A better way: Let’s give PG&E’s customers the reins
https://www.elkgrovenews.net/2019/11/a-better-way-lets-give-pg-customers.html
By Sam Liccardo, Special to
CalMatters |
“I think
it’s wrong that only one company makes the game “Monopoly.” - Steven Wright.
The light
at the end of the utilities’ tunnel has been shut off for the hundreds of
thousands of California residents who have recently lost their power, been
evacuated from their homes, or worse.
The
current dystopia of alternating wildfires and blackouts follows a decade in
which Pacific Gas & Electric distributed $7 billion to shareholders but
chronically underinvested in maintenance and safety.
It
follows a year in which the company’s executives proposed $11 million in
bonuses for themselves, while in bankruptcy, with tens of billions of debts to
wildfire victims.
In
bankruptcy court, two hedge funds cast lots over the company’s carcass, with
one set of investors proposing to issue junk bonds to pay debts, and the other
pledging to pay off wildfire victims with—wait for it—PG&E’s worthless
stock.
If
history is any guide, we’ll see PG&E emerge from bankruptcy burdened with
multi-billion dollar obligations for infrastructure upgrades, and an ownership
group seek to deliver short-term “shareholder value” at the expense of
long-term investment. State taxpayers, inevitably, will be left with the tab.
Mayors
and other local leaders throughout California have banded together to publicly
urge exploration of an
alternative model: a customer-owned utility.
To be
clear, we do not advocate for government ownership of PG&E, which would
require a buyout costing taxpayers tens of billions of dollars for poorly
maintained infrastructure, before a single dollar would be spent improving
it.
Rather
than having the government manage this multi-billion dollar enterprise, the
company should be run like other customer-owned businesses—such as credit
unions, or mutual insurance corporations—with management responsive to markets,
and responsible to customers.
It’s
hardly a novel concept. More than 900 utility “cooperatives”—including a couple
with billions in revenues—currently serve 19 million customers in the
U.S..
Two
reasons motivate our efforts:
- First, we need a
PG&E that aligns its financial interest with the public interest. A corporate board representing customers—rather than New
York hedge funds or global institutional shareholders—will best focus the
company’s resources on providing safe and reliable service to California
ratepayers. Restoring the public trust in PG&E requires bringing
customers into the boardroom.
- Second,
regardless of who or what owns PG&E when it emerges from bankruptcy, a
tall financial mountain remains. All of the solutions to what ails our
electricity distribution system— such as building microgrids, upgrading
transmission and distribution lines, and improving vegetation
maintenance—will require tens of billions of dollars of investment. We
need a utility company with ready access to capital markets to make these
big bets.
A
customer-owned cooperative would encounter sharply lower capital costs than
PG&E does today, because it would not need to pay dividends to
shareholders, or federal taxes to Uncle Sam. By saving billions in interest
payments, a customer-owned company would devote more of its resources to
improving the company’s infrastructure and service.
As local
leaders representing five million residents served by PG&E, we’re urging
the California Public Utilities Commission—which has the authority to approve
or reject whatever entity emerges from the U.S. Bankruptcy Court—to broaden the
scope of its review.
Rather
than simply rubber-stamping the outcome of the bankruptcy court proceedings,
the Public Utilities Commission must embrace its role as guardian of the public
interest. It must consider whether a customer-owned model can better
deliver results and restore public trust than can a hedge fund looking to
rationalize its purchase of stock at four times its current market value.
When
asked about our proposal, a PG&E spokesperson remarkably told
the Wall Street Journal that the company is “not for sale.” Of
course, PG&E is for sale. That’s the irritating little thing about
bankruptcy. The question isn’t whether the company gets reorganized, but how,
and whether we’ll use this crisis or waste it.
No one
should pretend that the path ahead is an easy one. A newly-branded
customer-owned utility won’t save us from wildfires or power-shut offs next
month, or even next year. Microgrids will take billions to build many
years to install.
Century-old
transmission poles will take time to replace. Public trust may take longer to
restore. A new model of ownership will better ensure a single-minded
focus on improving service, safety, and reliability—and that’s a future worth
investing in.
_____
Sam
Liccardo is mayor of San Jose, America’s 10th largest
city, mayoremail@sanjoseca.gov. He
wrote this commentary for CalMatters, a public interest journalism venture
committed to explaining how California's Capitol works and why it matters.
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