California Energy Utilities Value Human Life Too Much, Regulators Believe

A Californian’s life was worth $100 million to certain investor-owned utilities. That is, until state regulators ordered them to drop the price. 

The dollar figure is called the value of a statistical life. In this case, it’s worth spending $100 million to prevent a death according to San Diego Gas and Electric and Pacific Gas and Electric which helps utilities justify certain investments – namely, wildfire prevention.  

While a morbid exercise, putting a value on human life or in other words, picking a limit to spending on avoiding death, is a practice common for businesses and governments.  

But $100 million is a lot, way more than the U.S. government is willing to spend on the average American.  

The U.S. Department of Transportation, which makes federal transportation rules and builds highways for the country, says life is worth spending $13.7 million. The U.S. Environmental Protection Agency, which tries to regulate and protect people from pollution, has said it’s more like $7.4 million. The lower the value of human life, the less the government may make someone spend to avoid losing it. 

The difference is: When an investor-owned utility spends money to build things that make the energy grid safer, they also make a profit. The higher the value of human life, the more the utility can justify spending and the more they will want to spend, causing ratepayer bills to go up – the thinking goes. 

Californians already face some of the highest energy prices in the country and millions are struggling to pay their bills. There’s a lot of pressure on the state to do something about the mounting energy affordability crisis and lawmakers recently proposed sweeping changes like replacing private grid investments with cheaper public financing, according to reporting by Canary Media. 

The California Public Utilities Commission recently ordered both PG&E and SDG&E to cut the number of miles of electrical wire the company wanted to bury underground – a move that eliminates almost all the risk their equipment starts a fire but is also the most expensive thing the company does in the name of safety.  

When state regulators discovered the value of a statistical life SDG&E and PG&E’s plans produced, they ordered them to pick a lower, more reasonable one. 

“An overestimated (value of a statistical life) could be used as a means to justify investments in more expensive, capital-intensive risk mitigations, making them appear more cost efficient,” wrote Terrie Prosper, a spokesperson for the California Public Utilities Commission or CPUC, in an email. 

Translation: A high value makes it look like building more expensive projects to avoid wildfires is cheaper than it actually is.  

What the Hell Is VSL? 

“We make all kinds of regulations to make people a little bit safer, like installing safety features on cars or regulating how much pollution power plants can emit,” says Judson Boomhower, who teaches economics at the University of California-San Diego. “The tradeoff there is, it’s expensive to do that.” 

Enter the value of a statistical life. Think of it this way: We can’t expect limitless spending to keep ourselves safe. We are, in fact, the people paying the taxes or, in this case, the energy bills that then fund the burial of powerlines. 

“There’s a normal human reaction to this. It’s like, what? You’re going to put a dollar value on human life? That’s crazy. And I get it,” Boomhower said. “But as a human who thinks about public policy, the alternative is we don’t accept any risk of death ever and then you never leave your house and we all drive tanks.” 

And, we all go broke.  

The utility companies’ huge value on life is another way of saying these companies are willing to spend a ton to keep Californians safe. In other words, they’re willing to let you, the customer, spend a ton to keep yourself safe. 

“It’s called goldplating,” said Tom Long, now retired, who worked for the Utility Reform Network called TURN. “Utilities skew spending proposals toward capital (building) projects because they make a profit on top.” 

TURN pointed out the high price SDG&E ascribes to preserving one human life in something called a “protest” filed against the company at the CPUC in 2021. Later CPUC staff noted PG&E had a similar dollar value.  

SDG&E and PG&E didn’t come right out and say their value of a statistical life was $100 million, like the DOT or EPA publish publicly. Staff and watchdogs said it was buried in the math behind how the utilities justified their spending to reduce wildfire risk in something called the Risk Assessment Mitigation Phase Application.  

In it, utilities are allowed to come up with their own formula that ascribes value to different things they do for customers, like providing safety and reliability. SDG&E had inflated the way they valued safety which spit out this high statistical life number, watchdog groups said. 

SDG&E’s math described a catastrophic or worst-case wildfire as one that killed 20 people, Long argued in TURN’s protest. The CPUC and watchdogs said what’s considered catastrophic in terms of wildfire would be one that kills 200 people. Make that change and the company’s value of a statistical life would drop by a factor of 10, TURN wrote. 

In December of 2022, the CPUC agreed and said, OK everybody get on the same page here. The commission ordered the investor-owned utilities to use whatever the Department of Transportation’s statistical life value is.  

Most of the utilities said, fine. Southern California Edison was the only company opposed to the idea saying “placing a specific value on life brings up ethical issues.” The CPUC disagreed, saying utilities were doing it anyway just not explicitly. Better everybody use the same number and publish it publicly. 

“Its use here benefits risk assessment processes by promoting transparency and consistency across utilities,” the CPUC wrote. 

In response to questions from Voice of San Diego, SDG&E spokesman Anthony Wagner sent a statement:

“SDG&E builds infrastructure based on need, guided by data science, advance modeling, and a deep commitment to protecting our communities from extreme threats like wildfires,” Wagner wrote. “The safety of the communities we serve is our top priority. We don’t view safety through a financial lens. We view it as a responsibility. Our planning is rooted in evidence, not assumptions, and our goal is always to safeguard lives and strengthen resilience.”

PG&E didn’t return request for comment for this article. 

A Means to An Undergrounding 

“What’s at stake here is the balance between safety and affordability,” said Joseph Mitchell, an expert on wildfires caused by utility infrastructure, who works for the San Diego-based utility watchdog group Mussey Grade Road Alliance.  

Mitchell along with Long from TURN believe it’s profit that’s motivating these utilities to inflate things like the value of a human life. And there’s nothing more profitable to California’s investor-owned utilities than burying the state’s electrical grid underground to prevent their assets from sparking a wildfire.  

“The utilities for the last few years have been very eager to increase their undergrounding programs because it checks all the boxes: It prevents wildfire, liability, commission finger pointing and they get paid for it,” Mitchell said. 

Sempra, the company that owns SDG&E, asked the CPUC in 2024 for the OK to spend $1.9 billion to underground 605 miles of electric wire over four years. It’s the most expensive thing utilities can do to prevent wildfire – and it’s the most effective. But it costs just over $3.1 million per mile to do.  

For the first time, the CPUC said no. You can do $618 million worth of work and underground more like 140 miles. The commission said they didn’t find the proposed amount of spending “reasonable” when “wildfire risk has decreased considerably in the last 15 years.” 

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