The outage affected more than 80,000 customers and left people stuck in elevators and on the sides of buildings.
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The outage was first reported around 9:20 a.m. Friday morning.
The utility said the outage started at their Larkin Substation. "We had an equipment failure, a catastrophic failure of one of our circuit breakers. When the circuit breaker failed, it created a fire around the breaker," PG&E spokesperson Barry Anderson said.
If the breaker was working properly there should have been no fire. PG&E blames the age of that substation and says an upgrade is planned. "The facility upgrade is a $100 million project that will be completed in the 2nd quarter of 2018," a spokesman said.
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Smoke poured from the substation at Larkin and Turk Streets where the outage originated. "We needed to extinguish the insulation that was burning around the breaker. We were able to successfully do that with a chemical agent. We did notice some flare-ups, so we did apply CO2 to the fire," San Francisco Fire Chief Joanne Hayes-White said.
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The outage knocked out power to the Montgomery Street BART Station, forcing a temporary closure. Many businesses chose to close for the day due to the outage. "We lost a lot of business today. It was a big day for us, Friday. We lost breakfast, lunch. And the problem is we have all of the employees here. We can't let them go, because the power is coming back, we'd be in big trouble too," one restaurant owner said.
Photos shared on Twitter show an eerie look inside the Montgomery station, which was empty and with the lights out.
At one point 300 traffic signals were left dark, forcing traffic officials to man intersections and direct traffic.
The outage caused traffic congestion throughout the city, but Mayor Ed Lee said there were no injuries reported because of the outage, and traffic officials were working to keep the evening's commute flowing. "We are focusing our efforts on the bridges to facilitate traffic as much as we can," SFPD Chief Bill Scott said.
Firefighters rushed from one call to another in downtown San Francisco during the outage to rescue people from what is a worst nightmare scenario for many - getting stuck in an elevator.
"As soon as he got on the elevator, lights and all just went blank," Security Guard Renee said.
Renee, a building security guard on Geary Street said an employee got stuck inside an elevator for 30 minutes.
"I was making sure that he was okay, kept calling his name out, he said yeah I'm okay. And then when they finally came and they cracked it open enough where I could give him a bottle of water," Renee said.
Charles Villegas is an elevator technician with Kone Elevator. He says he was called to help eight people out of elevators today, mostly in hotels around Union Square. "So imagine if we had a natural disaster hit in the city, it would be pretty bad," Villegas said.
Twitter user Jessica Vickers shared video she shot from inside a stuck elevator during the outage.
PG&E is promising a thorough investigation into the outage.