptionally bad for the company. I had some idea of this going into it because of my coverage at the "Journal" that, as you say, I had collaborated on with two close colleagues. And one of the final stories that we did together was a really big picture narrative that tried to take readers through the last 20 years and what that's meant for PG&E. But as I got more into the details, I, too, was really surprised at some things and how bad it was.

David Roberts

Well, let's go back into the recesses of history. One of the most sort of telling tales from the beginning is that the original merger of PG&E with Great Western, another utility. This is the merger that ended up sort of saddling PG&E with all these power lines, that it never really understood. And that, to me, is kind of like the original sin, like the seed of everything that came after us. To tell us a little bit about the story of those two utilities and how they ended up as one.

Katherine Blunt

There's a couple of ways to think about this. It is a really fascinating part of PG&E's history. So, as I'm sure at least some listeners know, PG&E is a very old company, more than 100 years old at this point. It's got roots dating back to the Gold Rush. It only ever had, in the early days, one real competitor, and that was Great Western Power. Both PG&E and Great Western were competing to build systems to serve San Francisco to support the population growth there. And around this time, you're beginning to see the solidification of the conventional wisdom that utilities should be these monopoly companies. Because, of course, this industry is very capital intensive. And the idea was you shouldn't have a bunch of companies building duplicative infrastructure. And you're beginning to see the regulator emerge to oversee all of this.

David Roberts

There's some wild quotes from that period where people are like, "nothing scares customers more than an outbreak of competition among you." It's just such a weird perspective based on our current way we talk about markets.

Katherine Blunt

Yeah, absolutely. There was a lot of kind of colorful stuff that I managed to dig up, like a lawyer for PG&E and a lawyer for Great Western, like, almost got into a fistfight at what was known as the Railroad Commission, which is now the California Public Utilities Commission. Pretty funny. So they competed for a while, and then they ultimately merged and it formed the big Northern California monopoly that we know today. And so there's a few consequences of this. So it really did give this company a lot of economic might, this merger, and it allowed it to exist as a pretty good company for most of the 20th century. It did a lot to invest in its system. It helped electrify different parts of the state. It supported economic growth. It was largely run by engineers.

And as we will discuss in depth, this really begins to fall apart in the 21st century. And quite literally, in that, one of Great Western's power lines, one of the earliest transmission lines that this company built, that PG&E ultimately inherited, failed and started the Camp Fire. The component of the line that broke was literally 100 years old. It was installed somewhere around 1920, and it hung there ever since.

David Roberts

Yeah, it's wild. Great Western built these lines, and then PG&E sort of inherited them in the merger and never really had good documentation of them, or, like, never really did particularly good monitoring of them. It's kind of a gimme for a utility to do well in the 20th century, since mostly what they were asked to do, during the 20th century, is build stuff. And they love building stuff, and that's how they make money. And now we reach the age of maintenance and everything falls apart.

So before we actually get into the specifics, I wanted to, this is a bit of an axe I have to grind, so I have to emphasize it up front, but I thought your book was just this exquisite extended illustration of a point about utilities that I've been hammering for over a decade now — which is that investor-owned utilities make money by building new stuff. They get a rate of return on investments in new stuff. They do not get a rate of return on maintenance, on spending money, on monitoring and maintaining existing infrastruct