Making PG&E into a Cooperative

I'm reading Katherine Blunt's wonderful and tragic California Burning: The Fall of Pacific Gas and Electric -- and What It Means for America's Power Grid. I recommend it to anyone looking a broader understanding of the need for and complications of California's transition to clean energy.

At the end of chapter eleven, Blunt describes the moment in 2019 when converting PG&E into a cooperative or a state-owned utility was being advocated from many corners. As Blunt describes it, the decision fell ultimately to Governor Gavin Newsom and his choice for the head of California Public Utilities commission, Marybel Batjer. 

The arguments in favor of ending private ownership of PG&E were obvious to everyone. In the previous seven years, PG&E had payed out $4.4 billion in dividends to its shareholders while massively failing to meet its commitments to hardening the electrical grid to prevent wildfires. It failed in those commitments due to a lack of resources. So the thought has to occur to you that maybe if PG&E had taken that $4.4 billion and put it into preventing wildfires, the town of Paradise would still exist and eighty-five people wouldn't have burned to death or died of smoke inhalation.

But Newsom and Batjer ultimately decided to let PG&E remain private. In her book, Blunt outlines the three main reasons for this.

First, the cost of acquiring PG&E. As I write, PG&E's stock is trading at $14.89 per share and there are 2,465,411,810 outstanding shares. Let's call that $38 billion dollars to buy the whole mess. The whole California state budget for 2022 is $308 billion, just for reference.

Secondly, Newsom and Batjer held off because the new public or cooperative PG&E would still face liability for wildfires going forwards due to reverse condemnation, the law by which victims of damage from PG&E's operations can require the utility to compensate them. Since there is still a great deal of work to be done in securing the electrical grid from wildfire damage and climate change is only making our vulnerability to wildfires worse, the new cooperative or public utility would also have to come up with the money for inevitable future wildfires.

And last, PG&E and its shareholders would fight any such effort with every weapon at their disposal. That is not a fight that Newsom had the stomach for. In the real world we have to chose our battles carefully, so maybe he was right.

And yet it's hard for me to picture Northern California being able to protect itself, let alone carry out the clean energy transition, so long as PG&E's ultimate goal is to siphon off money for Wall Street. 

I would like to see the CPUC establish an ongoing effort to plan for an eventual takeover of PG&E. That planning should include a legal and legislative strategy for paying next to nothing for PG&E on the grounds that the utility's negligence over decades has left the state with work and risks that must be done to make PG&E functional. Sort of like discovering termite damage in a house you're considering buying and therefore demanding a reduction in the price of the house. Only in the case of PG&E the price of the house would be reduced to the price of a mobile home in a trailer park, so to speak.

Secondly, once PG&E is safely out of Wall Street's hands, the law of reverse condemnation should be modified to limit the new utilities risks on the grounds that there is only so much that can be done at once to fix PG&E's decades of neglect. Standards should be established for how much the new cooperative utility can realistically do in a given year and its liability should be reduced accordingly. Of course, we shouldn't do that for PG&E now because you don't cut a break like that for the SOBs that created the problem in order to make money.

And that last problem, the problem of getting into a big fight with Wall Street. Well, that's something else that just has to happen sooner or later. As I mentioned, you have to pick your battles, but if there's a fight that you have to have "then 'twere well it were done quickly."


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