In this Real News Network interview, Democracy Collaborative researcher Johanna Bozuwa discusses increasing pressures for public ownership of utilities, as Californa burns.
DHARNA NOOR: It’s The Real News. I’m Dharna Noor.
As multiple fires burn across California, thousands of residents have been left in the dark, prompting calls for publicly owned electricity. As of Wednesday afternoon, over a hundred thousand acres are in flames across the state, from Los Angeles to the Bay area. The Kincade Fire in Northern California is the largest in the state. It’s burned over 76,000 acres and destroyed 189 structures so far. Meteorologists expected strong winds Tuesday night would make the fire much worse, and it wasn’t as bad a night as they expected. But in the Northern part of the state, the Getty Fire is raging through the Los Angeles area. And meteorologists have warned that the extraordinarily dry, prolonged Santa Ana winds that are set to move through the area on Wednesday could make the fires there far, far worse.
Pacific Gas and Electric, the investor owned utility that supplies power to most of the state, has cut electricity to hundreds of thousands of homes and businesses to reduce wildfire risk. The utility company estimates that 75% of over 970,000 customers who lost power on Sunday have now had their electricity restored, and the company says that that move was necessary because hot dry wind can knock down power lines and start fires in the dry trees and devastation. But the blackout spurred outrage for many, and some are now calling to make the utility company publicly owned. PG&E, which provides power to most of the state, filed for bankruptcy in January, citing potential civil liabilities in excess of $30 billion from the fires.
Now joining me to talk about all of this is Johanna Bozuwa. She is a research associate at the Democracy Collaborative. Thank you for being here again.
JOHANNA BOZUWA: Thank you so much for having me, Dharna.
DHARNA NOOR: So again, on Sunday as California governor Gavin Newsom declared a statewide emergency, PG&E cut power to almost a million Californians. And a few weeks ago, they cut power to some two million people. Some of them didn’t even get a warning. Was this move justified? I mean, again, the company says that it was to protect from further wildfire risks.
JOHANNA BOZUWA: Yeah. So obviously we don’t want to put us at more wildfire risk. This is a longer story. PG&E has disinvested in its grid for decades upon decades, and that has led us to the situation in which we have a precarious energy system that can’t handle when these new climate induced wildfires are happening much more often. In addition, they also help to create this climate crisis that we’re in right now by being the ones that were burning the coal, oil and gas for far too long. And now we’re in this moment of total crisis in which we’re confronted with the problem of having to shut people’s power off or have more wildfires. But the blanket amount of people that they’re shutting off power to is totally unacceptable, and they aren’t actually taking the time to set up the structures we need so that people can survive these wildfires.
So for instance, what we’ve heard from governor Gavin Newsom is that these have not been surgical power shutoffs, they have been blanket. They have not considered how to actually take care of the folks who are without power right now. It was about only one place that folks had come to, for instance, charge their phone within a County that is just absolutely not enough. Their phone lines have gone down, their website isn’t up, so people can’t even get the information they need. And that is why these shutoffs have been so detrimental. And who are they detrimental to the most? Our low income community members, disabled community members, and elderly community members who need access to energy for things like medical assistance or to keep their medicines cold so that they can take them. Life sustaining things that now PG&E, because of their lack of precision in terms of how they were doing these shutoffs has left these people truly in the dark.
DHARNA NOOR: And of course, as you said, PG&E has fueled the climate crisis. They’ve harmed people by shutting off electricity, sometimes without warning. And of course, they also filed for bankruptcy in January because they were found responsible for at least in part fueling last year’s campfire, the deadliest wildfire in California’s history. And then two years ago in 2017, PG&E was found responsible for at least 17 of 21 major wildfires. How does an electricity company help fuel these kinds of disasters?
JOHANNA BOZUWA: Well, I mean it helps fuel it through commitment to fossil fuel infrastructure to not investing in the grid as it needs to; and just being negligent. These corporate entities are much more interested in their profits and their shareholders than they are to the community members of California. And they’ve proved that time and time again. This is not the first time that PG&E has gone bankrupt. This is not the first time that we’ve seen them put the corporate actors and themselves ahead of the people of California. And it became so clear to me in some ways when right before the initial shutoffs were happening, what were they having? They were having their gas executives courting some of the biggest gas users at a Sonoma winery and days before other people were being shut off, and now Sonoma is in flames. It just shows where they have their priorities and it’s not with the people of California.
DHARNA NOOR: But what does the actual infrastructure do to fuel wildfires? I mean, for instance, like they’ve been coming under fire, no pun intended, for not putting enough energy into trimming trees. So talk about how the physical infrastructure can actually make it easier for these wildfires to occur.
JOHANNA BOZUWA: Yeah, so there’s a bunch of stuff where basically they have not been taken care of their transmission. Those are the big, big pieces of infrastructure that cross the state that are helping to provide access to energy to different parts of the state. Those things have not been invested in in years. And the Wall Street Journal did some really good reporting on this that showed that you’ve seen less and less investment over time by PG&E and so that when you’re just allowing your grid to degrade to such a degree and aren’t out there thinking about trimming trees and also not thinking about like what new technologies we have to actually deal and confront with the new issues that necessitate us thinking better about resiliency. Right? So that means investing in distributed energy resources like community solar. It means thinking about things like micro grids that we can better turn on and off different parts of the grid and be more responsive. Obviously, PG&E has not done that and now we’re in this crisis because they haven’t been thinking about how they react to the climate crisis effectively and their infrastructure reflects that.
DHARNA NOOR: And you’re an advocate obviously of making power public to respond to these kinds of crises. And you’re not alone, on Sunday presidential candidate Bernie Sanders Tweeted, it is time to begin thinking about public ownership of major utilities on CNBC, California, representative Ro Khanna from Silicon Valley also called for the state to make PG&E publicly owned. And you’ve been researching this and advocating for this for a long time. What would making the utility public do to protect Californians from these kinds of wildfires, from climate change?
JOHANNA BOZUWA: Yeah, Dharna. So for me, this is about accountability. It’s about democracy and it’s about providing a public service. Like it really is a public service. I think what we need to understand is that with publicly owned utility, we are the ones in charge and we are the ones that are designing that institution. Right now in an investor owned utility model, the incentives are to make returns. And that’s not actually always in the public interest as we’ve seen with PG&E. And so by putting us in charge, we can design the institution so it’s reacting to the California context. So that is helping the people and providing a public service like it really is something that belongs to the public. And additionally, it also provides us more opportunity to be engaged and hold accountable our systems.
In a publicly run system. We are in a situation in which we don’t have the same amount of corporate influence that is going to be influencing the future of our energy system. Because they invest our own utilities, pour millions and millions of dollars into our legislatures. And that is why PG&E has been able to get so much out of the California context. And that’s not to say that a publicly owned system is going to be the perfect one, but it’s how we organize and how we build that institution. We have an opportunity to create something that is from the get-go climate resilient, that’s thinking about issues of democracy and is thinking about these issues of corporate influence.
And often people who may say, “Hey, why would public institutions be any better?” They can also lobby. The magnitude is just so radically different. PG&E at the national level spent $10 million lobbying and they’re Edison Electric Institute. That provides a lot of the industrie’s lobbying for them also spent another $8 million on lobbying. Let’s now contrast that to what the American public power association spent, which lobby’s on behalf of public power. It was under $1 million. So we just have far more recourse when we have a public institution and we are able to actually design it from the get-go in this situation.
DHARNA NOOR: So last month in September, San Francisco officials offered to purchase the parts of the utility grid that serve the city and County of San Francisco and, and their local public utilities commission said that the deal wouldn’t raise electricity rates locally. That’s a concern sometimes when utilities become publicly owned, that rates will go up. But they did say that it could increase the rates in the rest of California. And some are also concerned that that move could increase the fire and liability risk for the rest of PG&Es territory. So I just want to take a look at a clip from Leah Stokes on Democracy Now this past Tuesday.
Leah Stokes: There are some reasons why cleaving off a part of PG&E and to a municipal utility for San Francisco, I don’t really feel makes sense because what you’re going to do is have a huge amount of fire risk and liability for the rest of the PG&E territory, which theoretically will not be under that San Francisco municipalities control. And so my concern about some of these campaigns that are playing out, particularly in San Francisco as well as in New York City to try to turn existing private utilities into sort of city owned public utilities is that they’re breaking up these larger utilities into smaller urban areas where of course we have progressive’s and that’s great, but what happens to the rest of the system?
DHARNA NOOR: So what’s your response to that kind of critique?
JOHANNA BOZUWA: Yeah. So I respect Leah Stokes immensely, I think she’s an incredible political scientist and, and I think for me this is, there is still a justification for San Francisco municipalizing. And I think it’s because it is the domino that can be tipped. We have the political momentum and organizing to potentially municipalize there and already the city has taken steps to do so. San Jose has put out a proposal that says, “We can create a cooperatively owned utility for California that’s owned by us and is democratically accountable to us.” And that I think, is it from political momentum perspective, one of the real benefits of seeing this wave of municipalization happening. And actually from a historical perspective, this is what happened in Nebraska. And Nebraska is the only fully public power state. And the way that that happened was about 10 to 15 years.
There was some enabling legislation in Nebraska. People were so fed up with the investor owned utilities that were extorting it and exploiting them that the enabling legislation allowed them to municipalize and they did it. Oh, a wave of municipalizations followed. Then in 10 to 15 years it was a fully public state and they have created a system that is based off of that, therefore. So I think that that would be one of my responses. And the other one is that PG&E is fear-mongering to a certain degree as well. I think we absolutely need to think about the transition and what it could potentially mean and how do we mitigate that situation. But I also think that PG&E will take any opportunity to try to exploit the people of California so that it can keep its revenues up. Honestly, that is something that could potentially happen. But I think that’s something we need to push back on because, PG&E shouldn’t be able to do that because they have found so many ways of, gaining more money out of our system than they should’ve been able to do anyway.
DHARNA NOOR: Is it also easier to hold public utilities accountable than private ones? Obviously, there’s been issues of malfeasance in both public utilities and private ones.
JOHANNA BOZUWA: Yeah. And I think that’s a really important question to answer. I mean when it comes to private it’s always said, “Oh well if the public can’t do this.” Well private corporations are filled with malfeasance and the issue there is that we have far, we have less recourse, we have less ability to actually hold these, for instance, utilities accountable.
I mean we had Enron that already happened and then we re-upped with PG&E and the same thing is happening again in GM. There are all these examples and so sure a public institution may also be mismanaged but at least we have the recourse and for the context of PG&E the proposals that are out right now, it’s either we keep on going with PG&E. We have Berkshire Hathaway come in which is a big utility corporation that’s been shutting down the type of distributed solar we need in order to create resiliency. And we have Elliot Management coming in being called an activist investor. In fact, they are a vulture investor or a disaster capitalist who’s coming in and trying to make as much money as a Wall Street investor off of this climate crisis.
And what they’re going to do is try to extract as much money from this processes as possible. And at the end of the day, that’s not actually about resilience. And so at least in a public institution, if we are the ones that buy it, we have more recourse than we would elsewhere.
DHARNA NOOR: And what about the climate impact? So in the wake of these fires on Wednesday, the youth led environmental advocacy group, The Sunrise Movement held a sit in at house speaker and Nancy Pelosi’s office demanding climate action. And of course, wildfires are fueled by the climate crisis. Wildfires themselves are normal, but they’ve become much more severe as this state has gotten hotter and drier. The climate crisis is of course, fueled literally by the use of fossil fuels. And in a recent article in Teen Vogue, Greta Moran noted that five years ago, Burlington Vermont “Became the first city in the US to move to a hundred percent renewables while maintaining the same rates since 2009.” But some have also noted that public utilities don’t always move away from fossil fuels more quickly.
For instance, again on Democracy Now, Leah Stokes noted that public utilities in California resisted the first clean energy law passed in 2002 so it didn’t even apply to them. Does public ownership necessarily mean that a utilities become more sustainable and if not, how can folks really push to make sure that public utility’s actually do take climate action?
JOHANNA BOZUWA: Yeah, and so I think that’s a really important point. Obviously not all publicly owned utilities are operating like we’d like them to, and they may not even have democratic processes to the extent that we want. But with public institutions, we are not waiting for the benevolence of a, for instance, an investor owned utility to go to 100% renewable. We have more methods of accountability in a way that we would not have had otherwise. For instance, just things like having the open meetings act so that we can get access to meetings and open information act that give us access to governmental information.
So those are just on a very baseline, create more opportunities for us to organize. And in the end these public institutions are supposed to be beholden to their stakeholders who are us. We are in the end both their stake and stock holders. So it is a fair critique to say that not all public utilities have been great. I also think that another piece is that we are proposing and many of the people who are advocating for public ownership as a climate strategy are actually saying, “Well we’re redesigning the system. We are going to build this thing so that it is based on climate justice.” So that it is a system that isn’t based off of fossil fuels in a centralized model. And we can actually redesign these things so it starts to center the things that we actually want in this energy transition. So I think that those are the things that make me an advocate for public power and the reasons why I will continue to advocate for public power.
DHARNA NOOR: So depending on who you ask, one of the priorities that might come forth with that kind of democratic leadership is equity. Like, racial equity, gender equity. I want to just end on this. There’s this clip from the YouTube commentator Dave Rubin, who just went on Tucker Carlson and basically said that California is too busy focused on wokeness to control the fires or something. Let’s take a look at that. Who would care?
DAVE RUBIN: The problem right now is that everything from academia to public utilities to politics, everything that goes woke that that buys into this ridiculous progressive ideology that cares about what contractors are LGBT or how many black firemen we have or white this or Asian that everything that goes that road eventually breaks down. Imagine if your house was on fire, would you care what the public utility or what the fire company, what contractor they brought in, what gender or sexuality or any of those things he or she was, I mean it’s just absolutely ridiculous.
DHARNA NOOR: So what’s your response to this? And then more importantly, if you are say as someone who cares about racial equity and gender equity, not just like representation but real equity can public utility has helped further those goals?
JOHANNA BOZUWA: Yes. So I actually do care who my contractor is. Because I can say right now, the people who are putting out fires are incarcerated folk. And that is not what we want to be seeing. And also, who is the contractor will affect who gets access to those services. And we see this time and time again, where there are biases; hat if we’re only allowing white owned businesses into these spaces who are they more likely to help? And so those are really important things, as well as the fact that economic resiliency is a key factor of climate resiliency. The people who are being most affected are low income community members. And if we have the potential to actually create space so that community members get access to good family-sustaining jobs, unionized jobs, that are actually going to build the resiliency we need in a place like California, that is going to have multiple layers of benefit.
And that’s a lot of why I think the Green New Deal is so exciting and we’re seeing it in these other spaces as well is that it’s marrying explicitly those two things. Economic and social benefit and social justice to climate because it actually does matter. And what we’ve seen time and time again is that people of color and low income communities are subjugated on behalf of higher income community members. So, I mean, what we see right now is that if for instance, higher income people are able to have private access to firefighting, that is absolutely not something that we need people to have the same access to these services and just say that racial equity is getting in the way is incredibly misguided in what we actually need to do to create resiliency.
DHARNA NOOR: Okay. We have to leave it there. Johanna Bozuwa, co-manager of the Climate and Energy Program at the Democracy Collaborative, thank you so much for being here. And we look forward to talking to you again soon.
JOHANNA BOZUWA: Thank you so much for having me, and thanks for covering this really important topic.
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Bozuwa doesn’t know what she’s talking about. PG&E was forcibly divested of its combustion-fueled power plants as part of the GOP-led (but bi-partisan) “deregulation” and “privatization” of 1996 — but PG&E had not relied on oil or coal for decades before that, having converted the soon-to-be expropriated combustion plants to natural gas. PG&E today has one gas-fueled plant, one nuclear plant, and 68 hydro plants that Enron, Duke, Calpine, et al. didn’t want.
This report is well-intentioned but uninformed GND propaganda. This isn’t actually a Climate Change issue, this is a privatization and looting issue. PG&E was once a well-regulated vertically integrated public utility. It has been run into the ground after being broken-up by ideologues and pillaged by greed-heads.
I agree completely. PG&E has been a political deep pocket for the PTB in Sacramento. It was looted by “free stuff and phony environmental issues”mandated by the PUC and their handlers, the legislature of California.
The same lesson again, profits are private and losses are public/socialised.
You privatise an essential service, maximize short term profits by not doing sufficient maintenance and upgrades, then after several years when it inevitable occurs and stuff breaks down and falls apart, you socialise the very expensive cost to rebuild it using public tax player money. Years later some Republican or Conservative politian will have the bright idea to sell off some public utility for short term budgetary gain and the cycle repeats again.
What I do not understand is why when corporations own more than they are worth, can’t the government simply seize shareholder personal assets to make up the difference. After all, if shareholders can extract dividends from corporate profits, why not have negative (anti-) dividends from corporate losses.
shareholders? as in, for example, investors with vanguard or fidelity? to me it seems this action would cause an immediate sell off in practically every single u.s. stock.
this is certainly not the case with pg&e. their only positive asset is the income flow. their grid is a liability. diablo canyon is a liability. the damage from the kincade fire is a liability. it’s hard to think of a u.s. company with a greater negative worth.
Since when are shareholders special people who are protected from loss? Just because Noel didn’t make the best statement of his case does not make it sound.
Bankruptcy courts do that all the time, in case you didn’t notice. Were you paying attention during Lehman or Enron or a host of other bankruptcies? And it is pretty much unheard of for a company with as much in the way of liability as PG&E not to have its shareholders wiped out. This is what shareholders sign up for when they buy a stock, that’s it’s a residual claim on the business, the very last to get paid, and if the other claims eat up all the net worth and the company has no/crap future earnings prospects, they lose their investment.
The state could indeed seize PG&E under eminent domain. CA eminent domain is generous to property owners, so the state would probably have to pay something if it wanted to intercede outside the BK process. But that “something” should be pretty deminimus as the fires and fire-relted suits keep piling up.
I read Noel’s statement of seizing the personal assets of shareholders as piercing the corporate veil and going after other assets such as bank accounts as would the IRS to meet a tax liability.
Limited liability is favorable to investors over consumers and the bystanders subject to negative externalities. However, I do not think we have reached the point where we should ignore the positive externalities of spreading risk to allow private actors to join in the undertaking of risky projects, which was the point of limiting liability.
I could be argued out of this position and see the possibility that an institution run by benevolent actors, using debt issued by the institution (which is only secured by the asset to be built), and accepted by the community could build effective infrastructure. Or not. Today, there is no shortage of debt only a shortage of benevolence.
Its not like generating and distributing electricity is a new thing. It is a mature field and very low risk, the physical hazards are well-known.
If there’s any risk involved, it’s the risk that the CxO’s and board will abscond with everything that isn’t nailed down.
Yes, preventing that is precisely the point – “limited liability” – of the corporate form. It’s a big privilege, and one reason corporations should be taxed.
It’s also morally questionable, as Noel is implying. “Limited Liability,” plus the obfuscation of a large organization, leads to limited responsibility – as in PGE’s case – and that’s a serious social problem.
One way to address it, without losing the option of protecting shareholders, would be o make corporate “persons” subject to execution if convicted of a serious crime, like negligent homicide. They would be placed in involuntary bankruptcy and the assets sold off to settle the crime. Another way to wipe out the shareholders.
Utilities would have to be sold whole and operating to protect their customers; state seizure, in this case.
An underlying problem is that, for large companies, shareholder “ownership” has become largely fictional, especially with institutions actually holding the stock. Shareholders treat stock more like other securities, rather than intervene in management. “Private equity” has moved in to fill that void, destructively, part of a process of general decay.
i think noel’s statement goes far beyond ‘wiping out the shareholders’. i believe he’s saying that if you hold shares in pg&e, you are not only subject to having your shares go to zero, you’re also subject to having other assets confiscated.
There is a concept in bankruptcy called fraudulent conveyance, where the execs and shareholders loot a company that it clearly toast, pulling out excessive amounts and denying various creditors their due in BK. The courts can claw back $ using the fraudulent conveyance principle.
Unfortunately, fraudulent conveyance is used way more against individuals (think someone maxing out their credit cards < six months before they go BK). It has been used occasionally in egregious cases of PE looting, but even then it's been a hard slog because the PE guys (Sun Capital, specifically) fought so hard in court. However (and this seems to be the basis for the pushback), it's not as if PG&E shareholders made the decision to pay out excessive dividends and executive bonuses.
After all, if shareholders can extract dividends from corporate profits, … Noel Nospamington
If the chief purpose of a common stock company is to consolidate assets for economies of scale, etc., then dividends are contrary to that purpose since they dissipate assets.
So a dividend paying company is suspect to begin with and suggests a government privileged looting operation, such as a bank or privately owned natural monopoly, not a proper business.
Investor owned utilities are rentier class operations, who extract value from ratepayers in the form of dividends paid to shareholders, while adding nothing of value.
Has anyone ever seen a persuasive argument from a neoliberal or anyone else that running an electric generating plant as a for-profit operation is more advantageous to society compared to running the plant as a publicly owned co-operative, which rebates excess revenue to ratepayers?
Public ownership of electric utilities will not guarantee wise decisions, nor will it guarantee addressing climate change. But allowing the IOUs to continue to make decisions calculated to maximize shareholder value will all but guarantee that climate change will not be adequately addressed.
Establishing public policy to guide the course of evolution of the electric power industry can facilitate the most rapid and coordinated transition from central generation and distribution, to distributed generation, smart grids and micro-grids, and sustainable and renewable sources of power.
The IOUs are impeding progress because it is not profitable. Saving the world is not profitable. Moving to a war footing to address climate change via a Green New Deal would surely provide an economic stimulus. Apart from addressing climate change, retooling our electricity infrastructure would probably enable us to spend less in the long run.
If we could begin to treat the incumbent Investor Owned Utilities as government contractors, could we issue bonds to finance the Green New Deal’s retooling of our electric generation infrastructure?
Utilities were in the hoary days of my youth, regulated heavily. They had incentives to keep up their plant because bigger rate base = more dividends. Dividends were limited to a set % of the rate base.
Even though I agree that there are a lot of benefits of having municipalities own their own utilities, there is nothing wrong with a well regulated utility being privately owned precisely because they are heavily constrained and don’t act much like less regulated public companies (“public” here meaning being publicly owned, as in having shared listed on a stock exchange).
It is also easier to make a government-owned utility work in a municipal setting (more accountability) than for one that serves large, low population, small town and rural areas. Readers who know the economics might chime in regarding efficient scale of operation; that’s another consideration for how to structure them.
The problem with PG&E, as David in Santa Cruz said at the top, was the misguided breakup and the horrible conduct of the state regulator.
Salem (Oregon) Electric is a co-op and seems well-run. Price is reasonable, maintenance good, employees accessible. Have heard no complaints. One reason we chose Salem was its electric co-op and its city -owned water supply.
Co-ops seem a proper way to go for utilities with the profits distributed as cheaper, more reliable service to the customer-owners – rather than as raids on the assets of the utility to pay dividends to non-customer shareholders.
Oregon is dotted with electric co-ops and PUDs – There’s a rural one just west of here, and Eugene Water and Electric. Most are separate from municipalities, with their own elected boards, so the difference between them is pretty small.
Devolving PG&E into a similar patchwork might make sense, with an overarching utility for the major transmission lines and generation. There’s some advantage in multiple, separate approaches, which facilitates evolution. They all talk to each other.
The book “Energy Democracy” offers several real-life descriptions of what a few communities around the United States are doing to democratize the production and distribution of electricity.
By installing a small-ish (2.4 kW) photovoltaic array on our garage roof, we now own a piece of the means of production of the electricity we consume. We are considering adding a second array on the house roof, trying to achieve parity in our production and consumption. Adding storage would enable us to defect from our urban grid entirely. Others are talking about doing this as well. Our local IOU charges a “facilities fee” which, at about $16 per month, is often more than our monthly fee for the juice we use. At 71 I may not live long enough to see the whole return on our investment. But I would love to flip off our local IOU.
Huh?
The purpose of a corporation is to serve customers at a profit. Consolidation and economies of scale have nothing to do with it. Those may justify pursuing growth, but there are plenty of perfectly fine businesses were the growth opportunities are modest and owners/execs screw up the business trying to grow (like barely related acquisitions).
Moreover, owning common stock unless you have a controlling interest is a weak and ambiguous legal promise. You get dividends if there are profits and if the execs feel like paying them out. You have a vote on some matters. Both your economic interest and your vote can be diluted at any time. Getting dividends makes this lousy deal somewhat more palatable.
This is 2000 and 2001 Enron Crisis all over again. Except the con this time is asset stripping for the rich which makes the safe transmission of electricity impossible. Everyone in the USA is now vulnerable to an inevitable catastrophe be it wildfires, plagues, blowback from endless wars or a revolution. Neoliberalism failed. Greed never wins. It is pathological. Humans advance by cooperating. The only way out is peace and restoration of supremacy of constitutional government run by and for the people. Rebuild Public Service to serve and protect Americans.
I think that PG&E has to be seized as a public company but I doubt that Newson is the man for it. The reason is that “Gavin Newsom accepted $208,400 from the utility during his 2018 campaign. Of that total, $150,000 went to a political spending group called “Citizens Supporting Gavin Newsom for Governor 2018,” while the rest went to directly to Newsom’s campaign.” He is now, for all intents and purposes, a company man.
Looking at their Wikipedia entry shows a pretty bad actor. It mentions too that it has total assets of $68.01 billion with an equity of $19.47 billion but I doubt those figures. Consider all the money that will have to be spent to bring it up to code such as tree-clearing, replacing rotten timber posts, replacing transmission towers (I should note that the oldest recorded tower was erected when Teddy Roosevelt was President), and all the other infrastructure and you have a company worth, when all is said and done, approximately two bits. I doubt that most Californians would disagree with that assessment.
Most people recognize what has to be done and how it should be done but I do not think that the Californian political establishment is the one up for the job. The Republicans should be able to make hay on this but as far I can see, they are not even mentioned for some reason. Last time PG&E went bankrupt in 2001 they jacked up prices for 5.1 million of their customers for several years to cancel the debt and I would guess that the plan is a repeat performance but more.
https://en.wikipedia.org/wiki/Pacific_Gas_and_Electric_Company
You’re correct about the CA political establishment. The Dim party in CA is mostly neoliberal and bend to the will of the yuuge corps, especially SillyCon Valley ones. If PG&E is to be made public, all current and future liabilities have to be taken into account in pricing the purchase. All too often when an entity is taken over by the govt. the existing
culpritsmanagement rakes in the money at the expense of the taxpayer. Newsom and gang are clearly dancing to the tune of PG&E.SOME political party should be able to make hay on this issue with the abysmally poor record of the Dem controlled state government. But clearly NOT the Repubs who would simply amplify the very structural problems that got us where we are.
The San Francisco Chronicle has shown great political discipline in avoiding any mention of a public power option in response to the crisis. Even reporting on the fire has been less complete in the last few days, even though it is still burning. NPR has plenty to say about climate change, but is silent on the financial and criminal history of PG&E.
As we saw in the (failed) attempt to oust Chelsea Manning as San Francisco Gay Pride March Marshal by Democrat hacks a few years back, the network can really exert itself when it sees the need. Now they must manage the public appearance of open kleptocracy: PG&E deferred maintenance and sent the funds to stockholders and executives, and now business and household incomes are funding the stock buybacks. It will be interesting to see how the machine has to squirm to get itself out of this one.
Looks like the Chronicle had to respond. Today they reprinted an NYT story mentioning Newsom’s suggestion that a public control option might happen. I guess the public pressure was too great, and perhaps Buffett said no to a buyout.
Buffett’s investment philosophy is to buy well-managed companies (leveraged with cheap financing from his insurance businesses), not ones with enormous liabilities like PG&E…never mind that management has had to consult with attorneys specializing in criminal law about their personal liability. The whole “Warren Buffett will save us” line of thought is more revealing about Newsome and the corrupt Democratic party in the state than it is a realistic expectation.
Bury the electrical lines. Costly, but surely less costly than the fires.
PG&E has probably close to 20,000 miles of transmission lines. The cost of replacing overhead transmission with underground cables is at least $4M per mile and some more complex circuits can cost 10 times that much. Even on the low end the cost would be $80B. If you take a mid-point estimate of $20M per mile, that amounts to $400B. Much of California is densely populated and one simply cannot dig trenches on existing corridors and bury lines Of course, some parts of California are not subject to wildfires (so overhead is OK), but these are areas of very low population.
And while all this new underground construction would be going on, the existing overhead system would still have to be maintained and made more resilient — it would be a decades long project. I also doubt that the manufacturing capacity exists anywhere in the world (and certainly not in the US) to support such an enormous program. The skills set (engineering, management and trades) to pull it off doesn’t exist, either.
Note the above cost is for transmission only (the larges steel towers you see and lower voltages which are usually multiple wood pole structures). Distribution mileage dwarfs transmission mileage and is likely in worse shape than transmission.
Who is going to pay for such a program? Its not that buried transmission wouldn’t largely solve many problems, rather that the current system makes it impossible to achieve. And making PG&E a state-owned entity would not change the scope of the project, except on the margins, assuming it isn’t run like CalPERS or the high speed rail debacle.
The future is not bright.
How many of those 20k miles would be required if the whole system was redesigned to take advantage of microgrids, distributed generation / storage and demand management?
And…underground cables have a shorter service life than overhead cables, thus increasing life cycle costs more.
It would take many years to construct the mini-grid system, and those would need interconnects to provide power when a local facility is down for maintenance or failure. In the meantime remains the crying need to renovate PG&E’s present junky system while the system of the future is being built.
How would a public system have the will to spend money on the transmission & distribution, and renewable generation, when the public regulators of the private system didn’t have the will to force the private system to maintain the system?
…and let’s not forget California has earthquakes. We might be trading fire outages for earthquake outages if we buried the wires.
I have seen overhead lines with “hammocks” underneath to catch any broken wires, so perhaps there’s a different solution
Interesting, about the life cycle. In my neck of the woods, they get around 50 years out of buried 115kV lines, upstate NY. The pipes that the wires are in remain OK, they just have to replace the wires themselves. Said pipes are a few inches diameter usually installed by well drillers.
Drop one of the seven or eight of Americas ongoing wars and you are Golden already. The work would even be finished well before any of those wars are ‘won’ and the money spent would go to American workers so that sagging inflation KPI that the FED is moaning about could be boosted a tiny little bit.
I think it is interesting the way that the utility and size of some categories of expenses and timescales are never questioned whereas others are. This happens even within the scale of my household budget, BTW.
I don’t believe it is safe to assume that CA fires will be much less costly if the electrical lines are buried.
For example, the Carr fire in Redding, CA was apparently caused by a flat tire on a towed trailer that threw sparks into dry grass when the metal rim scraped on the roadway.
When much of CA is a tinderbox during the summer and early fall, burying the electrical lines might prove to be both costly and false solace.
A careless backpacker, fireworks enthusiast, natural lightning or even a house fire in a remote vulnerable region could launch a new catastrophic fire.
And in my view, if the electrical lines were buried, the CA real estate industry would probably view the event as allowing building in even more vulnerable areas.
This matter is rather close to me as my Santa Rosa, CA house burned down in the October 2017 Tubbs fire.
The insurance industry will, eventually, drive CA development in fire-prone areas.
Agree that the insurance industry will drive development away from fire and flood prone areas. Certainly the politicians won’t.
The difference in ecosystems, demographics and power challenges of Nebraska (publicly owned utility) & California is vast.
To replace the shareholders of PG&E as a source of capital for a p.o.u., Cali would likely need some new progressive taxes, focusing on those most benefiting from all-things-electric: silicon valley. The wealth is there to support it. But is the political will there also?
I am in agreement that this is a political issue. As of 2016 Calfornia had the 8th highest utility rate in the country so where has all that money gone? If California was a country its economy would be the 5th largest in the world yet they have a 3rd world electric infrastructure. While they have unique challenges in regards to the ecosystem and demographics, with all that wealth they should be able to keep the lights on.
Actually, one very old Silicon Valley city, Santa Clara, has it’s own municipal power company, Silicon Valley Power [SVP]. SVP has a 1896 origin as Santa Clara Electric. Funny how it’s never mentioned in recent local news commentary regarding switching to Municipal Utilities:
And then there’s Google’s Google Energy, which FERC very quietly provided with a Utility License to Buy and Sell Energy in February 2010. In 2016, Apple did the same.
As to this:
I hope you didn’t mean all of it’s residents, a vast amount of whom rent, don’t work in tech, and are either facing homelessness, or have become homeless and already have been punished significantly by California taxes, particularly one of the highest average sales tax rates in the country. Now, horrid Newsom has signed off on a Healthcare Mandate Tax modeled after Obama’s, despite the fact that near at least 3 million cannot afford the rents anymore, yet don’t qualify for Medi-Cal, so don’t have any healthcare insurance.
The nub?
Of course that assumes you have a functioning democracy where politicians pay a price if the services under their charge are defective. Unfortunately all of our current arrangements seem designed to isolate the people in charge from consequences to the greatest possible extent. Insofar as this is less true on a local level than national then perhaps “municipalization” is the way to go.
The Washington Public Power Supply System (WPPSS) scandal of the 70s and 80s is an excellent case study of the advantages and disadvantages of public control of power.
Public agency bonding authority was misused to fund construction of five big nuke plants. Huge cost overruns were incurred, but then the energy crisis cut power demand, eliminating need for the plants, and forcing price increases that drove demand down even further. Ratepayers were incensed, and threw pro-WPPSS members off the elected public utility boards. When the new board representatives exerted their power as members of WPPSS, two plants were terminated immediately, two were mothballed (and ultimately terminated), and one was finally built. A huge series of lawsuits later exposed legal and financial fraud by almost every major actor, though it was mainly settled out of court. But it would all be going on today had the ratepayers not been able to overthrow their local utility boards (and one of them, Snohomish PUD, later was the first to bring suit and publicly accuse Enron of swindling them during that scandal). As a result of the WPPSS crisis, northwest public utilities took a leading role in energy conservation.
So public power is no miracle, but they don’t do stock buybacks, do they? Financial market control of utility policy still exists, but mainly indirectly through the bond market when funding is required for new generation. And as the WPPSS scandal shows, ratepayer activism using the elected board structure can stop looter control of utilities and turn them in the direction of public good.
Efficient, inexpensive, reliable models for public power exist all over California; L.A. Power and Water and the Sacramento Municipal Utilities District that shut down a nuke decades ago.
The overshadowing danger that few mention are the TWO nuclear reactors controlled and “maintained” by PG&E at Diablo Canyon. Years ago, Gavin Newsom, sitting in a temporary sinecure the Democrats found for him on the State Lands Commission, could have shut down these reactors with a vote to deny them further access to state controlled cooling water. Instead, Newsom voted to extend the life of the reactors another 6 years, protecting PG&E’s stock value, which seems to be his main public service goal.
Hundreds died in PG&E fires. Because of Newsom’s vote,
Millions could die, with trillions of dollars of damage.
“Peck was the lead on-site (Nuclear Regulatory Commission) inspector for five years at Diablo Canyon, which has two reactors designed to produce about 18,000 gigawatts an hour (GWh) of electricity annually.”
“Peck’s report concludes that the nearby Shoreline, Los Osos, and San Luis Bay fault systems are capable of producing ground motions that exceed the plant’s safe shutdown precautions, according to the AP, which said it had verified the authenticity of the report.”
“According to Peck’s analysis, no one knows whether the facility’s key equipment can withstand strong shaking from those faults — the potential for which was realized decades after the facility was built, the AP said, citing the report.”
https://www.scientificamerican.com/article/u-s-inspector-wanted-reactor-shut-on-quake-fears-report1/
“In the wake of the 2011 explosions at Fukushima, the NRC staff compiled critical reforms for American reactors, including Diablo. But the Commission killed the proposed regulations. So nothing significant has been done to improve safety at two coastal reactors upwind of ten million people that are surrounded by earthquake faults in a tsunami zone like the one where the four Fukushima reactors have already exploded.”
https://www.commondreams.org/views/2019/07/11/quake-make-los-angeles-radioactive-dead-zone
Not sure I want to praise LADWP as a model utility. Their offices were raided by the FBI and the are under investigation by the Feds for corruption including over-billing their own customers. LADWP is also is the last California utility of significance involved in coal(out of state though).
I actually think the best argument for municipalization is where the municipality wants to “underground” all of the infrastructure. This was done on a small scale in Winter Park, FL(a relatively affluent suburb of Orlando). San Diego(not served by PG&E) is also undergoing a under-grounding program but in concert with SDG&E. Not sure if this was a actually a better solution.
If places like SF and San Jose were committed to a major infrastructure rebuild and undergrounding program I would be more enthused by municipalization but at this point I would be concerned about them using it as cash cow.
I found this explainer from the Nebraska Public Power District if anyone is interested – 2018 Public Power in Nebraska
An interesting point from 1 of the charts is that California has the largest shortage of electricity generation vs demand in the entire country. As of 2015 California had to get about 25% of their electricity needs from out of state. If climate change is as serious as it is made out to be then image if California made their utilities public like Nebraska and converted that 25% to renewable energy that was generated in state.
It is becoming obvious that PG & E needs to broken up, recapitalized, and protected from future theft. Last month, I posted the following into a related NC thread:
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One big PG&E problem is its centralization.
Break it up into regional distribution companies, each regional operator having a common interest in transmission lines linking the regionals and the lines to the generating facilities.
Regionals might (or might not…good case either way) own the generating facilities.
Set up the regionals as co-ops, owned by their customers (not external shareholders). All company revenue goes toward buying and distributing power and maintaining infrastructure.
This model is already very successful in other parts of the country.
It puts control into the right hands. The parts could be made quite small (a few counties each). PG&E is now or about to be in receivership. Who else wants the parts (their decrepit state and attendant legal risk suggests that no one else wants them).
So, if the consumer is going to have to pay to fix (bail out the thieves), then the consumer owns the asset once the heavy lifting is done.
Contra-example to the bank bailouts.
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In reply to my post, Heresy101 posted the following. Thx in advance to Heresy101 for permission to repost his/her post. Omissions, errors etc. all mine.
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Much of the structure is in place to take over and operate PG&E’s assets. 25% of California’s electricity is delivered by municipal utilities & irrigation districts.
Community Choice Aggregations (CCAs) are public entities that are mandated to provide renewable power as cheap, or cheaper, than PG&E, SCE, and SDG&E.
Currently, they provide about 50% of the power but don’t own or manage the distribution/transmission lines. They would be ideal entities to run broken up PG&E assets.
https://cal-cca.org/
https://cal-cca.org/about/members/
The public Transmission Agency of Northern California (TANC) would be an ideal starting point to take over and upgrade PG&E’s transmission lines.
http://www.tanc.us/mission_history.html
http://www.tanc.us/environmental.html
Make it public and it will have good maintenance!
Just like our country’s bridges and dams!
Oh. Wait a second here.
Keep shrinking that government.
Keep it private and they can’t keep the lights on.
Then they burn down the neighborhood (like SCE tried to do to mine, twice).
It is true that public ownership is no silver bullet against corruption and mismanagement. But, the maintenance couldn’t really get much worse than it’s been, *and* crucially, public ownership instantly frees up the $billions/year currently going to shareholder dividends, lavish exec-comp and political lobbying for use where it is needed, long-deferred grid maintenance. The article failed to make this point strongly – we are talking about a *lot* of money currently going elsewhere than it needs to go. Total up that fiscal drainage over 2-3 decades and it adds up to a massive pile of money, which I’m guessing is of similar magnitude as the huge sums being mentioned in the context of “how much is needed to overhaul the statewide grid”.
Public officials inspect businesses (restaurants, for example) and can encourage reform via fines and posted health department grade signs.
If PG&E knew that public officials had the training, expertise and funding to inspect PG&E facilities AND then fine PG&E and fund repairs via the fines, I believe PG&E would behave differently.
That is why I see the existing situation of poor maintenance as evidence of a failure of State government oversight.
A publicly owned utility that was under similar lax oversight may behave the same way.
But it would not be under pressure to pay out dividends, and would be politically responsible to the ratepayers, not faraway shareholders.
Public and co-op power has an extensive history in the West, as other commenters have pointed out; barring WPPS, which was corrected at great expense (boy, do I remember that battle, and I’m not even in WA), it has a very good record. Better than PG&E, by far.
Mr. Phillies,
The Oroville Dam was a construction defect from back in the 1960s. No reinforcing steel was used in the spillway, and it crumbled. It has nothing to do with maintenance.
Bridges have a lifespan. Some maintenance, like repainting and resurfacing is possible, but without money forget it. Even with unlimited funds, bridges eventually have to be replaced.
Now, let’s talk about the Romans and Victorian engineers. Their bridges still stand, and in some cases are still used. Massive overbuilding and redundancy make that possible.
Sigh.
When government does it, government disappears.
It would be like anything else run by government: it you’re unhappy about it well then just write a letter to a newspaper and that will fix it.
Btw, what about PG&E’s bondholders? In an egregious situation such as this (betrayal of public trust) shouldn’t they be wiped out too and not just the stockholders? As an example to encourage lenders to require more responsibility from borrowers?
And also to make the conversion of PG&E to a customer-owned co-op less expensive?
Interest rates would soar, you might say? Not according to MMT.
Pensioners might suffer? Then let’s have generous Social Security Benefits to compensate.
But what if the bondholders are banks and other depository institutions? Might wiping out the bondholders damage our one and only payment system (besides mere coins and paper FRN’s ) that must work through the banks, etc. or not at all?
Hence the need for an additional but inherently risk-free payment system consisting of individual, business, etc. debit/checking accounts at the Central Bank itself so that we are no longer held hostage to a government-privileged usury/gambling cartel.
I live in Santa Clara, one of the few cities in Northern California blessed with a municipal power company. We pay 4 cents per kwh less than PG&E customers, have excellent electric power infrastructure, and have virtually no chance of having the power shut off to prevent fires. I ask my friends in other cities why they put up with PG&E, and they just shrug their shoulders. The concept of a publicly-owned utility just doesn’t register with them. We all need electricity, just like we need clean drinking water, which is most often supplied by a municipal utility. So why is electricity different from water?
Not only do I pay less than PG&E, but our utility incents customers to conserve. PG&E loses profits when their customers conserve – the whole notion of conservation is at cross-purposes with their drive for profit. Public power has the exact opposite incentive – conservation reduces the need for high-cost peak power generation, which in turn lowers the average cost of power acquisition for the utility.