Gavin Newsom knew he was inheriting major issues such as affordable housing and the growing homeless quagmire when he was elected governor. It is doubtful, however, he expected to be thrown the curve ball known as PG&E.
PG&E is a big mess not just politically for the governor but for the economic vitality of California, and the pocketbooks of 16 million people. PG&E’s well-documented laissez faire attitude toward the need to update its aging infrastructure that those in the for-profit utility’s corporate suite milked as a cash cow to fill their pockets with six to seven figure bonuses and to keep the money flowing to Wall Street hedge funds gave birth to a fire insurance crisis not to mention a major drain in state and federal emergency management resources.
The last time PG&E decided to put profits first and foremost at the expense of public safety, investment in infrastructure, and being a good steward of public resources it has been entrusted with via the state’s granting them a monopoly Gray Davis was recalled as governor, the company plunged into bankruptcy, and they killed 8 people while blowing up a San Bruno neighborhood.
PG&E didn’t learn anything from its reckless behavior. Now they have created more political quicksand for those in Sacramento, have again entered bankruptcy, and upped their death game by killing 85 people, burning 20,000 homes and other buildings, and almost wiping an entire town off the face of the earth,
The question that Newsom must ask regardless of all of the promising and posturing PG&E is making that they will be a responsible corporate entity going forward is can California afford to give PG&E a third chance?
Those that have paid the price for PG&E’s bankruptcies have not been the well-paid corporate teams, the hedge funds, or even creditors to a large degree. It’s been 16 million Californians held hostage by the PG&E way. PG&E’s customers have bailed out the rogue cooperate behavior. Customers have paid dearly by being forced to pay the nation’s highest electrical rates. And at least 93 customers have paid an even higher price in losing their lives so PG&E can continue to exist.
Newsom can end PG&E’s reign of terror, build a foundation for a stronger California economy, reduce wildfire danger, and make housing more affordable for 16 million people all in one fell swoop.
And he can do it by investing part of the $21 billion in projected state budget reserves for economic downturns in the upcoming year by spending part of it to take over the biggest drag on a third of California’s economy — PG&E.
PG&E, as it stands now, arguably no longer meets the basic state criteria to operate an electric franchise when it comes to its financial stability and wantonly endangering public safety.
Given the state holds the cards as to whether PG&E can have a franchise to begin with they could obviously force a sale. The current market value of PG&E has fallen to $6 billion.
The goal would be to resell as much of the PG&E distribution system as possible to local non-profit agencies while opting to tap into the Northern California Power Authority or forming a similar agency to oversee and operate the transmission system.
Government power agencies in PG&E territory consistently deliver electricity at lower rates than PG&E. The PG&E arguments used to try and stop an agency like South San Joaquin Irrigation District from taking over a part of their territory is the same PG&E used in their epic battle from 1923 to 1946 to prevent the Sacramento Municipal Utility District from doing the same thing. The court battle centered on whether SMUD was competent enough, could run a system safely, was financially muscular enough, and whether they could provide dependable service.
SMUD today has rates 35 percent lower than PG&E, rarely has equipment starting fires, has never filed bankruptcy, and hasn’t killed any customers.
Imagine the impact of not having PG&E as the electric provider can be when it comes to people being able to afford to keep a roof over their heads. Lower rates means lower housing costs.
Those that are the most vulnerable to PG&E’s stratospheric rates — the poor and working families none of which can afford to install solar to reduce their exposure to PG&E’s high cost — would have more breathing room.
Given energy is an expensive component of doing business having electricity that could end up being anywhere from 10 to 35 percent cheaper than PG&E would improve the business climate.
Local control also means better response to service and system issues. There is a reason Trinity Utilities District surrounded by PG&E deep in the heart of the mountainous rural area of northwest California has significantly less wildfire-related issues while charging their customers less. They aren’t worried about making sure Wall Street hedge funds turn a profit. They also know what is in their own backyard. That means they are more responsive to local conditions such as wildfire threats and take the required steps to aggressively reduce that risk.
Just like with water and wastewater system ratepayers will have the ears of those that provide electrical power if they are a public agency. That is dramatically different than PG&E that dances to the tune hedge fund managers sing.
Much of the $6 billion would be returned to the state as public power agencies are formed or expanded. Given it takes capital to do that as well as to improve infrastructure, the private financial sector would not be cut out of the picture. They could rely on stable long-term investments while customers could rely on more stable long-term power costs.
There would be no need to feed a built in minimum 10.5 percent profit that PG&E and other for-profit power providers in California are guaranteed by the state. Nor would there be an attempt to try and retrieve even large Wall Street style “returns” that is essentially even higher profits.
PG&E had its second chance and it blew it sky high.
Giving PG&E a third chance would set a new standard for reckless behavior even for Sacramento politicians.
If the past 15 years has taught us anything it is PG&E can’t operate a utility with a guaranteed customer base without financially running it into the ground, they can’t be entrusted to replace aging and faulty equipment before they cut checks for hedge funds, they can’t provide low cost power, they can’t be trusted with human lives, and as the forced blackouts of the past year underscore they can’t even provide reliable service.
California’s future depends on getting rid of PG&E and putting in place non-profits dedicated to serving their communities and not Wall Street hedge funds.