As firefighters contained the largest wildfire in Texas history last week, the electricity provider for the state’s panhandle region, Xcel Energy, bad news announced: The wildfire, which burned more than a million acres of land and killed at least two people, appeared to have been caused by one of the utility’s electrical poles.
“Based on currently available information, Xcel Energy acknowledges that its facilities appear to have been involved in an ignition of the Smokehouse Creek Fire,” the statement said, referring to the largest of several fires raging in the area. An investigation by the state’s forest management agency found that the fire started when a dilapidated wooden pole shattered and fell, sending sparks onto nearby grass. Photos obtained by Bloomberg News appear to show the pole washed marked as unsafe before the fire.
Using this evidence, multiple landowners in the area have already filed lawsuits against the company – as well family members of the fire’s victims, are demanding millions of dollars in damages. Xcel denied it was to blame for the historic fire: In the same statement, the utility said it “disputes claims that it acted negligently in the maintenance and operation of its infrastructure.”
The lawsuits are just the latest in a string of high-profile wildfire cases against major electric utilities, whose flammable power lines are one of the most common culprits for major fire events. California companies such as Pacific Gas & Electric and Southern California Edison have paid out billions of dollars to fire victims and insurance companies over the past decade. Earlier this month had a jury judgment rendered against Oregon utility Pacificorp, which may owe victims billions of dollars. Xcel itself is fighting hundreds of lawsuits in Colorado about its similar role in the 2021 Marshall Fire near the city of Boulder. These lawsuits hit utilities with huge costs that they passed on to customers in the form of rate increases.
The emergence of the trend in Texas, a state that has avoided massive fire losses in recent years, underscores that wildfires are now a national threat to utilities, according to Karl Rábago, a former Texas utility regulator and utility law expert.
“They don’t turn to the world we live in,” he told Grist. “When we’re faced with these situations, we have a legal system that’s likely to dish out some pain. The crazy thing is, after we pay out a certain amount of money, the problem will become so ubiquitous, and so frequent reiterate, that we will treat this as business as usual.”
As in many previous lawsuits, the question in Texas is what counts as negligence on the part of a utility company. If the fact that Xcel knew the pole needed to be repaired but failed to repair it is sufficient evidence of negligence, the company will likely be on the hook for a large portion of the fire damage, which could amount to hundreds of millions. The state utility regulator require companies to plan for emergencies, and Xcel has told the state in the past that it does rotating inspections of old poles. However, most experts agree that utilities need to do more by burying power lines or adding technology that allows for quick and precise power shutdowns during firefighting.
“There is at least a recognizable negligence in the failure to ensure that the systems are not extremely vulnerable,” Rábago said. “If your pole was 40 years old, it has probably become so weak that it will be knocked over in severe winds.” Other fires that broke out in the Texas Panhandle at the same time as the Smokehouse Creek fire also burned thousands of acres, but investigators have not yet determined the cause of those events.
Xcel declined to comment for this story.
Xcel’s subsidiary in the Texas Panhandle provides power to approximately 400,000 customers across a vast and sparsely populated service area of about 50,000 square miles. Pacific Gas & Electric in California, by comparison, provides power to 16 million people over a service area not much larger. On the other hand, the fire burned mostly open fields, destroying far fewer homes than the Marshall Fire or other urban fires. This can keep the potential damage relatively low.
The Smokehouse Creek Fire and its companion fires are the most devastating in Texas history, but there is some precedent for holding Lone Star State utilities accountable. Dozens of victims and insurance companies sued the much smaller Bluebonnet Electric Cooperative near Austin for failing to remove dead trees before a 34,000-acre fire. The company and its tree trimming contractor settled those matters over the following years, with the contractor $5 million paid as recently as 2020. At the time, the fire was the most destructive ever in Texas, but the panhandle complex is many times larger.
“The consequences of utility ignitions are greater than they used to be, and there is an increasingly clear set of practices that utilities can take, which some do, to avoid these types of ignitions,” said Michael Wara, a senior research scientist at Stanford Law. School and an expert on how climate change affects utilities. “It creates a situation where juries are more likely to hold utilities liable when they cause these catastrophic fires, if they didn’t take appropriate action.”
Wara said the most cost-effective steps include installing more accurate weather stations and proactively turning off power during extreme weather events.
These lawsuits may become more common as climate change increases the potential for massive fires in many parts of the country. The Texas Panhandle has always seen wildfires, but studies show that the state’s high plains are now seeing them an additional month of “firefighting” every year compared to the middle of the twentieth century. The combination of high temperatures and high winds that started the Smokehouse Creek fire will only become more common as the Earth continues to warm, which could mean more expensive fires and more litigation.
Utilities in other states have responded to fire lawsuits by raising rates on customers and using the money to pay out settlements or upgrade their infrastructure. Most Texans buy power through a controversial wholesale market that has come under fire prices increase during extreme weatherbut Xcel’s system in the panhandle is not part of that market, so the utility’s customers could see an immediate rate increase depending on how the lawsuit shakes out.
The growing trend of utility lawsuits has started to make markets nervous. Warren Buffett, whose company Berkshire Hathaway owns the Oregon utility Pacificorp, has in his annual letter to shareholders last month that “the regulatory climate in some states raises the specter of no profitability or even bankruptcy … in what was once considered one of the most stable industries in America.” The legendary investor referred to his failure to foresee this difficulty as “a costly mistake.”
In an interesting twist, Buffett then speculated that this threat to utility profits could one day lead to more areas to adopt public power modelswhere governments rather than corporations control electrical infrastructure.
“Ultimately, voters, taxpayers and users will decide which model they prefer,” he said.
