Maui Fire Lays Bare Utility Missteps Mirrored Across the Country

When flames ripped through the drought-parched town of Paradise in 2018, destroying homes and killing 85 in California’s deadliest-ever wildfire, it was a wake-up call to power companies across the country. Electric lines would ultimately be blamed for the blaze, and the state’s largest utility was driven into bankruptcy.

It’s clear that officials at Hawaiian Electric Industries Inc. were taking note. Almost exactly 12 months later, the company publicly vowed to fly drones to identify areas vulnerable to fire.

But then it took the utility roughly another three years — until the summer of 2022 — before it would finally submit a public action plan to address the threats. In it, the company cited the devastation in California and highlighted Lahaina, the historic seaside town that was burned to ash by this month’s blaze, as one of the priority areas for prevention and mitigation. The request remains pending with the regulator.

The Lahaina blaze killed more than 100 people, making it the deadliest US fire in more than a century. While investigations into the cause of the wildfire are still ongoing and it’s not clear if the blame lies with Hawaiian Electric, emerging details indicate that the state’s main utility was slow to respond to the rapidly increasing risks that were made worse by climate change.

This isn’t just a problem for Hawaii. Across the country, America’s power companies have been sluggish at a time when urgency is growing.

Risk Doubles

The number of people in the US exposed to wildfire risk has doubled in just two decades. But rather than taking decisive steps, utilities are often slow to react by taking their time filing for approvals to recover their costs, as was the case for Hawaiian Electric.

“What I see the utilities doing is they are asking for a repayment from regulators” to hedge an existential company risk, “instead of taking action,” said Michael Wara, a wildfire expert and director of the Climate and Energy Policy Program at Stanford University. “The risk of utility-caused wildfires has been increasing rapidly.”

In its funding request, Hawaiian Electric, which supplies roughly 95% of the state’s residents with power, proposed a nearly $190 million plan to fortify the grid from severe weather events, citing increasing risks from climate change. The proposal included about $6 million earmarked for wildfire prevention and mitigation in Maui.

The filing specifically cited the Paradise tragedy, known as the Camp Fire, and said: “The risk of a utility system causing a wildfire ignition is significant.” The entire five-year action plan to harden the grid against the threat of severe weather, including steps to “strengthen lines and deploy devices to help prevent and respond to wildfires,” would cost consumers less than $1 a month, the company estimated.

Responding to a request for comment, Hawaiian Electric didn’t address an inquiry over whether any of the wildfire mitigation work identified in its June 30, 2022, application with the Hawaii Public Utilities Commission had started. The company has said in filings it was doing preliminary engineering work on the plan before regulatory approval.

“Hawaiian Electric employs a wildfire mitigation and grid resilience program with a focus on vegetation management, grid hardening and pole replacement and routine line and equipment inspections,” the company said in an emailed statement, adding that since 2018 it has spent about $84 million on maintenance and vegetation management in Maui County.

Shares Tumble

Shares of Hawaiian Electric plunged 58% last week, the steepest decline in data going back to 1980, amid increasing investor concern that the utility could be held responsible for the fires that ravaged Maui.

The potential liabilities could reach almost $4 billion if the utility is deemed negligent, according to investment research firm Capstone LLC. Liabilities of that size would dwarf the company’s current market capitalization and exceed its existing debt load.

In a regulatory filing, Hawaiian Electric said that its goal isn’t to restructure, but to endure as a financially strong utility that Maui and the state needs.

Scientists warn that as the planet heats up, it will lead to longer and more active wildfire seasons. Utilities operating aging grids in parched lands, particularly in the US West, will have little room for error.

But the threat isn’t limited only to areas that have faced the risk of fire for decades. Climate change coupled with development and the spread of non-native plant species is making for increasingly rapid transformations across the globe. That will increase the vulnerability of places like Maui, where wildfire hasn’t been at the top of the risk list until more recently.

Traditionally, utilities, which are heavily regulated by the government, have been a plodding, cautious group that has mainly focused on reliably keeping the lights on while meeting energy policy mandates.

The business model for investor-owned utilities is based on a system that rewards state-approved new capital spending with profits, but considers the maintenance work needed to make sure power lines are in good condition and clear of trees and brush as an operating cost that can eat into earnings.

‘Highly-Regulated Monopoly’

“The industry is a essentially a highly-regulated monopoly business, and that doesn’t lend itself to a highly nimble culture,” said Paul Patterson, a utility analyst for Glenrock Associates.

Wildfires are growing in intensity and frequency, Those changes are happening far faster than even many scientists were predicting. And its not just utilities that been slow to respond, regulators and governments have also failed to keep up with the rapidly evolving conditions.

After San Diego Gas & Electric’s downed power lines sparked three major fires in 2007, California regulators initiated an effort in 2008 to map power lines to identify those strung through areas at high risk of fires — but it wasn’t completed until a decade later.

In 2021, a report by the county of Maui on fire prevention warned of increasing risk on the island, including threats to citizens, properties and sacred sites. It also said its current budgets were inadequate for an effective fire prevention and mitigation program.

All it takes is a spark to come off a line or other power equipment to cause the initial flame. Once vegetation dries out, it can easily ignite.

PG&E Corp. was driven into bankruptcy in 2019 after its poorly-maintained equipment failed during a series of windstorms that sparked some of the worst fires in state history, including the 2018 Camp Fire. The blazes came after a crippling drought in California that left more than 100 million trees dead and severely parched landscapes.

Southern California Edison’s equipment was also blamed for large wildfires in 2017 and 2018 that leveled more than 2,000 homes and structures and killed four people.

Grass Fires

The calamities forced both utilities to step up their efforts to harden their grids against fire risk. The companies are spending billions of dollars to trim vegetation away from their lines, install covered conductors, bury lines and set up fire weather monitoring systems. In addition, PG&E and Edison started to pro-actively shut off power lines in advance of high winds during dry conditions, a controversial practice that has angered customers but prevents fires.

The need for utilities to do more extends beyond California.

PacifiCorp, a utility owned by Warren Buffett’s Berkshire Hathaway Inc., lost a lawsuit this summer over a 2020 Oregon wildfire, where a jury found the company was grossly negligent for not cutting power during high, dry winds. It could face billions of dollars of claims.

Colorado utility Xcel Energy Inc. is also facing lawsuits that its equipment caused the most destructive fire in that state’s history that burned more than 1,000 homes in late 2021. A sheriff’s report found power lines were partly to blame for the conflagration. Xcel has called the report’s analyses “flawed” and conclusions “incorrect.”

There are echoes of the Colorado devastation in Maui’s tragedy. Both involved grass fires that spread quickly amid extremely strong winds.

“It’s mind boggling that the people who are holding the loaded revolver with the safety off aren’t learning that when there is a major wind blowing, that there is going to be power lines falling,” said Robert Julian, a partner at BakerHostetler who was the lead attorney for wildfire victims committee in the PG&E bankruptcy and is representing victims in the 2020 Oregon fires. “And that’s going to start fires.”

Photo: A destroyed neighborhood in Lahaina on Aug. 18. (Bloomberg)