PG&E, without a doubt, needs billions of dollars to prevent the quasi-monopoly they have been bestowed from plunging the Northern California economy into Third World status.
The for-profit utility is seeking $4.84 billion in additional money from ratepayers over a three-year period starting in 2014 to do major infrastructure replacement, safety improvements and upgrades to their natural gas and electricity distribution facilities that have been avoided, delayed or ignored for years.
If you doubt the scale of the need go to San Bruno, where PG&E’s failure to invest in upgrades of aging infrastructure killed eight people and leveled a neighborhood. You can look elsewhere as well, from San Francisco to Roseville — where natural gas line failures have sent flames soaring through street asphalt. And you can probably look around your own neighborhood and the nearby countryside to see more evidence of neglect — power poles with markers on them that are long past their life expectancy. Treated wood does rot, pipes do deteriorate, and wires do fatigue.
The International Brotherhood of Electrical Workers knows better than anyone else the price of PG&E’s past management style, focusing on profit above the obligation to operate as a responsible steward of a critical economic engine that goes with the government creating a protected monopoly for natural gas and electricity.
For years, PG&E has been scaling back construction crews. While you can’t find fault with PG&E and how their crews handle power restoration in the aftermath of storm damages, flooding, or earthquakes, you can find plenty to criticize in the company’s failure to act like a real business.
Consider this: If a trucking firm, instead of periodically replacing tires kept using patches to fix flats and waited until all tires failed to replace them, they’d be in big trouble. First, increased tire failures would undermine reliability and dependability. And — if they pushed it enough — all of their cost savings could align into one major traffic accident that would cost them and their insurers millions of dollars as well as a loss of lives.
That is exactly the type of behavior that PG&E’s past brass have engaged in. But unlike the trucking company that would have gone out of business because more reliable, safe, and efficient competitors would peel off their business. PG&E has no such competition to keep pressure on them internally to make sure critical infrastructure replacement is done.
That pressure is supposed to be applied by the California Public Utilities Commission, but the CPUC has proven to be more of a lapdog than a watchdog.
That is the biggest problem with the proposed PG&E general rate hike. It’s not the fact that PG&E may indeed need most or all of the money. It’s the fact there is no way of guaranteeing that any of it will be spent wisely and efficiently.
PG&E owns 2.3 million power poles that their own experts say need to be replaced every 50 years on average. That translates into 46,000 power poles that should be replaced every year. The CPUC did the math and has repeatedly granted rates that provide PG&E with money to replace that many poles a year. Records show that in 2002 and 2003 PG&E replaced only 15,000 poles or 121,000 fewer than what ratepayers paid for. Then in 2004 they cut the replacement rate to 3,300 annually. They money was used elsewhere, or was considered profit.
If that wasn’t bad enough, the CPUC several years later granted PG&E a rate increase to replace the very poles that PG&E had already been allowed to charge ratepayers once before to replace.
PG&E may have questionable practices but they pale in comparison to the systematic and continued failure of the CPUC to oversee the utility and to do anything to protect the interests of ratepayers.
Over the course of three years the PG&E rate hike will cost an average combined electrical and natural gas residential customer around $500. It will mean roughly $20 million will be taken from the pocketbooks of residential users in Manteca, Ripon, and Escalon alone over to do work that would have been substantially less had PG&E and the CPUC been acting prudently.
Without the work, the economic cost could ultimately be much higher for everyone.
Even so, we need to ask not simply whether all of what PG&E is asking for is justified but whether the CPUC has the will and expertise to analyze and monitor what is the utility equivalent of the Marshal Plan for Northern California.
This column is the opinion of managing editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at firstname.lastname@example.org or 209-249-3519.