No. of Recommendations: 2
The 2nd and 3rd derivatives of the damage are significant. The state is in serious financial jeopardy. A 4th derivative could be the California municipal bond market.
The punchline here is clear: Los Angeles, the state of California, and its top leaders are now engulfed in a crisis that should — repeat, should — result in a major political reckoning. As one lifelong Californian told me on Friday afternoon, the fires have exposed the rank incompetence of the state’s leadership, the corruption of its institutions, and the foolishness of its energy and climate policies.
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Asleep At The Switch
The Los Angeles Department of Water and Power aggressively touts sustainability, solar, EVs, hydrogen, and its pursuit of “100% clean power.” Did it ignore wildfire risk?
JAN 11
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A firefighter battling the Palisades Fire in Los Angeles on January 8. Credit: Apu Gomes, Getty Images.
The Los Angeles Department of Water and Power’s latest annual report is a 59-page paean to the gods of sustainability, solar energy, “green” hydrogen, decarbonization, diversity, equity, and, of course, the “clean energy transition.” On the first page, the report declares that LADWP is “creating a clean energy future...and doing so in a way that leads with equity.” The second paragraph on the first page claims the utility is “powered by equity.”
The report shows that LADWP is snuggling every “green” energy trope in the Sierra Club’s official Handbook Of Crummy Energy Policies.
It says LADWP, the largest municipal utility in the US, has “embraced electrification of our transportation fleet” and that some of “the latest and most modern EVs in the market have been purchased for use during our day-to-day operations.” It touts its efforts to expand solar projects, which are part of an effort to “ramp up our distributed energy resources equitably to support the transition to 100% clean power.”
It says LADWP is pushing for building electrification because it is “critical for meeting California’s ambitious decarbonization goals.” The report contains an entire page on the utility’s “clean energy progress.” Another full page is devoted to “green hydrogen pathways.” It says a “transition to green hydrogen from fossil fuel power generation is a key pillar of LADWP’s strategy to ensure our future power grid is clean, equitable, and reliable.”
The third page of the report has photos of the agency’s top leadership, including Greg Reed, who is “Senior Assistant General Manager — Diversity Equity and Inclusion.” In 2021, the utility created an Office of Diversity Equity and Inclusion to “help LADWP move forward in all areas of DEI.”
The report contains precisely one paragraph on wildfire mitigation.
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That paragraph, on page 13, adjacent to disqusitions on substation automation and transmission upgrades, explains that the state mandates the wildfire plan and “describes how we continually mitigate the threat of wildfires posed by electrical lines and equipment. Our plan includes preventative strategies and programs, such as system hardening through design and construction, vegetation management, operating protocols, and inspection and maintenance programs.”
LADWP may be a model for woke energy, EV inanity, and the DEI fad, but the utility, which serves four million Angelenos, may have ignored its vulnerability to wildfires and the potential for its power lines to cause them.
Power lines and arson are the two most likely causes of the deadly fires that are ravaging Los Angeles. And there’s a real possibility that the utility’s power lines may be to blame for some of the damage. Earlier this week, Katherine Blunt, a savvy writer at the Wall Street Journal, reported that LADWP “hasn’t implemented an increasingly used safety protocol intended to prevent its equipment from igniting blazes, a measure that every other big California power provider has in place.”
Further, as Blunt explains, “The Palisades Fire, the largest of the fires burning in the area, ignited in LADWP’s service territory, as did the Hurst Fire, a smaller blaze that originated in the San Fernando Valley near Sylmar.” The Palisades Fire has burned some 21,600 acres and is about 11% contained. The Hurst Fire has burned 800 acres and is 76% contained.
Source: California Municipal Utility Association
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Before going further, let me be clear: LADWP and other electric utilities in the region may not be responsible for the fires, which have destroyed about 10,000 structures. But power lines are a prime suspect.
Between 2016 and 2020, wildfires caused by electric utilities accounted for 19% of the acres burned in California. In 2018, the Camp Fire near the town of Paradise, California, that killed dozens of people was caused by electric lines owned by Pacific Gas & Electric. PG&E later set aside some $10.5 billion to cover claims from that fire. PG&E’s power lines have been implicated in several other major wildfires.
Power lines owned by Hawaiian Electric caused the deadly wildfire that swept across Maui in 2023. That fire, the deadliest in more than century, killed 102 people and led to numerous lawsuits against the utility, which is publicly traded under the ticker HE. It agreed to pay some $2 billion to settle the litigation. As Blunt notes, Hawaiian Electric “hadn’t developed protocols for proactive shut-offs before the fire.”
In 2024, the Smokehouse Creek Fire burned over one million acres in the Texas Panhandle. The fire, the largest in Texas history, was caused by power lines owned by Xcel Energy.
Here’s a screen grab from the LADWP’s annual report. LA Mayor Karen Bass is in the middle. Credit: LADWP
While LADWP says outside entities have evaluated its wildfire mitigation plan, economist Jonathan Lesser points out those audits haven’t been robust. In a piece in City Journal, Lesser noted that a 2022 report by the California State Auditor found that the state’s utilities had not done enough to prevent wildfires. That State Auditor report found the state’s Energy Safety Office had issued certifications to the three biggest utilities in the state “even though it identified serious deficiencies in the utilities’ mitigation plans.” It must be noted that the auditor’s report did not specifically look at the LADWP and its wildfire plans. That said, the State Auditor also concluded that the California Public Utility Commission “has not required safety culture assessments of utilities, which are reviews that emphasize appropriately prioritizing employee safety and that are responsive to risk factors, such as wildfires — pursuant to the state law that requires such assessments.”
The outside evaluation of LADWP’s wildfire mitigation plan, done by the engineering firm Dudek, is just 11 pages long, and the report appears to have been done solely to confirm that LADWP had checked the right boxes. It concludes that the utility has met “all the statutory requirements” required by the Public Utility Commission. In the recommendations section, Dudek concluded that, “No changes are necessary to LADWP’s” wildfire mitigation plan to “comply with PUC 8387(b)(2), and the WMP comprehensively describes the utility's wildfire prevention programs.”
Here’s another screen grab from the LADWP’s annual report. Credit: LADWP
There will be much more to write about this catastrophe. With the fires still raging, there has been a lot of finger-pointing, particularly regarding vegetation management and water supplies. And as I said earlier, LADWP’s power lines may not be to blame for igniting any of the fires.
But a few things are clear.
LADWP, the city, and the state, have been far too focused on EVs, DEI, and other politically correct postures, and in doing so, they neglected the danger of catastrophic fire. The city of Los Angeles was woefully unprepared. It hasn’t had enough water to fight the fires and the city’s fire department is, as Los Angeles Fire Chief Kirstin Crowley put it, “understaffed, underfunded and under-resourced.” This year, under Mayor Karen Bass, the fire department’s budget was cut by $17.5 million.
The numbers are dreadful. At least 11 people have been killed, and some 200,000 have been evacuated. Thousands of people have lost their homes and the state, which has been in the midst of a housing crisis for years, doesn’t have enough homes to accommodate them. That assures that the population exodus from California will continue. And as wealthier residents leave, the cost of maintaining the state’s vast infrastructure and bureaucracy will result in an even more significant tax burden on those who stay.
The fires will add fuel (pun intended) to California’s cost of living crisis. AccuWeather estimates damages from the fire will total a mind-boggling $135 to $150 billion. The Los Angeles fires are the most expensive blazes in US history, and the event will be among the most costly disasters ever to hit the US.
Two large insurance carriers have quit offering home insurance in the state. That means that property insurance rates in the state which were already high, will rise yet further, and that assumes homeowners will be able to get coverage. As the New York Post explained yesterday, the fires “are fueling an existential insurance crisis in California that raises questions how millions of homeowners will secure coverage against future disasters.”
The insurance crisis is yet another lousy outcome for California, which has the dubious distinction of having the highest poverty rate in the country. A recent analysis by the California Budget & Policy Center found that the poverty rate in the state jumped from 11% in 2021 to 18.9% in 2023. That means “7.3 million state residents lacked the resources to meet basic needs last year.” It continued, noting that poverty “remains disproportionately high” among Latino and Black Californians at 25% and 22.3%, respectively.
Expensive energy is the enemy of the poor. These fires ensure that electricity prices in the state, which are already among the highest in the US, will continue soaring. In doing so, power prices will continue punishing California’s low- and middle-income residents. An analysis published this week by the Legislative Analyst’s Office concluded that electricity prices in the state are roughly double the US average and that “significant and increasing wildfire‑related costs [and] the state’s ambitious greenhouse gas (GHG) reduction programs and policies,” are key drivers of the state’s electricity prices. It also found that wildfire-related costs are “likely to continue to be a driver of increases in electricity rates.”
In the aftermath of the fires, the state’s utilities will redouble their wildfire-related spending, and ratepayers will bear all those costs. Ratepayers will also be invoiced for the staggering cost of the mandates to decarbonize the state’s electric grid over the next two decades. How much will the pursuit of that scheme cost Californians? As I noted last March, it will cost at least $80 billion. The final tally could be double or triple that sum.
The punchline here is clear: Los Angeles, the state of California, and its top leaders are now engulfed in a crisis that should — repeat, should — result in a major political reckoning. As one lifelong Californian told me on Friday afternoon, the fires have exposed the rank incompetence of the state’s leadership, the corruption of its institutions, and the foolishness of its energy and climate policies.
One of the entities that should lead that reckoning is the LADWP.
Media Hit
I was recently on the Feudal Future podcast with my friends Joel Kotkin and Marshall Toplansky, who live in California. We recorded the episode before the fires. We discussed energy humanism, the incoming Trump administration, California’s deranged energy policies, nuclear energy, offshore wind, and the essentiality of affordable energy. It was a fun conversation. You can listen to it here.
