Anybody here who is flaming/blaming/questioning the OP and her husband are WAY out of line. 
I simply can not believe some of the comments here.
It is not up the OP to tell her sister or any other adult anything about how they 'live their life'.
It is not up to the OP to go over to her sister's to take care of things more often so that they don't get 'that bad'.
Like the OP is to blame for her sisters situation.... Wow.... just WOW.
I've been there done that, and I know that's just not how it works.
While I know this situation hurts the OP very deeply, she is NOT her sisters keeper.
OP, I completely understand!!!!!
And, I assumed right when I posted that her husbands response was probably the product of having been taken advantage of one too many times before, only to see his in-laws do NOTHING to improve their situation.
OP, try to be a little closer to your sister so that you can make a better assesment of the situation. ( NOT getting involved... taking over and insisting on helping...) but just be closer to her. Call her up, tell her you will drop by to pick her up and go to lunch, or whatever... Just like sisters hanging out. Like I said, this kind of situation is the result of heavy issues, such as drug abuse/addiction, spousal abuse, psychological emotional mental issues, etc... But, you will never see the truth from a distance.
If you continue to feel that this situation is not acceptable for the kids after you take a while to take a closer look... then by all means, yes, you may want to consider a call to CPS.
PS: Do you, or anyone you know, know of an electrician who may be able to take care of that huge concern. I might suggest that you could try to help take of of that one pressing issue... I would be like "Hey, sis, I know this guy who can come fix that up for you... let me give him a call... I would be happy to pay for it...." I would consider doing that, as it would at least help me to sleep easier re: the children's safety!!!
But, other than that one pressing safety issue... nope... It hurts to see that sometimes there is really nothing you can do.
