GB590 Unit 10 Stakeholder Case Analysis Example

Thirty-Five Miles an Hour: A Unit 10 Stakeholder Case Analysis of a Utility's Power Shutoff Threshold

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Purdue University Global

GB590: Ethics in Business and Society

Unit 10 Stakeholder Case Analysis

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[Date]

The utility, its customers and every figure are composite and illustrative; the 2018 fire, the investigation report and the studies cited are real.

The Decision

The utility serves about 1.4 million customers, and 18 percent of its distribution lines run through areas the state rates as high fire threat. Under its public safety power shutoff program, it de-energizes lines in those areas when forecast gusts exceed 45 miles an hour and humidity is low, because wind can push branches into lines or bring lines down, and a spark in dry vegetation can start a fire. Last season it called four shutoffs, which averaged 31 hours each. Its engineers propose lowering the gust trigger to 35 miles an hour, which their models suggest would cut the risk of a utility-caused ignition during wind events by about half but would roughly triple the outage hours experienced by the 210,000 customers on affected circuits.

Why Western Utilities Plan Around 2018

In November 2018, the Camp Fire, started by a transmission line owned by Pacific Gas and Electric, destroyed most of the town of Paradise, California, and killed 85 people. The company filed for bankruptcy in early 2019 and in 2020 pleaded guilty to 84 counts of involuntary manslaughter (Butte County District Attorney, 2020). Every western utility now plans with that outcome in view. It shapes how boards weigh fire risk against outages, and it is the reason shareholders appear prominently in this analysis: a single catastrophic fire can threaten a utility's survival.

Eleven Stakeholder Groups

Residents on powered medical devices. About 6,400 customers on affected circuits are enrolled in the utility's medical baseline program, many using oxygen concentrators or home dialysis. A longer outage risks their health directly.

Older residents living alone. Outages cut air conditioning, refrigeration and phone charging, and older residents are less able to relocate.

Rural households on wells. Without power, well pumps stop, so these households lose water as well as electricity.

Residents in fire zones. The same customers who lose power also face the fire risk the shutoffs reduce. Their interests point both ways.

Small businesses. Restaurants and grocers lose refrigerated stock; most small firms lose a day's revenue for each day without power.

Hospitals and clinics. Hospitals have backup generators, but rural clinics often do not.

Water and telecommunications providers. Water districts may lose pumping, and cell towers on battery backup can fail after several hours, cutting emergency calls.

Firefighters and emergency services. They gain from fewer ignitions but must also respond to residents in distress during outages.

Line workers. They must patrol and inspect every de-energized line before restoring power, often in difficult terrain.

Shareholders and bondholders. They face liability for fires caused by the utility's equipment and gain most from fewer ignitions.

Regulators and the public outside affected areas. They pay for the system through rates and judge the utility's balance of safety and reliability.

Severity, Reversibility and Voice

Each group was scored on three measures from 1 to 3. Severity measures how badly the proposal could harm the group. Reversibility measures whether the harm can be undone: a spoiled inventory can be compensated; a death or a burned town cannot. Voice measures how much influence the group has over the decision through rate cases, public comment and political access.

The scores reveal a pattern. Residents on medical devices, older residents and rural well households score high on severity and low on voice. Shareholders score high on voice. Residents in fire zones score high on severity on both sides of the decision, since they bear both the outage and the fire risk. The utility's past decisions have tended to track voice, which is why the analysis uses voice to correct the weighting rather than to reward it: groups with low voice and high severity receive extra weight. Abatzoglou et al. (2020) found that shutoffs in Northern California fell disproportionately on rural and older populations, which supports that correction.

The groups who suffer most from a long outage are the ones least likely to be in the room when the threshold is set.

Two Readings of One Table

A utilitarian reading sums expected harms. Lowering the trigger halves the probability of a utility-caused ignition during wind events, and an ignition in a populated fire zone could cause enormous and irreversible harm. On this reading, the proposal looks justified even with tripled outage hours, because the expected harm of a catastrophic fire outweighs the expected harm of outages.

A justice reading asks how the worst-off fare. Rawls (1971) argued that institutions should be arranged to benefit the least advantaged. On this reading, the proposal places a large and certain burden on vulnerable groups to reduce a risk that is shared more widely. It is justified only if the burden on the worst-off is reduced or compensated.

The two readings agree that fire risk must be reduced; they disagree on who should bear the cost.

Options

Lower the trigger everywhere. Cuts ignition risk most, triples outage hours for all 210,000 customers.

Keep the current trigger. Avoids new outage harms, leaves ignition risk unchanged.

Targeted thresholds. Lower the trigger to 35 miles an hour only on the circuits with the highest fire consequence, about a third of affected customers, and keep 45 elsewhere. The engineers estimate this would achieve about two-thirds of the risk reduction with about half the added outage hours.

Compensated outages. Whatever threshold is chosen, pay customers a credit for each day without power, fund backup batteries for medical baseline customers and well households, and staff resource centers with charging, water and cooling.

Recommendation

The utility should adopt targeted thresholds combined with compensated outages. It should lower the trigger to 35 miles an hour on the highest-consequence circuits, fund backup batteries for about 6,400 medical baseline customers and 9,000 well households at an estimated cost of about $48 million over three years, and pay a credit of $50 a day to residential customers during shutoffs. It should also accelerate projects that make shutoffs less necessary, such as covered conductors and devices that isolate smaller sections of a circuit. The recommendation reduces fire risk substantially while shifting part of the burden from the most vulnerable customers back to the utility and its rate base, which is where the justice reading says it belongs. The utility should report each season how many medical baseline customers lost power, for how long and whether their batteries worked, so regulators and the public can see whether the burden actually fell where the plan intended.

References

Abatzoglou, J. T., Smith, C. M., Swain, D. L., Ptak, T., & Kolden, C. A. (2020). Population exposure to pre-emptive de-energization aimed at averting wildfires in Northern California. Environmental Research Letters, 15(9), 094046. https://doi.org/10.1088/1748-9326/aba135

Butte County District Attorney. (2020). The Camp Fire public report: A summary of the Camp Fire investigation. Butte County District Attorney's Office.

Rawls, J. (1971). A theory of justice. Harvard University Press.