Here is their project page: https://www.boringcompany.com/chicago/
It's not. The tunnels generally account for at best 1/3 the cost of a subway project, and even then, the cost of the tunnel that's variable per diameter is an even smaller fraction (since you're sticking a lot of other stuff in the tunnels). The big money sinks tend to be the underground stations. Overall, moving to a smaller diameter tunnel might save you around 10%, and you'd probably eat up much of those savings with rolling stock incompatibility issues.
With either a fixed power rail next to the track or overhead lines, if there's an accident the power can be removed, and all that can burn is the vehicle.