Legislative Update: Blackouts, Wildfires and Budgets

Edelstein Gilbert Robson & Smith

No one ever said being the Governor of California was easy, but things were looking pretty good for Governor Newsom when he took office in 2019.  His fellow Democrats held some of their largest majorities in the Legislature in history with well over 2/3 of the Senate and Assembly in their control.  Newsom also inherited a financially sound budget from Governor Brown who worked throughout his last eight years in office to increase revenue and decrease the state’s liabilities.  In short, Governor Newsom was well positioned to lead as he saw fit and use California’s strong financial situation and large Democratic majorities to push for a progressive agenda that stood in stark contrast to that of the President.

Much has changed in a short time.  While nothing will break the tight hold Democrats have on the Legislature, the state’s finances have been devastated by the economic crisis inflicted by COVID-19.  While Governor Newsom’s response to the pandemic has won him more national attention then ever before, it hasn’t all been positive.  California’s brief flirtation with lifting its shelter in place order has resulted in a rapid rise in infections and mortality.

The last seven days have turned Newsom’s already challenging Governorship into a waking nightmare for any public official.

Rolling Blackouts

California’s failed experiment in energy deregulation in the late 90’s created a volatile energy market for California.  Wholesale energy providers, such as Enron, created artificial shortages in California to drive up the cost of energy.  When these conditions led to three days of rolling black outs in 2001, the state had to come to the rescue and procure emergency energy supplies at a premium that would cost California ratepayers billions of dollars over the next two decades.  The blackouts were a major factor in the recall of then Governor Gray Davis in 2003.

For the first time since California’s 2001 energy crisis, the state experienced one hour rolling black outs on the 14th and 15th of August.  A number of factors contributed to the shortage in energy supplies.  The massive heat wave rolling across the US simultaneously increased demand for power in California while reducing the availability of electricity from other states.  Meanwhile, two power plants failed to supply power to the grid last week.  Some have also speculated that California’s increasing reliance on renewable energy leaves the state more vulnerable to energy shortages when the sun goes down and the wind stops blowing.

Finally, and most importantly for the Governor, the supply shortages could represent a regulatory failure.

Who to Point the Finger At

With the precedent of Governor Davis’s recall looming large, it is no shock that Governor Newsom responded quickly to the new crisis.  There are three major players who regulate the supply of power to California’s grid.  The California Independent System Operator (CalISO) is a public benefits corporation whose board is appointed by the Governor.  CalISO is tasked with managing the grid on a day to day basis.  Meanwhile, the California Energy Commission and California Public Utilities Commission forecast demand and regulate procurement of power by the state’s energy providers.  During his press conference on Monday, Governor Newsom stated that the blackouts were unacceptable, the relationship between the three entities would need to be reexamined to ensure they were communicating effectively, and called for an investigation into the failure to ensure adequate electricity supplies.

But while the Governor was delivering that message, CalISO’s President was levelling the blame squarely at the CPUC, stating that existing rules for backup procurement were broken and needed to be fixed and that they had been warned that energy imports were drying up.

At the end of the day, it doesn’t really matter for Governor Newsom.  Most Californians have never heard of CalISO, the CPUC, or the CEC.  They have heard of Governor Newsom, and they know they don’t want their power to go out.  Conservation efforts led in part from the Governor’s Office, loosening of environmental rules via executive order, and help from municipal utilities who were more prepared for the heat wave all staved off further black outs, at least for now.

Not the First, Not the Last

Last fall, millions of Californians had their power shut off by PG&E, which delivers power to much of Northern California, in an effort to avoid wildfires sparked by PG&E’s poorly maintained grid.  Some customers were without power for days at a time.  That crisis also hit the Governor like a ton of bricks, leading him to engage aggressively in PG&E’s bankruptcy proceeding.

While the onset of the pandemic quickly shifted attention away from this issue, it is worth remembering that while the recent blackouts have an entirely different cause, it is not the first time millions of Californians have lost power in the last twelve months.  It likely won’t be the last.  As we discuss further below, California is once again moving into its annual catastrophic wildfire seasons.  While utilities have yet to schedule any large scale “public safety power shut offs” they are likely just around the corner.  If they come, the Governor will have to grapple with them shortly after unexpected energy shortages knocked the grid out unexpectedly.

Wildfires

Devastating wildfires have unfortunately become the annual norm in California.  Sadly 2020 will be no exception.  The massive heat wave that helped switch off power last week ran head long into the remnants of a tropical storm last weekend.  The result was a dry lightning storm that led to nearly 11,000 lightning strikes over the weekend and sparked at least 367 fires across the state.

The three largest fires are burning hundreds of thousands of acres, threatening tens of thousands of structures, and have forced the evacuation of tens of thousands of people.  The massive threat of these fires led Governor Newsom to declare yet another state of emergency on Tuesday, opening the door to Federal aid and mutual assistance from other states.  Even so, CalFire is spread thin and the demand for support in fighting the fires exceeds supply.  Air quality across in Northern California is currently the worst in the world.

Meanwhile, housing evacuated residents is more challenging than ever given the need to maintain social distancing.  For instance, the City of Vacaville, which is in the shadow of the largest fire currently burning, opened twice as many evacuation centers as they normally would.  Nevertheless, these shelters filled up quickly and evacuated residents struggled to find a place to go.

Sadly, the peak of wildfire season, which typically runs from August to November, is just beginning.  Even once the current fires are under control, California could easily be facing a new fight in the coming months.

Conclusion

Governor Newsom is facing extreme challenges on all fronts and is likely stretched thin.  While he has been criticized for reopening California’s economy too early, this week’s crises are arguably not within his control.  The Governor cannot prevent fires and California’s rules on energy procurement predate his time in the Governor’s Office.  As noted above though, the voting public in and out of California likely won’t care about that kind of nuance.  It is frankly too early to judge the Governor’s response to these crises, but it will likely dictate his political future.  As challenging as these events are for the state, his response is an opportunity for the Governor to demonstrate his qualifications for higher office and possibly wrack up some successes that could stand in contrast to his slip ups on the pandemic.

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The California Alarm Association develops and manages programs to benefit members and to promote the growth of professionalism in the electronic security industry throughout the state of California. We exist to serve our members and associates by being the industry advocate and liaison with public safety agencies, government bureaus, and licensing, standards and regulation bodies.