California's PG&E Details Spending to Bury Electric Lines to Mitigate Wildfires

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--PG&E Corporation (NYSE:PCG) (San Francisco, California), parent of utility Pacific Gas and Electric Company (PG&E) (San Francisco, California), is planning a capital program of $53 billion for the 2022-2026 period, company executives told investors and analysts last month.

The capital expenditures (capex) will be spread across the parent company's electric and gas distribution business, its electric generation, electric transmission system, undergrounding electric distribution lines and other potential growth opportunities. By contrast, over the prior five-year period, PG&E's capital spending was $35 billion, company officials said on their February 10 earnings call.

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In its annual 10-K filing with the U.S. Securities and Exchange Commission (SEC), also made on February 10, PG&E provided the following annual range of potential capital spending for all units in its utility business over the next five years:

• 2022: $7.8 billion to $8.9 billion
• 2023: $7.9 billion to $10.4 billion
• 2024: $7.9 billion to $10.7 billion
• 2025: $8 billion to $11.3 billion
• 2026: $8.1 billion to $12 billion

Click here to view a chart showing the midpoint of PG&E's capital budget for its utility units over the 2022-2026 period.

A good bit of that planned spend, as much as $13.5 billion, will be invested in undergrounding about 3,600 miles of electric distribution line over the next five years, company officials said during the February 10 conference call.

PG&E officials estimated it would cost between $2.5 million and $3.75 million to underground each mile of electric distribution line over the next five years. In the early years, the higher per-mile cost was assumed, but by 2026 undergrounding costs would fall to about $2.5 million, as cost efficiencies and learning curve benefits were realized. So the estimated five-year price tag for undergrounding approximately 3,600 miles of electric distribution lines will be between $9 billion and $13.5 billion.

And that sum is only a down payment on the overall long-term cost to bury roughly 10,000 miles of electric distribution line. PG&E officials last year announced what they called a "moonshot" program to bury about 10,000 miles of distribution line in areas with a high risk of wildfires, at a cost of between $15 billion and $20 billion, though company officials conceded total costs could exceed $20 billion.

Undergrounding the lines in heavily wooded areas is expected to reduce the chance that utility equipment could spark wildfires, as has happened several times in recent years. For more on that undergrounding program, see July 26, 2021, article - PG&E Unveils 'Moonshot' Effort to Underground 10,000 Miles of Distribution Line to Reduce Wildfire Risk and November 8, 2021, article - Pacific Gas and Electric's Planned Capex Soars on Wildfire Prevention Measures.

Assuming the utility succeeds in burying 3,600 miles of electric distribution line over the next five years, that leaves another 6,400 miles of line to be buried after 2026. At an average per-mile cost of $2.5 million, that works out to an additional $16 billion in outlays. That number could be lower if the utility is able to capture greater-than-expected cost efficiencies in the post-2026 period. But the reverse also is true: If further cost efficiencies do not materialize after 2026, or if the costs for the 2022-2026 period are higher than expected, the ultimate cost would swell further.

Undergrounding distribution lines is only one aspect of the utility's annual wildfire mitigation plan, filed February 25 with the California Office of Energy Infrastructure Safety (Sacramento, California). The plan also includes:

• Expanding Enhanced Powerline Safety Settings: Piloted in 2021, the utility said, these new safety settings provide additional safeguards against fire ignitions by rapidly and automatically shutting off power when objects such as a tree or branch fall onto a powerline. These settings decreased CPUC-reportable ignitions on enabled circuits in high fire-risk areas by 80% during the pilot in 2021, compared to the prior three-year average. PG&E plans to expand this program across all 25,500 distribution line miles in high fire-risk areas, as well as select adjacent areas in proximity to high fire-risk areas.
• Enhanced Vegetation Management: Crews inspect and identify maintenance on distribution and transmission circuit miles in PG&E's service area including high fire-risk areas on a recurring cycle using various patrol types. Enhanced Vegetation Management (EVM) goes above and beyond regulatory requirements for distribution lines in high fire-risk areas by expanding minimum clearances, removing overhanging branches and assessing strike-potential trees in high fire-risk areas. Since the EVM program began in 2019, PG&E has completed more than 6,300 miles of EVM work. PG&E plans to continue these efforts in 2022 by performing 1,800 miles of EVM work.
• Improving Situational Awareness and Forecasting: The utility said it uses state-of-the-art weather forecasting, artificial intelligence and machine learning to help detect, prevent and respond to the risk of wildfires. For 2022, the utility said it plans to install 98 high-definition wildfire cameras, adding to the 502 installed since 2018.
• Improving Public Safety Power Shutoffs (PSPS): PG&E said it uses PSPS, which are extremely unpopular with its customers, as a last resort during extreme weather conditions to reduce the risk of catastrophic fire, while also minimizing the impact on customers. The utility said its meteorologists use cutting-edge weather models, using a network of advanced weather stations, to forecast risk on a granular basis and factoring in vegetation in proximity to overhead electrical lines.

A longer-term piece of PG&E's wildfire mitigation plan, in addition to undergrounding distribution lines, includes grid design and system hardening. That calls for installing stronger poles and covered lines, making at least four additional temporary distribution microgrids operationally ready, and operating two new remote grids. In 2022, PG&E plans to complete system hardening projects on 470 miles of distribution powerlines, including undergrounding. The company also will install additional automated devices that allow it to sectionalize the grid to reduce the customer impacts of PSPS.

None of these upgrades are free, or even inexpensive. So, unsurprisingly, the utility's plans were met with a hail of protests, as customers are expected to pay for most of the costs of the wildfire mitigation plan that are approved by regulators at the California Public Utilities Commission (CPUC). The CPUC is holding public hearings this month, and in the future will decide how much of these proposed costs it will pass along to customers in the form of increased retail electricity prices.

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