Quantifying the Economic Risk of Wildfires and Power Lines in San Diego County

Abstract

San Diego Gas & Electric Company has proposed retrofits to seven of its transmission lines to reduce the lines’ potential for igniting fires and to increase their ability to withstand damage from wildfires. Since the company’s ratepayers will ultimately pay for the cost of these retrofits through electricity rates, the benefit of the projects in terms of wildfire risk reduction is a matter of public policy interest. This study estimates the range of potential monetary losses that the company could incur due to wildfires and compares those losses to the costs of the transmission line retrofits as a means of evaluating their risk reduction benefit. The study uses a Monte Carlo simulation to estimate the losses for the company from wildfires in a given year. The model outputs the number of ignitions from the transmission lines, the acreage of the resulting wildfires, the property damage caused by those fires, the length of transmission line damaged by wildfires, and the costs of repairing those lines. The model is parameterized using empirical observations of transmission lines ignitions, wildfire sizes, and property values for San Diego County. Results suggest that although the expected value of losses is not large enough to justify the investment in the retrofits, the high risk of losses (driven by rare but extremely damaging events) may justify the investment. The transmission lines in closest proximity to populated areas are the best candidates for retrofits. The study provides a possible framework for regulators and electric utilities to discuss the public benefit of safety-related infrastructure investments as part of the regulatory process.