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Reddy Kilowatt might just look good in orange
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Not that anyone in the upper echelons at PG&E is going to be exchanging an executive suite at 77 Beale Street in San Francisco for a cell at Leavenworth federal prison but the firm that once was represented by the lovable Reddy Kilowatt is anything but lovable these days.

Had the 12-count federal criminal indictment handed down this week happened in the 1960s, it would have shocked and perhaps even outraged the for-profit utility’s customers. That’s not the case anymore.

Most people seem to assume that PG&E’s corporate structure is rotten to the core. That certainly isn’t the same attitude the general public has when it comes to the hardworking men and women who keep our lights on and the natural gas flowing. In fact, investigation after investigation shows the PG&E rank-and-file routinely warned their superiors of pipeline safety concerns that were then just as routinely ignored as they were sent up the food chain.

So what happened?

Some blame deregulation but that isn’t the real culprit.

PG&E, just like many other corporations viewed as blue chip investments, got hooked on a powerful drug. That drug was supercharged profits. And the pusher of the drug was the Wall Street cartels.

Profit isn’t a four-letter word. That said there was a time when firms such as banks were content with steady profits. In the 1960s, banks opened at 9, closed at 3, and were happy with 6 percent profits.

PG&E – and other California for-profit utilities – had it even better. State regulators currently guarantees them a 10.5 percent return on their investment no matter what the market or the economy does.

But then it happened. Wall Street investors wanted a bigger thrill in the form of bigger profits. 

Banks were able to comply without cutting corners. Instead, as federal and state regulations changed they were able to roll out new products and tap new markets. And while the image and your perceptions of your local bank branch changed as well as your relationship and the cost of doing business with a bank was altered, you weren’t forced to stay with them. There were upstarts out there – local and regional banks – that saw how the big guys were ditching small business and such in favor of chasing bigger and bigger dollars.

At one point, when Bank of America was still based in the state of its birth here in California, there was a running joke among customers that it was easier getting a loan from BofA if you were a foreign country or a large out-of-state corporation than if you’d been one of the steady customers of “little guys” that Amadeo Giannini served to create one of the world’s largest financial institutions.

PG&E – the company your father once told you to buy along with bank stocks as a basis for a sound retirement – could not tap new markets. Sure, Reddy Kilowatt urged customers to buy new electrical appliances such as the cutting edge electric ranges of the 1960s. But beyond new electrical gadgets PG&E couldn’t grow any faster than the population it served.

Still, a 10.5 percent steady return the state assured public utilities such as PG&E in exchange for being regulated as a monopoly was considered golden.

That is until Enron came into the world. It was able to send profits sky high by various slights of the hand that went undetected for years. At the same time, they aggressively pushed deregulation of the energy markets, promising lower costs to customers and higher profits for utilities.

PG&E along with other major regulated utility players jumped on the deregulation bandwagon. In order to win the final legislative votes needed to deregulate California’s utilities and allow them to find wonderful ways to circumvent the 10.5 percent return on their investments that also represented a ceiling as well as a floor, they dangled a populist carrot.

In exchange for being deregulated they would provide exemptions to power transmission charges to irrigation districts such as South San Joaquin Irrigation District to allow them to enter into the retail power business. Once they got deregulation, PG&E then set about doing everything in their power to renege on the carrot. Obviously PG&E didn’t count on SSJID’s tenacity or fully understand how well positioned SSJID is financially and in terms of infrastructure to be able to actually deliver significantly lower rates.

Meanwhile, deregulation allowed PG&E to create a holding company to sell itself to itself. That pumped up profits by having ratepayers who already paid for power plants and other infrastructure once through rate charges to pay for them again. PG&E’s top management also found other ways to supercharge profits.

It was during this period they slashed rank-and-file staffing even as construction was booming throughout their service territory not to keep rates down as much as it was to keep pumping up profits. It was when the brass put pressure to reduce all costs, setting the stage for what seems to be a rampant disregard for safety concerns about pipelines and such that frontline PG&E employees were dutifully telling their superiors about.

The federal indictment of a public utility is extremely rare.

That said someone needs to pay for the reckless disregard of innocent lives in the pursuit of what seemed to be PG&E’s No. 1 priority when the San Bruno explosions occurred – more profit at any cost.


This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at or 209.249.3519.