WEBVTT 00:00:00.000 --> 00:00:01.840 You know, usually when we do these deep dives, 00:00:01.840 --> 00:00:04.639 we're looking at a tech giant or maybe a specific 00:00:04.639 --> 00:00:07.799 historical one. We analyze the strategy, the 00:00:07.799 --> 00:00:10.970 market, the fallout. Right. But today... Today, 00:00:11.050 --> 00:00:12.970 I feel like we're looking at a ghost story. A 00:00:12.970 --> 00:00:16.550 ghost story. That's an interesting way to frame 00:00:16.550 --> 00:00:19.050 a utility company. I mean, looking at the stack 00:00:19.050 --> 00:00:21.989 of sources you sent over, we have NTSB accident 00:00:21.989 --> 00:00:24.109 reports. We have bankruptcy court filings. We 00:00:24.109 --> 00:00:27.769 have these dusty archives from the 1850s. We 00:00:27.769 --> 00:00:29.769 have a lot. It feels less like we're analyzing 00:00:29.769 --> 00:00:31.929 a corporation and more like we're reading the 00:00:31.929 --> 00:00:34.649 biography of a monster. A monster that built 00:00:34.649 --> 00:00:37.390 the world we live in, sure, but one that keeps 00:00:37.390 --> 00:00:40.109 consuming the people it's supposed to serve. 00:00:40.520 --> 00:00:43.460 That is a dark way to start. But looking at the 00:00:43.460 --> 00:00:45.939 data, it's not an unfair characterization. We're 00:00:45.939 --> 00:00:48.640 talking about Pacific Gas and Electric, PG &E. 00:00:48.759 --> 00:00:51.079 The entity that powers California. The entity 00:00:51.079 --> 00:00:53.880 that is California in so many ways. You really 00:00:53.880 --> 00:00:56.200 can't tell the history of the Golden State from 00:00:56.200 --> 00:00:59.579 the gold rush to Silicon Valley AI data centers 00:00:59.579 --> 00:01:02.020 without telling the story of this one specific 00:01:02.020 --> 00:01:05.040 company. And it's such a story. It is. It's a 00:01:05.040 --> 00:01:08.599 story of engineering, genius, absolute monopoly 00:01:08.599 --> 00:01:13.299 power. and negligence on a scale that is genuinely 00:01:13.299 --> 00:01:15.900 hard to comprehend. And that's the mission today. 00:01:16.060 --> 00:01:18.980 We're going to unpack 121 years of history. We're 00:01:18.980 --> 00:01:21.159 going to try to figure out how a company that 00:01:21.159 --> 00:01:23.879 started with the motto, let there be light, ended 00:01:23.879 --> 00:01:26.900 up pleading guilty to 84 counts of involuntary 00:01:26.900 --> 00:01:29.159 manslaughter. It's a wild arc. We're going to 00:01:29.159 --> 00:01:33.239 cover the gas wars of the 1800s, the nuclear 00:01:33.239 --> 00:01:36.620 hubris of the Cold War, the poisoning of Hinckley. 00:01:36.799 --> 00:01:39.359 And the financial and physical fires that... 00:01:39.560 --> 00:01:41.400 are currently threatening to burn the whole state 00:01:41.400 --> 00:01:43.680 down. Yeah, that pretty much covers it. So let's 00:01:43.680 --> 00:01:45.340 get into it. And I want to start where the sources 00:01:45.340 --> 00:01:48.920 start. San Francisco, 1850. Okay, picture this. 00:01:49.459 --> 00:01:53.000 San Francisco in the early 1850s is. It's not 00:01:53.000 --> 00:01:55.379 the tech metropolis we know. It's a boomtown 00:01:55.379 --> 00:01:57.540 in the mud. Just exploded out of nothing because 00:01:57.540 --> 00:01:59.799 of the gold rush. Exactly. The population just 00:01:59.799 --> 00:02:01.700 mushroomed, but the infrastructure hadn't caught 00:02:01.700 --> 00:02:04.420 up at all. The sources describe it as literally... 00:02:04.840 --> 00:02:07.439 Dark. Pitch black. You have to remember, this 00:02:07.439 --> 00:02:09.520 is pre -electricity. There's no moon. You can't 00:02:09.520 --> 00:02:11.520 see your hand in front of your face. And that's 00:02:11.520 --> 00:02:14.300 not just an inconvenience. It's dangerous. It's 00:02:14.300 --> 00:02:17.039 incredibly dangerous. Crime is rampant. People 00:02:17.039 --> 00:02:19.639 are literally falling into holes in the boardwalks 00:02:19.639 --> 00:02:22.060 and drowning in the mud and into this darkness. 00:02:22.650 --> 00:02:25.250 Come the Donahue brothers. Peter, James, and 00:02:25.250 --> 00:02:27.889 Michael. These guys are classic industrial pioneers. 00:02:28.009 --> 00:02:30.189 They ran a foundry, a shipbuilding operation. 00:02:30.490 --> 00:02:33.270 They were iron men. And they looked at this muddy, 00:02:33.449 --> 00:02:36.370 dangerous city. And saw a massive opportunity. 00:02:36.729 --> 00:02:39.930 In 1852, James Donahue goes to the city council 00:02:39.930 --> 00:02:43.289 and says, I can fix the darkness. I can bring 00:02:43.289 --> 00:02:46.289 you brilliant gas. Brilliant gas. It sounds like 00:02:46.289 --> 00:02:49.400 a magic trick. It kind of was. We should probably 00:02:49.400 --> 00:02:51.500 explain what that actually means because it wasn't 00:02:51.500 --> 00:02:53.360 the natural gas we use today. Right. This is 00:02:53.360 --> 00:02:56.340 something else entirely. This was coal gasification. 00:02:56.520 --> 00:02:59.400 They would take coal, bake it in a retort, which 00:02:59.400 --> 00:03:01.539 is, you know, basically a sealed oven without 00:03:01.539 --> 00:03:05.039 oxygen until it released these volatile vapors. 00:03:05.099 --> 00:03:07.419 And that's what you burn. Almost. Then they have 00:03:07.419 --> 00:03:10.280 to scrub out the tar and sulfur mostly and pipe 00:03:10.280 --> 00:03:12.680 that flammable gas through the streets. It sounds 00:03:12.680 --> 00:03:16.159 incredibly dirty. Oh, it was filthy. It smelled 00:03:16.159 --> 00:03:20.259 terrible. The byproduct was toxic coal tar. But 00:03:20.259 --> 00:03:22.900 compared to a whale oil lamp. It was a miracle. 00:03:23.159 --> 00:03:26.340 It was a miracle. They incorporate on August 00:03:26.340 --> 00:03:30.120 31st, 1852, the San Francisco Gas Company. And 00:03:30.120 --> 00:03:32.159 I love that you flagged their corporate seal 00:03:32.159 --> 00:03:35.800 in the notes. Fiat Lux. Let there be light. It's 00:03:35.800 --> 00:03:39.639 very biblical. It feels like they weren't just 00:03:39.639 --> 00:03:41.840 selling a utility. They were selling civilization 00:03:41.840 --> 00:03:44.900 itself. They absolutely were. When they turned 00:03:44.900 --> 00:03:47.860 on the first streetlights on February 11th, 1854, 00:03:48.139 --> 00:03:51.340 it was a huge event. A gala. Right. A banquet 00:03:51.340 --> 00:03:53.759 at the Oriental Hotel. People were toasting the 00:03:53.759 --> 00:03:55.900 conquest of the night. It completely changed 00:03:55.900 --> 00:03:58.300 the social fabric of the city. Shops could stay 00:03:58.300 --> 00:03:59.860 open later. You could walk home without getting 00:03:59.860 --> 00:04:01.620 mugged. Or at least you could see the mugger 00:04:01.620 --> 00:04:03.199 coming. But here's the thing about conquering 00:04:03.199 --> 00:04:06.020 the night. It's profitable. Insanely profitable. 00:04:06.319 --> 00:04:08.159 And usually when something is that profitable, 00:04:08.379 --> 00:04:10.500 you get competition. Right. And this brings us 00:04:10.500 --> 00:04:12.360 to the first major insight from the history of 00:04:12.360 --> 00:04:15.599 PG &E. the inevitability of monopoly, because 00:04:15.599 --> 00:04:17.620 they did not have the market to themselves for 00:04:17.620 --> 00:04:22.120 very long. No. Capitalism hates a vacuum. You 00:04:22.120 --> 00:04:24.519 had other players enter the scene. The city gas 00:04:24.519 --> 00:04:26.899 company. Right. Back by the Bank of California, 00:04:27.079 --> 00:04:29.199 which was the biggest financial powerhouse in 00:04:29.199 --> 00:04:32.180 the West. And suddenly you had the gas wars. 00:04:32.300 --> 00:04:35.740 The gas wars of the 1870s. This wasn't just a 00:04:35.740 --> 00:04:37.899 polite business rivalry. I mean, you had these 00:04:37.899 --> 00:04:40.259 companies digging up the same streets, laying 00:04:40.259 --> 00:04:42.980 parallel pipes. That seems incredibly wasteful. 00:04:43.040 --> 00:04:46.000 It was. Totally inefficient. And it highlights 00:04:46.000 --> 00:04:48.459 a fundamental economic reality of utilities. 00:04:49.149 --> 00:04:51.629 It makes no sense to have three different gas 00:04:51.629 --> 00:04:53.970 pipes running to the same house. The capital 00:04:53.970 --> 00:04:57.050 costs must have been astronomical. Exactly. It's 00:04:57.050 --> 00:04:59.850 what economists call a natural monopoly. The 00:04:59.850 --> 00:05:01.750 infrastructure is just too expensive to duplicate. 00:05:02.110 --> 00:05:04.230 So what happened? Did one of them win? The same 00:05:04.230 --> 00:05:05.670 thing that always happens in utility history. 00:05:05.769 --> 00:05:09.689 They stopped fighting and they merged. In 1873, 00:05:09.850 --> 00:05:12.430 they combined to form the San Francisco Gaslight 00:05:12.430 --> 00:05:15.199 Company. So that's the DNA of PG &E right there. 00:05:15.579 --> 00:05:17.279 Consolidation. It's the core of the business 00:05:17.279 --> 00:05:19.879 model. Whenever competition rises, you either 00:05:19.879 --> 00:05:22.180 buy it or you merge with it. Rinse and repeat. 00:05:22.480 --> 00:05:25.720 But then a new threat appears on the horizon. 00:05:25.860 --> 00:05:29.660 And this one isn't another gas company. No, it's 00:05:29.660 --> 00:05:33.319 the light bulb. 1879. Exactly. And this is a 00:05:33.319 --> 00:05:35.199 fascinating nugget I found in their commissioned 00:05:35.199 --> 00:05:38.620 history. San Francisco actually had the first 00:05:38.620 --> 00:05:41.259 central generating station for electric customers 00:05:41.259 --> 00:05:43.920 in the entire United States. Wait, really? Before 00:05:43.920 --> 00:05:47.040 New York? I always associate Edison and the Pearl 00:05:47.040 --> 00:05:48.779 Street station with the beginning of the grid. 00:05:48.980 --> 00:05:51.480 San Francisco beat them to it, technically. It 00:05:51.480 --> 00:05:53.560 was the California Electric Light Company. They 00:05:53.560 --> 00:05:55.660 were selling arc lighting, which is this incredibly 00:05:55.660 --> 00:05:58.379 bright, kind of harsh light to businesses. Yeah, 00:05:58.379 --> 00:06:00.319 and the gas guys. They were terrifying. I can 00:06:00.319 --> 00:06:02.259 imagine. It's like Blockbuster watching Netflix 00:06:02.259 --> 00:06:05.199 launch. Precisely. They looked at this wire and 00:06:05.199 --> 00:06:08.240 realized, if we don't own this, it will bury 00:06:08.240 --> 00:06:11.680 us. So more mergers. More mergers. The gas companies 00:06:11.680 --> 00:06:15.339 started buying the electric companies. But, and 00:06:15.339 --> 00:06:17.060 this is the crucial pivot point in the story, 00:06:17.279 --> 00:06:20.459 the real power, the real juice wasn't coming 00:06:20.459 --> 00:06:22.060 from the city. It was coming from the mountains. 00:06:22.379 --> 00:06:26.439 Yes. This is where the Pacific part of PG &E 00:06:26.439 --> 00:06:29.579 really comes in. Up in the Sierra Nevada mountains, 00:06:29.740 --> 00:06:32.120 you had these guys like John Martin and Eugene 00:06:32.120 --> 00:06:34.389 DeSabla. These two sound like characters out 00:06:34.389 --> 00:06:36.790 of a Western movie. They essentially were. They 00:06:36.790 --> 00:06:39.290 were building hydroelectric plants. But not for 00:06:39.290 --> 00:06:41.649 cities, initially. For the gold mines. Right. 00:06:41.910 --> 00:06:44.910 Mines need massive amounts of energy to run stamp 00:06:44.910 --> 00:06:47.670 mills and pumps. But as the mines started to 00:06:47.670 --> 00:06:50.689 play out, or as the hydro capacity exceeded what 00:06:50.689 --> 00:06:53.810 the mines needed, Martin and DeSable had a realization. 00:06:54.209 --> 00:06:56.230 We have all this power up here in the mountains, 00:06:56.310 --> 00:06:58.189 and all the people are down there in the city. 00:06:58.410 --> 00:07:01.490 Exactly. But there was a huge problem. Distance. 00:07:01.850 --> 00:07:04.449 Distance. You couldn't transmit electricity that 00:07:04.449 --> 00:07:07.430 far back then. The physics just didn't work. 00:07:08.350 --> 00:07:10.949 The voltage would drop to zero due to resistance 00:07:10.949 --> 00:07:13.370 before it got anywhere near the bay. But they 00:07:13.370 --> 00:07:15.610 figured it out. They took a massive gamble on 00:07:15.610 --> 00:07:18.069 high -voltage transmission. They built a 140 00:07:18.069 --> 00:07:21.170 -mile line from the Colgate powerhouse all the 00:07:21.170 --> 00:07:24.209 way to Oakland. 140 miles. At the time, engineers 00:07:24.209 --> 00:07:25.810 said it was impossible. It couldn't be done. 00:07:26.050 --> 00:07:29.920 But it worked. It worked. And suddenly, the entire 00:07:29.920 --> 00:07:33.180 economic model of power generation shifted. How 00:07:33.180 --> 00:07:35.279 so? Well, the city companies were burning coal 00:07:35.279 --> 00:07:37.939 to make steam, to spin turbines to make electricity. 00:07:38.339 --> 00:07:40.560 That's expensive. You have to buy the coal, ship 00:07:40.560 --> 00:07:43.100 it in. Whereas Martin and DiSablo were using... 00:07:43.100 --> 00:07:45.480 Falling water, which is free once you've built 00:07:45.480 --> 00:07:47.620 a dam in the powerhouse. So the cheap mountain 00:07:47.620 --> 00:07:50.720 power wins. It wins big. The marginal cost of 00:07:50.720 --> 00:07:54.509 hydro is near zero. So in 1905, Martin and DeSable's 00:07:54.509 --> 00:07:57.149 outfit merges with the San Francisco gas giants. 00:07:57.290 --> 00:08:00.230 And that's the birth. And on October 10th, 1905, 00:08:00.550 --> 00:08:03.050 the Pacific Gas and Electric Company is officially 00:08:03.050 --> 00:08:06.970 born. 1905. So pause here for a second. They've 00:08:06.970 --> 00:08:09.189 successfully consolidated everything. They control 00:08:09.189 --> 00:08:11.129 the gas. They control the city's electricity. 00:08:11.329 --> 00:08:12.970 They control the cheap hydro from the mountains. 00:08:13.230 --> 00:08:16.410 They are the undisputed kings of California energy. 00:08:16.589 --> 00:08:18.170 They're sitting on top of the world. And then 00:08:18.170 --> 00:08:22.079 six months later. The world ends. April 18th, 00:08:22.079 --> 00:08:26.379 1906. 5 .12 a .m. The great earthquake. It's 00:08:26.379 --> 00:08:28.120 hard to overstate the violence of this event. 00:08:28.920 --> 00:08:33.000 The ground didn't just shake, it liquefied. In 00:08:33.000 --> 00:08:35.600 the city, the gas mains, those iron pipes we 00:08:35.600 --> 00:08:37.820 talked about earlier, they just snapped like 00:08:37.820 --> 00:08:40.759 twigs. And when you snap a gas main in a city 00:08:40.759 --> 00:08:43.720 made of wood. You get an inferno. Yeah. The earthquake 00:08:43.720 --> 00:08:46.139 did the damage, but the fire did the destroying. 00:08:46.779 --> 00:08:50.169 PG and infrastructure was decimated. Their headquarters 00:08:50.169 --> 00:08:53.110 on Post Street, gone. All the records burned. 00:08:53.289 --> 00:08:56.110 The substations, rubble. I was reading the account 00:08:56.110 --> 00:08:58.169 of the employees. They were literally trying 00:08:58.169 --> 00:09:00.750 to fight fires with their bare hands to save 00:09:00.750 --> 00:09:03.149 the generation stations. But the water mains 00:09:03.149 --> 00:09:05.409 were broken, too. It was a complete apocalypse. 00:09:05.549 --> 00:09:07.950 It's amazing the company survived it all. But, 00:09:07.950 --> 00:09:09.710 and this is the key insight from this part of 00:09:09.710 --> 00:09:13.370 the story. This disaster actually cemented PG 00:09:13.370 --> 00:09:15.590 &E's monopoly forever. How does an apocalypse 00:09:15.590 --> 00:09:18.149 help a business? That sounds completely counterintuitive. 00:09:18.309 --> 00:09:19.889 Because of where their assets were. Remember 00:09:19.889 --> 00:09:21.929 the merger? They had just bought all those hydro 00:09:21.929 --> 00:09:23.470 plants up in the Sierras. And the earthquake 00:09:23.470 --> 00:09:26.169 didn't hit the Sierras. Not at all. So the city 00:09:26.169 --> 00:09:28.789 was destroyed, but their main power source was 00:09:28.789 --> 00:09:32.250 fine. Ah. So there's smaller competitors in the 00:09:32.250 --> 00:09:35.129 city. They were completely wiped out. Physically 00:09:35.129 --> 00:09:37.500 and financially. They had no assets left, no 00:09:37.500 --> 00:09:39.980 way to make money. PG &E still had generating 00:09:39.980 --> 00:09:42.580 capacity. They still had revenue coming from 00:09:42.580 --> 00:09:44.539 other parts of the state. They were the only 00:09:44.539 --> 00:09:46.940 entity with the capital and the surviving infrastructure 00:09:46.940 --> 00:09:49.580 to actually turn the lights back on. Survival 00:09:49.580 --> 00:09:51.379 of the biggest. It was the ultimate stress test. 00:09:51.960 --> 00:09:54.320 And it proved that a centralized, integrated 00:09:54.320 --> 00:09:57.740 regional grid was more resilient than a bunch 00:09:57.740 --> 00:10:00.480 of disconnected local plants. It gave them the 00:10:00.480 --> 00:10:02.960 moral and political license to expand even further. 00:10:03.100 --> 00:10:05.700 And expand, they did. The period from, what, 00:10:05.799 --> 00:10:09.820 1910 to 1930 reads like a game of Monopoly where 00:10:09.820 --> 00:10:13.149 one player just buys every single... property 00:10:13.149 --> 00:10:15.350 on the board. It was a massive buying spree. 00:10:15.509 --> 00:10:17.610 They bought up the water rights, the old mining 00:10:17.610 --> 00:10:19.750 ditches, the small town electric companies in 00:10:19.750 --> 00:10:21.509 the Central Valley, and they started building 00:10:21.509 --> 00:10:24.029 big infrastructure. This is the era of the super 00:10:24.029 --> 00:10:26.210 inch. The super inch. Sounds like a weapon from 00:10:26.210 --> 00:10:28.309 a sci -fi novel. It was a weapon of commerce 00:10:28.309 --> 00:10:31.500 for sure. Yeah. By the late 1920s. San Francisco 00:10:31.500 --> 00:10:33.419 was running out of capacity for manufactured 00:10:33.419 --> 00:10:36.539 gas, but they found these massive natural gas 00:10:36.539 --> 00:10:39.580 fields down in Kettleman Hills and even further 00:10:39.580 --> 00:10:42.120 in Texas. In the distance problem. How do you 00:10:42.120 --> 00:10:44.120 get the gas all the way to the Bay Area? You 00:10:44.120 --> 00:10:47.179 build a 34 -inch diameter pipeline. Yeah. At 00:10:47.179 --> 00:10:50.039 the time, 1930, it was the largest high -pressure 00:10:50.039 --> 00:10:53.019 gas transmission line in the world. They trenched 00:10:53.019 --> 00:10:56.179 it through mountains, under rivers. It was a 00:10:56.179 --> 00:10:59.720 true engineering marvel. And this sets the culture, 00:10:59.860 --> 00:11:01.879 doesn't it? The sources keep coming back to this 00:11:01.879 --> 00:11:04.759 engineer's mindset. We can build anything. We 00:11:04.759 --> 00:11:07.240 can conquer any geography. That is the command 00:11:07.240 --> 00:11:09.740 and control philosophy. Nature is something to 00:11:09.740 --> 00:11:12.240 be tamed. If there's a river, damn it. If there's 00:11:12.240 --> 00:11:14.340 a mountain, tunnel through it. If there's a distance, 00:11:14.480 --> 00:11:16.799 you span it with wire. And for 50 years, it worked 00:11:16.799 --> 00:11:18.879 brilliantly. It made California the economic 00:11:18.879 --> 00:11:20.740 powerhouse it is today. There's no question about 00:11:20.740 --> 00:11:24.759 that. But that philosophy assumes that nature 00:11:24.759 --> 00:11:27.649 is static. It assumes the ground won't move, 00:11:27.769 --> 00:11:30.870 the climate won't change, and that the people 00:11:30.870 --> 00:11:33.549 won't fight back. And as we move into the post 00:11:33.549 --> 00:11:36.669 -war era, all three of those assumptions start 00:11:36.669 --> 00:11:38.990 to crumble. They really do. Let's talk about 00:11:38.990 --> 00:11:41.570 the atomic age. Because PG &E wasn't content 00:11:41.570 --> 00:11:44.250 with just gas and hydro. They wanted to split 00:11:44.250 --> 00:11:46.629 the atom. Everyone did in the 50s. It was the 00:11:46.629 --> 00:11:49.090 new frontier. Power too cheap to meter. That 00:11:49.090 --> 00:11:52.269 was the slogan. And PG &E, true to form, wanted 00:11:52.269 --> 00:11:55.600 to be first. Of course. In 1957, they brought 00:11:55.600 --> 00:11:58.460 the Vecitos Nuclear Center online. It was the 00:11:58.460 --> 00:12:01.820 first privately funded atomic power plant in 00:12:01.820 --> 00:12:04.559 the United States. They were riding high, but 00:12:04.559 --> 00:12:07.159 then they tried to build at Bodega Bay. A beautiful 00:12:07.159 --> 00:12:09.830 fishing village. Right on the San Andreas Fault. 00:12:09.950 --> 00:12:12.490 Wait, literally on the fault? Like, uncomfortably 00:12:12.490 --> 00:12:15.070 close. And this is where they hit the first real 00:12:15.070 --> 00:12:18.049 wall of the modern era, the environmental movement. 00:12:18.190 --> 00:12:20.889 This wasn't just NMBYs, not in my backyard, right? 00:12:20.990 --> 00:12:23.169 This was something new. It was the birth of organized 00:12:23.169 --> 00:12:25.730 environmentalism, the Sierra Club, local activists. 00:12:26.049 --> 00:12:29.470 They fought PG &E to a standstill. And for the 00:12:29.470 --> 00:12:32.940 first time, PG &E had to back down. They abandoned 00:12:32.940 --> 00:12:34.980 the Bodega Bay project. That must have been a 00:12:34.980 --> 00:12:37.100 massive blow to their ego. They weren't used 00:12:37.100 --> 00:12:39.139 to hearing the word no. So they moved down the 00:12:39.139 --> 00:12:41.940 coast to Diablo Canyon. And walked right into 00:12:41.940 --> 00:12:44.639 an even bigger buzzsaw. Yeah. Construction started 00:12:44.639 --> 00:12:48.200 in 1968. It didn't fully open until the mid -80s. 00:12:48.240 --> 00:12:50.519 Why the huge delay? Because after they'd already 00:12:50.519 --> 00:12:52.440 started building, they found another earthquake 00:12:52.440 --> 00:12:55.700 fault right offshore. The Hosgree fault. You 00:12:55.700 --> 00:12:57.720 are kidding me. They started building a nuclear 00:12:57.720 --> 00:13:00.080 plant and then found the fault line. It was a 00:13:00.080 --> 00:13:03.950 geological surprise. A big one. And it led to 00:13:03.950 --> 00:13:07.029 massive retrofits, billions in cost overruns 00:13:07.029 --> 00:13:09.750 and the largest anti -nuclear protests in American 00:13:09.750 --> 00:13:13.409 history. The sources mentioned 1900 arrests in 00:13:13.409 --> 00:13:16.590 a single two week period in 1981. Think about 00:13:16.590 --> 00:13:21.179 the optics of that. In 1906, PG &E is the hero 00:13:21.179 --> 00:13:24.080 rebuilding the city from the ashes. In 1981, 00:13:24.519 --> 00:13:26.879 they're the monolith arresting grandmothers who 00:13:26.879 --> 00:13:29.139 are terrified of a meltdown. The public trust 00:13:29.139 --> 00:13:31.419 had just evaporated. Completely. And while everyone 00:13:31.419 --> 00:13:33.440 was looking at the nuclear plants, staring at 00:13:33.440 --> 00:13:36.059 these giant cooling towers, something much more 00:13:36.059 --> 00:13:38.120 insidious was happening in the desert. Something 00:13:38.120 --> 00:13:41.000 you couldn't see. Hinkley. Hinkley. I think most 00:13:41.000 --> 00:13:42.600 people know the name because of Julia Roberts. 00:13:42.779 --> 00:13:45.080 The movie Erin Brockovich. It's a great movie. 00:13:46.279 --> 00:13:48.879 But the reality is so much grimmer than what 00:13:48.879 --> 00:13:51.179 you see on screen. Walk us through the science 00:13:51.179 --> 00:13:53.879 here. Because the movie focuses on the legal 00:13:53.879 --> 00:13:55.799 drama, but I want to understand the mechanics. 00:13:56.159 --> 00:14:00.000 What exactly did they do? Okay. So PG &E has 00:14:00.000 --> 00:14:03.299 these massive gas pipelines, like the Super Inch. 00:14:04.039 --> 00:14:06.340 To keep the gas moving, you have to compress 00:14:06.340 --> 00:14:08.539 it at regular intervals. Right, at compressor 00:14:08.539 --> 00:14:11.159 stations. And compressing gas creates a ton of 00:14:11.159 --> 00:14:13.299 heat. So they have these huge engines that need 00:14:13.299 --> 00:14:16.059 to be cooled. Like a radiator in a car. Exactly. 00:14:16.460 --> 00:14:19.659 And just like a radiator, you use water in cooling 00:14:19.659 --> 00:14:23.799 towers. But water causes rust corrosion. So to 00:14:23.799 --> 00:14:25.700 keep the machinery from corroding, they added 00:14:25.700 --> 00:14:28.220 a corrosion inhibitor to the water. Texavalent 00:14:28.220 --> 00:14:30.679 chromium. Chromium -6. It's incredibly effective 00:14:30.679 --> 00:14:33.480 at stopping rust. It's also a potent carcinogen. 00:14:33.659 --> 00:14:35.779 And what did they do with this contaminated water 00:14:35.779 --> 00:14:38.360 after it cycled through the towers? For 14 years, 00:14:38.519 --> 00:14:42.419 from 1952 to 1966, they took this cooling water. 00:14:42.730 --> 00:14:45.090 loaded with chromium -6, and just discharged 00:14:45.090 --> 00:14:47.610 it into unlined ponds. Unlined, meaning it just 00:14:47.610 --> 00:14:49.289 goes straight into the dirt. Straight into the 00:14:49.289 --> 00:14:51.669 dirt and then down into the aquifer, the groundwater. 00:14:52.070 --> 00:14:54.950 How much are we talking about? Roughly 370 million 00:14:54.950 --> 00:14:57.350 gallons of it. And the people of Hinkley, they 00:14:57.350 --> 00:14:59.470 were all on well water. They were drinking it, 00:14:59.529 --> 00:15:00.830 they were bathing their kids in it, they were 00:15:00.830 --> 00:15:03.129 filling their swimming pools with it. And this 00:15:03.129 --> 00:15:04.970 is where the chemistry gets really insidious. 00:15:05.149 --> 00:15:08.350 What do you mean? Well, chromium -6 is structurally 00:15:08.350 --> 00:15:11.409 very similar to sulfate. Why does that matter? 00:15:11.769 --> 00:15:15.090 Because human cells have active transport channels 00:15:15.090 --> 00:15:18.169 specifically designed to pull sulfates inside 00:15:18.169 --> 00:15:20.870 the cell. Yeah. We need sulfates for various 00:15:20.870 --> 00:15:24.029 functions. Okay. Chromium 6 hijacks that pathway. 00:15:24.370 --> 00:15:26.929 It tricks the cell into letting it in. And once 00:15:26.929 --> 00:15:29.149 it's inside, it reacts. It turns into a different 00:15:29.149 --> 00:15:32.230 form, chromium 3. And in that chemical process, 00:15:32.509 --> 00:15:35.789 it shreds the DNA. It's a Trojan horse on a molecular 00:15:35.789 --> 00:15:38.710 level. That is absolutely terrifying. And PG 00:15:38.710 --> 00:15:41.870 knew it was dangerous. The internal memos suggest 00:15:41.870 --> 00:15:44.850 they knew it was toxic. But the cover -up is 00:15:44.850 --> 00:15:47.309 what really damns them in the sources. They didn't 00:15:47.309 --> 00:15:49.429 report the contamination to the regional water 00:15:49.429 --> 00:15:51.730 board for years. And when they finally did... 00:15:51.730 --> 00:15:53.990 They launched this PR campaign to tell the locals 00:15:53.990 --> 00:15:55.889 that chromium -6 was actually good for them. 00:15:55.990 --> 00:15:58.570 Good for them? How do you even begin to argue 00:15:58.570 --> 00:16:01.029 that? They compared it to the chromium you find 00:16:01.029 --> 00:16:04.629 in multivitamins, which is chromium -3. A totally 00:16:04.629 --> 00:16:07.870 different, benign thing. It was purposeful scientific 00:16:07.870 --> 00:16:10.570 gaslighting. Which leads to the lawsuit, the 00:16:10.570 --> 00:16:13.850 $333 million settlement. Which at the time was 00:16:13.850 --> 00:16:16.029 the largest direct action settlement in U .S. 00:16:16.029 --> 00:16:18.789 history. But the money didn't run the town back. 00:16:19.129 --> 00:16:21.649 It's a ghost town now. It really is. I looked 00:16:21.649 --> 00:16:24.330 at the recent satellite imagery. It's just empty 00:16:24.330 --> 00:16:26.809 grids where houses and farms used to be. It feels 00:16:26.809 --> 00:16:28.610 like this is the turning point in the whole story. 00:16:29.070 --> 00:16:34.210 Before Hinckley, PG &E was a builder. After Hinckley, 00:16:34.350 --> 00:16:36.610 they were a defendant. It changed the adversarial 00:16:36.610 --> 00:16:38.990 relationship forever. But right as they were 00:16:38.990 --> 00:16:41.110 trying to write the check for Hinckley, the 2000s 00:16:41.110 --> 00:16:44.009 hit. And the financial floor just fell out from 00:16:44.009 --> 00:16:45.870 a... The energy crisis. I remember the rolling 00:16:45.870 --> 00:16:48.330 blackouts. My power went out all the time. The 00:16:48.330 --> 00:16:51.610 2001 crisis is a perfect example of a Frankenstein 00:16:51.610 --> 00:16:54.590 regulatory system. California decided to deregulate 00:16:54.590 --> 00:16:57.789 the market. Sort of. Sort of? Seems to be doing 00:16:57.789 --> 00:16:59.940 a lot of heavy lifting in that sentence. It is. 00:17:00.100 --> 00:17:02.840 They forced PG &E to sell off their gas power 00:17:02.840 --> 00:17:05.059 plants, the things that actually make the electricity. 00:17:05.559 --> 00:17:09.279 So PG &E became just a wires company for a lot 00:17:09.279 --> 00:17:11.759 of its supply. They had to buy power from the 00:17:11.759 --> 00:17:14.599 open market. OK, so they buy low, sell high. 00:17:14.819 --> 00:17:18.039 No, that's the trap. They had to buy at market 00:17:18.039 --> 00:17:21.579 price, which fluctuates wildly. But the state 00:17:21.579 --> 00:17:23.720 law said they could only sell to you and me at 00:17:23.720 --> 00:17:26.480 a fixed price. Oh. I see the problem immediately. 00:17:26.720 --> 00:17:28.940 If the market price goes above the fixed price. 00:17:29.059 --> 00:17:30.740 They lose money on every single light switch 00:17:30.740 --> 00:17:33.359 that gets flipped. And then you had Enron. The 00:17:33.359 --> 00:17:35.819 smartest guys in the room. Enron and other traders 00:17:35.819 --> 00:17:38.099 realized they could game this broken system. 00:17:38.509 --> 00:17:41.170 They engaged in these schemes with names like 00:17:41.170 --> 00:17:43.849 Fat Boy and Death Star. What were they doing? 00:17:44.069 --> 00:17:45.970 They would purposefully congest the transmission 00:17:45.970 --> 00:17:48.869 lines or take power plants offline to create 00:17:48.869 --> 00:17:51.190 artificial shortages. Supply goes down, price 00:17:51.190 --> 00:17:53.349 goes up, basic economics. Except they took it 00:17:53.349 --> 00:17:55.549 to an extreme. The price of wholesale electricity 00:17:55.549 --> 00:17:59.109 went from about $45 per megawatt hour to over 00:17:59.109 --> 00:18:01.910 $1 ,400. And PG &E couldn't raise its rates to 00:18:01.910 --> 00:18:04.210 cover that. They were legally frozen. They were 00:18:04.210 --> 00:18:06.069 bleeding billions of dollars a month. They were 00:18:06.069 --> 00:18:09.750 completely insolvent. So in April 2001, the mighty 00:18:09.750 --> 00:18:12.009 monopoly filed for Chapter 11. Bankruptcy number 00:18:12.009 --> 00:18:14.410 one. The state eventually had to step in. It 00:18:14.410 --> 00:18:16.349 cost taxpayers and ratepayers something like 00:18:16.349 --> 00:18:19.710 $45 billion to clean up the mess. But here's 00:18:19.710 --> 00:18:23.450 the key takeaway. When PGE emerged from bankruptcy 00:18:23.450 --> 00:18:27.089 in 2004, they were a different company. How so? 00:18:27.450 --> 00:18:29.609 They were leaner. They were desperate to cut 00:18:29.609 --> 00:18:32.009 costs to pay back their creditors. And when a 00:18:32.009 --> 00:18:34.450 utility is desperate to cut costs, what gets 00:18:34.450 --> 00:18:38.049 cut first? Maintenance, inspections, record keeping, 00:18:38.250 --> 00:18:40.589 all the boring, unglamorous stuff that keeps 00:18:40.589 --> 00:18:43.170 people safe. Which brings us to a quiet afternoon 00:18:43.170 --> 00:18:46.569 in San Bruno, September 9, 2010. This is one 00:18:46.569 --> 00:18:48.509 of those moments that divides California history. 00:18:48.690 --> 00:18:51.009 There's before San Bruno and after San Bruno. 00:18:51.170 --> 00:18:53.109 Set the scene for us. It was a residential neighborhood. 00:18:53.690 --> 00:18:55.609 Crestmoor Drive. People were coming home from 00:18:55.609 --> 00:18:57.869 work. Kids were playing. People making dinner. 00:18:58.009 --> 00:19:01.809 And under the street ran Line 132, a 30 -inch 00:19:01.809 --> 00:19:03.930 natural gas transmission pipeline. Installed 00:19:03.930 --> 00:19:07.970 in 1956. Right. And at 6 .11 p .m., it ruptured. 00:19:08.329 --> 00:19:11.410 But it didn't just crack or leak. It exploded 00:19:11.410 --> 00:19:14.250 with such force that it registered as a magnitude 00:19:14.250 --> 00:19:17.569 1 .1 earthquake. Wow. It launched a 28 -foot 00:19:17.569 --> 00:19:20.009 section of pipe weighing 3 ,000 pounds into the 00:19:20.009 --> 00:19:22.880 air. It landed 100 feet away. That is horrific. 00:19:23.220 --> 00:19:26.119 3 ,000 pounds of steel flying through a neighborhood. 00:19:26.380 --> 00:19:29.440 The crater it left was 72 feet long. Eight people 00:19:29.440 --> 00:19:32.420 died. 38 homes were completely destroyed. And 00:19:32.420 --> 00:19:35.259 the fire burned for hours because PG &E couldn't 00:19:35.259 --> 00:19:37.160 find the manual shut -off valves in their own 00:19:37.160 --> 00:19:39.500 system. And the investigation. This is where 00:19:39.500 --> 00:19:42.119 the negligence part of our story really cements 00:19:42.119 --> 00:19:44.420 itself. It wasn't an accident, was it? The NTSB 00:19:44.420 --> 00:19:47.839 report is just. It's scathing. It found that 00:19:47.839 --> 00:19:50.240 the section of pipe that failed had defective 00:19:50.240 --> 00:19:52.599 welds. It didn't even meet the standards of 1956 00:19:52.599 --> 00:19:54.380 when it was first put in the ground. So it was 00:19:54.380 --> 00:19:56.759 a time bomb from day one. Essentially. But the 00:19:56.759 --> 00:19:59.339 real scandal was the records. PG &E didn't know 00:19:59.339 --> 00:20:01.539 the pipe was defective. They didn't even know 00:20:01.539 --> 00:20:03.339 what kind of pipe was in the ground. Their internal 00:20:03.339 --> 00:20:06.440 database listed that section as seamless pipe, 00:20:06.640 --> 00:20:09.420 which is very strong and modern. In reality, 00:20:09.460 --> 00:20:11.579 it was pieces of scrap pipe with a shoddy well 00:20:11.579 --> 00:20:13.740 down the side. So they were operating a high 00:20:13.740 --> 00:20:16.420 pressure line based on a complete fantasy of 00:20:16.420 --> 00:20:19.160 what was actually underground. Exactly. They 00:20:19.160 --> 00:20:21.619 had cut funding for inspections. They had prioritized 00:20:21.619 --> 00:20:23.779 financial performance over a culture of safety. 00:20:24.220 --> 00:20:27.059 The NTSB chairman called it a dismal history 00:20:27.059 --> 00:20:29.849 of oversight. And they were charged criminally 00:20:29.849 --> 00:20:32.130 for this. Yes. They were convicted of multiple 00:20:32.130 --> 00:20:35.950 felonies and put on criminal probation. A federal 00:20:35.950 --> 00:20:38.650 judge appointed a monitor to watch their every 00:20:38.650 --> 00:20:42.170 move. A utility company on probation. That feels... 00:20:42.480 --> 00:20:45.200 That feels significant. It is. But as bad as 00:20:45.200 --> 00:20:47.579 San Bruno was, it was still a localized disaster. 00:20:47.920 --> 00:20:50.180 It was one neighborhood. What was coming next 00:20:50.180 --> 00:20:52.640 was regional. It was statewide. The wildfire. 00:20:52.779 --> 00:20:55.140 The wildfire era. This is where climate change 00:20:55.140 --> 00:20:57.220 collides with that aging infrastructure we talked 00:20:57.220 --> 00:20:59.539 about. All those deferred maintenance decisions. 00:20:59.940 --> 00:21:02.019 It seems like it started slow and then suddenly 00:21:02.019 --> 00:21:06.460 happened all at once. It did. 2015, the Butte 00:21:06.460 --> 00:21:11.339 fire. A tree hits a power line. 2017, the North 00:21:11.339 --> 00:21:14.960 Bay fires. 13 separate fires confirmed to be 00:21:14.960 --> 00:21:18.980 caused by PG &E equipment. But 2018? 2018 changed 00:21:18.980 --> 00:21:21.519 everything. The Camp Fire? November 8, 2018. 00:21:22.000 --> 00:21:25.019 The deadliest and most destructive wildfire in 00:21:25.019 --> 00:21:27.779 California history. It virtually wiped the town 00:21:27.779 --> 00:21:31.799 of Paradise off the map. 85 people died. 18 ,000 00:21:31.799 --> 00:21:34.430 structures destroyed. And the cause, I remember 00:21:34.430 --> 00:21:36.410 hearing it was something small. It was a C -hook. 00:21:36.450 --> 00:21:38.710 Explain that. What is a C -hook? It's a small 00:21:38.710 --> 00:21:41.230 piece of cast iron hardware on a giant transmission 00:21:41.230 --> 00:21:43.049 tower. It basically looks like the letter C, 00:21:43.150 --> 00:21:45.369 and it holds the insulator string that holds 00:21:45.369 --> 00:21:47.710 the wire. Okay. The specific hook that failed 00:21:47.710 --> 00:21:50.599 was purchased and installed in. Recorded. 1921. 00:21:50.839 --> 00:21:52.759 It was nearly 100 years old. It had been hanging 00:21:52.759 --> 00:21:54.640 there, swinging in the wind, grinding against 00:21:54.640 --> 00:21:56.819 a tower arm for 97 years. It just wore through. 00:21:56.940 --> 00:21:58.960 It broke. The high voltage line fell against 00:21:58.960 --> 00:22:00.980 the tower. It sparked. And because the vegetation 00:22:00.980 --> 00:22:03.839 was bone dry from years of drought, Paradise 00:22:03.839 --> 00:22:06.079 burned. A hundred year old hook. It goes right 00:22:06.079 --> 00:22:08.640 back to that build it big era. They built it 00:22:08.640 --> 00:22:11.140 and then they just left it there. They deferred 00:22:11.140 --> 00:22:14.880 maintenance. They focused on profits. They missed 00:22:14.880 --> 00:22:17.700 the wear patterns during inspections. And PG 00:22:17.700 --> 00:22:21.269 &E. admitted guilt? They pleaded guilty to 84 00:22:21.269 --> 00:22:24.990 counts of involuntary manslaughter, one for each 00:22:24.990 --> 00:22:26.990 person who died in the fire where they could 00:22:26.990 --> 00:22:28.990 identify a cause of death. I just want to pause 00:22:28.990 --> 00:22:31.809 on that again because it is so shocking. A publicly 00:22:31.809 --> 00:22:34.630 traded corporation pleaded guilty to killing 00:22:34.630 --> 00:22:38.549 84 people. It is completely unprecedented. But 00:22:38.549 --> 00:22:40.950 financially, the Camp Fire triggered something 00:22:40.950 --> 00:22:44.190 even bigger than the criminal charges. It triggered 00:22:44.509 --> 00:22:46.950 Inverse condemnation. OK, we need to unpack this 00:22:46.950 --> 00:22:48.549 term because I'm guessing the listener isn't 00:22:48.549 --> 00:22:51.170 a lawyer. What is inverse condemnation? It's 00:22:51.170 --> 00:22:53.589 a legal doctrine that's pretty unique to California 00:22:53.589 --> 00:22:57.049 and it's derived from the Constitution. You know 00:22:57.049 --> 00:22:58.589 how the government can take your property for 00:22:58.589 --> 00:23:00.609 a highway, but they have to pay you for it. Right. 00:23:00.670 --> 00:23:03.789 That's eminent domain. Or condemnation. Inverse 00:23:03.789 --> 00:23:05.950 condemnation is when the government takes or 00:23:05.950 --> 00:23:08.789 damages your property without asking first. In 00:23:08.789 --> 00:23:11.289 California, courts have ruled that utilities 00:23:11.289 --> 00:23:14.009 like PG &E are acting as agents of the state. 00:23:14.210 --> 00:23:16.609 Okay. So if their equipment starts a fire that 00:23:16.609 --> 00:23:18.769 burns down your house, they have effectively 00:23:18.769 --> 00:23:20.930 taken your property and they have to pay for 00:23:20.930 --> 00:23:22.769 it. Okay. But what if it wasn't really their 00:23:22.769 --> 00:23:25.269 fault? What if a tree branch flew a mile in a 00:23:25.269 --> 00:23:27.309 hurricane and hit the line? What if it was an 00:23:27.309 --> 00:23:30.140 act of God? It doesn't matter. And that is the 00:23:30.140 --> 00:23:32.960 absolute kicker. It's strict liability. Yeah. 00:23:33.200 --> 00:23:36.000 Even if PG &E followed every single safety rule 00:23:36.000 --> 00:23:38.920 perfectly, if their equipment ignited the fire, 00:23:39.079 --> 00:23:42.559 they are liable for 100 % of the damages. Wow. 00:23:42.740 --> 00:23:44.759 So they are essentially the insurance company 00:23:44.759 --> 00:23:47.460 for the entire state's fire risk. Precisely. 00:23:47.519 --> 00:23:50.039 And in the era of climate change, that risk has 00:23:50.039 --> 00:23:53.980 become uninsurable. Facing $30 billion in liabilities 00:23:53.980 --> 00:23:56.920 from the Camp Fire and other fires. PG &E completely 00:23:56.920 --> 00:23:59.740 collapsed. Bankruptcy number two, January 2019. 00:24:00.200 --> 00:24:03.539 And this bankruptcy was even messier and more 00:24:03.539 --> 00:24:06.619 complex than the first one. Because now you had 00:24:06.619 --> 00:24:09.339 tens of thousands of victims, people who lost 00:24:09.339 --> 00:24:11.740 their homes, their businesses, their family members, 00:24:11.940 --> 00:24:14.400 fighting against Wall Street hedge funds for 00:24:14.400 --> 00:24:16.599 the scraps of the company. And the settlement 00:24:16.599 --> 00:24:19.400 they reached. This is the most dystopian part 00:24:19.400 --> 00:24:21.740 of the entire story to me. It is a true paradox. 00:24:22.400 --> 00:24:26.390 They agreed on a 13 .5. billion -dollar settlement 00:24:26.390 --> 00:24:30.569 for the fire victims. But PG &E didn't have that 00:24:30.569 --> 00:24:32.769 much cash. So how did they pay them? They paid 00:24:32.769 --> 00:24:35.390 about half of it in PG &E stock. So the victims 00:24:35.390 --> 00:24:37.289 of the fire became the owners of the company 00:24:37.289 --> 00:24:40.029 that started the fire. They now own about 22 00:24:40.029 --> 00:24:42.670 % of PG &E. That creates a terrible, terrible 00:24:42.670 --> 00:24:44.630 incentive structure, doesn't it? It's completely 00:24:44.630 --> 00:24:47.130 perverse. If you're a victim, you need your payout 00:24:47.130 --> 00:24:49.869 to rebuild your life. For your stock to be worth 00:24:49.869 --> 00:24:52.829 anything, PG &E has to be profitable. So you 00:24:52.829 --> 00:24:54.269 find yourself in this position where you might 00:24:54.269 --> 00:24:56.450 be rooting for the company to raise rates or 00:24:56.450 --> 00:24:59.289 cut costs just so the stock price goes up enough 00:24:59.289 --> 00:25:01.150 for you to get your money back. It turns the 00:25:01.150 --> 00:25:03.789 victims into, in a strange way, accomplices. 00:25:04.069 --> 00:25:06.509 It ties their fate directly to the fate of the 00:25:06.509 --> 00:25:08.809 monster that destroyed their lives. So we're 00:25:08.809 --> 00:25:10.869 in the modern era now, post -bankruptcy number 00:25:10.869 --> 00:25:13.230 two. They're trying to prevent the next paradise. 00:25:13.569 --> 00:25:16.029 And one of their main tools is something that 00:25:16.029 --> 00:25:20.289 drives everyone in California crazy. PSPS. Public 00:25:20.289 --> 00:25:22.829 safety power shutoffs. Turning the power off 00:25:22.829 --> 00:25:25.769 before the wind blows. It's a brute force solution. 00:25:25.990 --> 00:25:28.890 It really is. They basically realized they couldn't 00:25:28.890 --> 00:25:31.150 trust the 100 -year -old hooks. They couldn't 00:25:31.150 --> 00:25:34.089 inspect every inch of their massive grid in time. 00:25:34.329 --> 00:25:37.769 So the only way to be 100 % sure a line doesn't 00:25:37.769 --> 00:25:40.839 start a fire is to de -energize it. But the impact 00:25:40.839 --> 00:25:43.700 of that. It's massive. Yeah. In 2019, they shut 00:25:43.700 --> 00:25:45.839 off power to millions of people for days at a 00:25:45.839 --> 00:25:48.779 time. Schools closed. Businesses lost inventory. 00:25:49.099 --> 00:25:51.640 People who rely on medical devices were terrified. 00:25:51.900 --> 00:25:53.799 And they completely botched the execution, right? 00:25:53.900 --> 00:25:55.859 Oh, completely. Their website crashed because 00:25:55.859 --> 00:25:57.559 everyone tried to check the maps at once. The 00:25:57.559 --> 00:25:59.460 maps were inaccurate. They hadn't coordinated 00:25:59.460 --> 00:26:01.940 with local emergency services. It was chaos. 00:26:02.460 --> 00:26:05.779 The state fined them over $100 million just for 00:26:05.779 --> 00:26:08.559 how badly they communicated it. It feels like 00:26:08.559 --> 00:26:11.009 they're trapped. If they leave the power on and 00:26:11.009 --> 00:26:13.029 a fire starts, they go to prison and go bankrupt. 00:26:13.349 --> 00:26:16.049 If they turn the power off, the state screams 00:26:16.049 --> 00:26:18.829 at them and the public hates them. That is the 00:26:18.829 --> 00:26:21.549 corner they are painted into. Which brings us 00:26:21.549 --> 00:26:24.990 to the only real permanent solution. The gold 00:26:24.990 --> 00:26:27.930 standard for safety. Undergrounding. Burying 00:26:27.930 --> 00:26:30.250 the lines. If the wire is five feet under the 00:26:30.250 --> 00:26:32.890 dirt, a tree can't fall on it. The wind can't 00:26:32.890 --> 00:26:35.829 blow it into dry grass. Problem solved. So why 00:26:35.829 --> 00:26:37.710 haven't they done it already? It seems obvious. 00:26:38.130 --> 00:26:40.190 Money. How much money are we talking about? Okay, 00:26:40.210 --> 00:26:43.150 let's do the math. In 2021, they announced a 00:26:43.150 --> 00:26:46.009 plan to bury 10 ,000 miles of distribution lines 00:26:46.009 --> 00:26:49.210 in high -fire risk areas. 10 ,000 miles? That 00:26:49.210 --> 00:26:50.990 is a lot of digging. It's roughly the distance 00:26:50.990 --> 00:26:53.549 from San Francisco to London and back. The cost 00:26:53.549 --> 00:26:55.750 estimates vary, but it's generally cited at around 00:26:55.750 --> 00:27:00.529 $3 to $4 million per mile. So, $40 billion. Give 00:27:00.529 --> 00:27:03.349 or take. Now, PG &E claims they can get the cost 00:27:03.349 --> 00:27:05.890 down to closer to $2 million a mile through economies 00:27:05.890 --> 00:27:08.609 of scale. But even at $20 billion, that is a 00:27:08.609 --> 00:27:10.890 staggering amount of capital. And here's the 00:27:10.890 --> 00:27:13.910 question. Who pays for it? The ratepayers, us. 00:27:14.170 --> 00:27:16.950 Exactly. And PG &E rates are already some of 00:27:16.950 --> 00:27:18.509 the highest in the nation. They're about 80 % 00:27:18.509 --> 00:27:20.930 higher than the national average. People are 00:27:20.930 --> 00:27:22.630 already struggling to pay their power bills. 00:27:22.789 --> 00:27:25.369 So you have this fundamental tension. How much 00:27:25.369 --> 00:27:27.869 safety can we actually afford? And it seems like 00:27:27.869 --> 00:27:29.950 the government is realizing the ratepayers can't 00:27:29.950 --> 00:27:31.970 handle it alone. I saw in the notes that the 00:27:31.970 --> 00:27:34.250 Department of Energy just stepped in. Yes, just 00:27:34.250 --> 00:27:39.589 recently, in December 2024, a $15 billion federal 00:27:39.589 --> 00:27:42.339 loan. That sounds like a bailout, doesn't it? 00:27:42.420 --> 00:27:45.079 Well, they call it a low -interest loan to upgrade 00:27:45.079 --> 00:27:47.480 the grid and support renewables. But let's be 00:27:47.480 --> 00:27:50.720 real. It's a lifeline. It's the federal government 00:27:50.720 --> 00:27:53.920 admitting that PG &E is too big to fail. Yes, 00:27:53.980 --> 00:27:57.420 it is. It serves 16 million people. The fifth 00:27:57.420 --> 00:28:00.519 largest economy in the world, California, cannot 00:28:00.519 --> 00:28:02.759 function without it. So Uncle Sam is stepping 00:28:02.759 --> 00:28:04.900 in to backstop the risk. And amidst all this, 00:28:04.940 --> 00:28:07.119 they're trying to rebrand. They moved their headquarters. 00:28:07.720 --> 00:28:11.029 Yep. They left a historic complex in San Francisco, 00:28:11.250 --> 00:28:13.509 the one right near where the 1906 quake hit, 00:28:13.609 --> 00:28:15.730 and moved to a fancy new building in Oakland. 00:28:16.529 --> 00:28:19.910 It's all symbolic. We're leaving the old PG &E 00:28:19.910 --> 00:28:22.269 behind. But can you really leave it behind when 00:28:22.269 --> 00:28:24.529 the culture might be the problem? We have to 00:28:24.529 --> 00:28:26.609 talk about executive pay because that always 00:28:26.609 --> 00:28:30.569 riles people up. Patty Pop, the CEO. In 2021, 00:28:30.930 --> 00:28:33.630 her total direct compensation was valued at over 00:28:33.630 --> 00:28:39.559 $50 million. $50 million! While the company is 00:28:39.559 --> 00:28:42.200 on federal probation, while wildfire victims 00:28:42.200 --> 00:28:44.759 are waiting for stock checks, how do they possibly 00:28:44.759 --> 00:28:48.039 justify that? The corporate argument is, this 00:28:48.039 --> 00:28:50.529 is the hardest job in America. You are running 00:28:50.529 --> 00:28:52.450 a company that literally kills people if you 00:28:52.450 --> 00:28:54.730 mess up. You're managing wildfires, bankruptcy, 00:28:55.069 --> 00:28:57.589 political rage. To get a top tier executive to 00:28:57.589 --> 00:29:00.130 even touch this job, you have to pay a massive 00:29:00.130 --> 00:29:02.190 premium. And the counter argument. The counter 00:29:02.190 --> 00:29:04.809 argument is you're profiting from a state sanctioned 00:29:04.809 --> 00:29:06.789 monopoly that pleaded guilty to manslaughter. 00:29:06.970 --> 00:29:09.130 Public service should not come with a 50 million 00:29:09.130 --> 00:29:11.410 dollar payday. Both sides are just screaming 00:29:11.410 --> 00:29:13.230 past each other. They're also betting on tech. 00:29:13.390 --> 00:29:15.970 It's not just shovels and undergrounding. No, 00:29:16.029 --> 00:29:18.150 they're leaning really hard into AI and machine 00:29:18.150 --> 00:29:20.410 learning. They're using satellite data, weather 00:29:20.410 --> 00:29:23.049 models, everything they can to predict exactly 00:29:23.049 --> 00:29:26.490 where a fire might start. So the idea is, instead 00:29:26.490 --> 00:29:29.009 of shutting off power to a whole county, maybe 00:29:29.009 --> 00:29:30.970 we can just shut off this one specific valley 00:29:30.970 --> 00:29:33.549 for two hours. Surgical shutoffs, that's the 00:29:33.549 --> 00:29:36.759 dream. It's a race, really. Technology versus 00:29:36.759 --> 00:29:39.279 climate change. So we've traced this incredible 00:29:39.279 --> 00:29:42.220 arc from the Donahue brothers and their coal 00:29:42.220 --> 00:29:46.900 gas in the mud to a $15 billion federal loan 00:29:46.900 --> 00:29:50.079 and AI fire models. At its core, it's a story 00:29:50.079 --> 00:29:53.099 of infrastructure fragility. We built this massive 00:29:53.099 --> 00:29:55.660 machine, the super inch, the hydro dams, the 00:29:55.660 --> 00:29:58.720 nuclear plants, assuming a stable world. A world 00:29:58.720 --> 00:30:00.539 where the ground doesn't shake too much, the 00:30:00.539 --> 00:30:02.740 forests don't burn too hot, and the population 00:30:02.740 --> 00:30:04.839 stays put. But the world isn't stable anymore. 00:30:05.019 --> 00:30:07.259 No. The climate has changed, the equipment has 00:30:07.259 --> 00:30:10.059 aged beyond its lifespan, and we are living in 00:30:10.059 --> 00:30:12.079 the interphase between the wild and the suburbs. 00:30:12.359 --> 00:30:14.339 It really makes you look at the outlet on your 00:30:14.339 --> 00:30:16.119 wall differently. I mean, usually you plug in 00:30:16.119 --> 00:30:17.700 your phone and you just don't think about it. 00:30:17.799 --> 00:30:21.180 But that outlet is the end of a very long, very 00:30:21.180 --> 00:30:23.940 expensive, and very bloody wire. It connects 00:30:23.940 --> 00:30:26.380 you directly to the Sierra snowpack, to the nuclear 00:30:26.380 --> 00:30:28.630 reactors sitting on... a fault line and to the 00:30:28.630 --> 00:30:31.309 ghosts of paradise. And it raises the big question 00:30:31.309 --> 00:30:34.750 for the listener. We've seen the failure of the 00:30:34.750 --> 00:30:37.490 private model, the two bankruptcies. We've seen 00:30:37.490 --> 00:30:39.970 the failure of a public oversight, the CPC being 00:30:39.970 --> 00:30:43.960 too cozy with the company for decades. Can a 00:30:43.960 --> 00:30:46.220 private company, an investor -owned utility, 00:30:46.440 --> 00:30:49.299 ever truly serve the public interest when the 00:30:49.299 --> 00:30:51.680 risks are this high and the stakes are life and 00:30:51.680 --> 00:30:54.380 death? That is the multibillion -dollar question. 00:30:54.559 --> 00:30:57.059 When the victims own the stock and the federal 00:30:57.059 --> 00:30:59.119 government provides the loans and the ratepayers 00:30:59.119 --> 00:31:02.539 cover the lawsuits, is it even a private company 00:31:02.539 --> 00:31:05.170 anymore? Or is it a zombie? A zombie monopoly. 00:31:05.309 --> 00:31:07.890 Exactly. Are the profit motive and public safety 00:31:07.890 --> 00:31:10.309 now just permanently at odds in California? I 00:31:10.309 --> 00:31:12.430 don't have the answer. But looking at this history, 00:31:12.549 --> 00:31:15.049 it is hard to be optimistic that business as 00:31:15.049 --> 00:31:18.130 usual is going to work. Something to mull over 00:31:18.130 --> 00:31:20.730 the next time you pay that power bill. Indeed. 00:31:21.269 --> 00:31:23.690 Thank you for listening to this deep dive into 00:31:23.690 --> 00:31:27.230 the history, tragedy, and future of PG &E. It's 00:31:27.230 --> 00:31:29.450 been a heavy one, but an important one. Stay 00:31:29.450 --> 00:31:31.109 safe out there. We'll see you next time.