We can do better by owning our own power
Pacific Gas & Electric Company’s looming bankruptcy is going to pinch virtually every Californian’s pocketbook. So it’s important that we get something in return.
If, and when, PG&E disappears, we’ve got to be better off than we were before it went belly-up. Like most catastrophes, this offers an opportunity.
PG&E’s problems didn’t start with the Camp Fire, which killed 86 people and destroyed 15,000 homes and an entire city with an estimated liability of $30 billion. The company was screwing up long before that. Remember the San Bruno gas-line explosion that killed eight in 2010? How about last year’s Wine Country fires, which destroyed 5,300 homes and killed 40. A gas leak in Rancho Cordova killed a man on Christmas Eve, 2008. Each time, PG&E promised to do better.
Get your electricity from Modesto, Turlock or Merced irrigation districts? So you’re off the hook, right? Wrong.
If PG&E goes under, a financial maelstrom will follow. The website Motley Fool notes the state retirement systems, CalPERS and CalSTRS, have large PG&E holdings. Giant mutual funds like Black Rock, State Street and Vanguard hold thousands of PG&E shares that were worth billions at $47 each, but not so much at $7 apiece. Many shares are in 401(k) accounts.
PG&E’s assets are valued around $69 billion, its liabilities at $50 billion. If broken up, the difference would likely go to victims.
The liabilities from the fires won’t go away even if PG&E does. As Motley Fool puts it, “it may just wind up being the state and Californians as a whole that foot the bill. There really is no precedent for a utility bankruptcy with liabilities of this magnitude.”
Michael Wara, director of the Climate and Energy Policy Program at Stanford, suggested to Slate a taxpayer-funded bailout is necessary. Such an idea would ignite a different kind of fire.
“How is this our fault?” was John Sweigard’s first question. Sweigard is general manager of the Merced Irrigation District, which provides power to around 9,000 customers. “(The state) wouldn’t help us if we failed,” he noted.
Sweigard worries the state could impose a surcharge, say a penny per kilowatt hour, on all electricity sold statewide. “Shifting responsibility financially or otherwise should be everybody’s major concern,” he said.
The California Public Utilities Commission is accepting comments on how best to serve the millions living in PG&E’s 70,000-square-mile service area. Some of those comments, we hope, will mention creating an agency that doesn’t shut its eyes to the terrifying transgressions of those it is tasked to regulate.
“It’s a really a complex problem,” said Jeffrey Michael, director of the Business and Policy Research Center at the University of the Pacific in Stockton. “If PG&E were to be broken up and sold off … I think a court would be interested in that being done in a way that generates the most revenue (for investors and victims). There would be a big argument over what these assets are worth. Who knows how that would play out.”
However it plays out, Californians should not be forced to carry investors on our backs.
Electricity is as necessary to modern life as clean water, good roads or healthcare, which the state tacitly recognizes through regulations and bureaucracy. In many cities, from Los Angeles to Sacramento, the public owns its utility company. Each of those utilities provides power more safely, more reliably and more cheaply than does PG&E.
With climate-driven wildfires occurring every year, safety is of utmost concern.
While PG&E has removed hundreds of thousands of dead trees, last week a federal judge blamed the company for the wildfires, saying, “the single most recurring cause of the large 2017 and 2018 wildfires” was the “susceptibility of PG&E’s lines” to being blown into trees.
“I’m looking at Lassen Municipal (Utilities District) and Surprise Valley (Rural Electrification), and they’re in some of the most fire-prone areas of the state,” said Jeff Shields, a public-utilities David who battled Goliath PG&E for decades. “And they’ve never been accused of starting a fire.”
Shields, who retired as GM of South San Joaquin Irrigation District two years ago, tried to force PG&E to release its electricity customers in Manteca, Ripon and Escalon to SSJID in 2004. What ensued was a ferocious legal battle never fully resolved.
Turlock, Modesto and Merced irrigation districts are publicly owned agencies delivering power more cheaply and reliably than for-profit companies. But there are benefits that go beyond cost.
“We have a locally elected board. We have open meetings; we’re subject to open-record act rules. You can see our budgets,” said Sweigard. “All that leads to better utility operation and transparency and accountability.”
In Escalon, Ripon and Manteca, it appears SSJID, which already owns part of the power generated at three dams in the Sierra, would be a likely candidate. After all, the district has been trying to provide power in those cities for years. In Merced, the irrigation district could add the central part of the city to its 9,000 existing customers. Some cities or communities could form an “aggregating” organization to deliver power generated elsewhere.
And what about small mountain counties, where fire hazards are worse?
“We need to be careful that we don’t end up with a two-tier system of reasonably priced power for people living in the cities, and extremely expensive power for people living in rural communities,” Michael Toney, head of the Utility Reform Network, told Bloomberg.
That’s where our legislators come in. They should be planning to make any transition as seamless as possible – establishing vetting processes for capacity and financing, expediting transfer of assets and, above all, ensuring the safety of residents.
“This is fascinating, fascinating,” said UOP’s Michael. “And really important. We may end up totally restructuring the way we supply electricity in Northern California.”
We hope so.
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This story was originally published January 19, 2019 at 8:55 AM.