PG&E wildfire state bill blasted as bailout by some, deemed vital by others(mercurynews.com)
mercurynews.com
PG&E wildfire state bill blasted as bailout by some, deemed vital by others
https://www.mercurynews.com/2018/07/17/pge-wildfire-state-bill-blasted-as-bailout-by-some-deemed-vital-by-others/
34 comments
My mother in law lost her home in the Butte Fire that was also a result of negligence on the part of PG&E. They don't deserve a bailout of any kind.
Favorite quote:
http://leginfo.legislature.ca.gov/faces/billVersionsCompareC...
Complicating matters, PG&E employs (new bill author Assemblymember) Quirk’s son.
http://leginfo.legislature.ca.gov/faces/billVersionsCompareC...
So this was a bill about plug-in hybrid electric vehicles, and they just re-wrote the whole thing to be about wildfires? What's the point?
I'm assuming it's a bargaining chip that lawmakers can use. E.g., it you vote for this thing I care about, you can rewrite my bill (that probably wasn't going anywhere anyways) for your own ends. Maybe someone with more insight in to state politics could weigh in...
Right. But why not just make it a different bill?
If you’re looking for fast legislation, you have to ‘gut’ an existing bill because the CA constitution requires a 30 day wait after you introduce a bill (with an exception for budget bills).
CA constitution requires a 30 day wait
Either house can have rules about that, but such rules are routinely waived by the Democrat leadership.
One point of the strategy is that the murdered bill number already traversed one or more required committees that the bill rewriter wants to avoid.
I don't understand the outrage.
PG&E is a public utility. That it is not officially an arm of the government is a mere technicality. It has two potential sources of income - ratepayers, and taxpayers. Where do you think the money is going to come from?
PG&E is a public utility. That it is not officially an arm of the government is a mere technicality. It has two potential sources of income - ratepayers, and taxpayers. Where do you think the money is going to come from?
PG&E is publicly traded (PCG.SG), the debate in the capitol is how much those stock holders should pay (through reduced dividends) vs. ratepayers.
PG&E is making the argument that the cost to too high to be paid off by investors. If they state allows the cost to be fully covered by rate payers (keeping profits margins unchanged) what is the incentive for PG&E to take actions that reduce fire risks in the future?
This issue has come up in the past as well, e.g. the San Bruno pipeline explosion and what resulting safety upgrades should be financed though state approved rate increases vs. investors (reduced profits)
PG&E is making the argument that the cost to too high to be paid off by investors. If they state allows the cost to be fully covered by rate payers (keeping profits margins unchanged) what is the incentive for PG&E to take actions that reduce fire risks in the future?
This issue has come up in the past as well, e.g. the San Bruno pipeline explosion and what resulting safety upgrades should be financed though state approved rate increases vs. investors (reduced profits)
I think you miss my point.
PG&E may be publicly traded, but it's not subject to market forces. It's a government-granted monopoly in the strictest literal terms. Penalizing the company or their shareholders doesn't change the market landscape; it doesn't improve the position of competitors or risk bankrupting the company.
PG&E's profit (dividend) is effectively decided on by a public committee. They pick how much profit the company gets on a cost-plus basis. They could pick any number at any time; they could certainly pick zero.
Let's say these bad events keep happening and we just keep the number at zero indefinitely. What changes?
PG&E may be publicly traded, but it's not subject to market forces. It's a government-granted monopoly in the strictest literal terms. Penalizing the company or their shareholders doesn't change the market landscape; it doesn't improve the position of competitors or risk bankrupting the company.
PG&E's profit (dividend) is effectively decided on by a public committee. They pick how much profit the company gets on a cost-plus basis. They could pick any number at any time; they could certainly pick zero.
Let's say these bad events keep happening and we just keep the number at zero indefinitely. What changes?
> PG&E is a public utility.
No, it's a publicly regulated private utility.
> That it is not officially an arm of the government is a mere technicality.
No, it's not.
> It has two potential sources of income - ratepayers, and taxpayers. Where do you think the money is going to come from?
It should come from ratepayers, because significant portions of the state are served by different (sometimes actually public, e.g., SMUD) utilities instead of PG&E.
And I say that as a PG&E ratepayer.
No, it's a publicly regulated private utility.
> That it is not officially an arm of the government is a mere technicality.
No, it's not.
> It has two potential sources of income - ratepayers, and taxpayers. Where do you think the money is going to come from?
It should come from ratepayers, because significant portions of the state are served by different (sometimes actually public, e.g., SMUD) utilities instead of PG&E.
And I say that as a PG&E ratepayer.
I'm a PG&E ratepayer as well. I disagree that we should pay for it. PG&E is a publicly-traded utility. The shareholders should pay for it through reduced dividends. They're ultimately responsible for PG&E's management, who is responsible for the failed process that led to their culpability in the wildfires.
If PG&E doesn't have enough cash on hand, they should be forced to borrow it. If that wipes out dividends for investors for years to come, so be it.
If PG&E doesn't have enough cash on hand, they should be forced to borrow it. If that wipes out dividends for investors for years to come, so be it.
The Forum program on NPR this week at one point covered this. The ceo of the company said on the last earnings call that this would not bankrupt them. I dont recall if they had cash, or just had secured financing for the repayment amount, but they can cover at least this fire okay.
(minor correction: Forum is a KQED production, not NPR). KQED-FM broadcasts content from NPR, PRI, and others as well as their own original content.
Then what's going on here? Why is AB33 a thing? Just greed?
It’s a systemic imperative of capitalism to externalize the costs of extracting profits from society onto society itself. Governments are incentivized to facilitate this because they have long been captured by and dependent on capital for continued support and existence. If there is a path for increasing profits by offloading costs onto the public, it will be pursued to the maximum extent.
But yeah, most of us who wind up shouldering the public burden of externalized costs to maximize private profit would call it greed.
But yeah, most of us who wind up shouldering the public burden of externalized costs to maximize private profit would call it greed.
It should come from ratepayers, because significant portions of the state are served by different utilities
That's like saying PGE customers should pay for SMUD's choice to decommission a functional nuclear plant.
> But the premise that customers, rather than company resources,
I was accepting, for the sake of discussion, the implicit premise in the post I was responding to that on some level the choice was between taxpayers and ratepayers paying; otherwise, yes, stockholders would have been at least part of the answer.
I was accepting, for the sake of discussion, the implicit premise in the post I was responding to that on some level the choice was between taxpayers and ratepayers paying; otherwise, yes, stockholders would have been at least part of the answer.
It's not like the rate payers made any bad choices that PG&E did ... nor do they have a choice to switch do they? Lower income folks will get hit hard too I would think as far as a % of their income won't they?
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ianal, but this honestly seems odd to me.
I'm assuming in this case all the issues are with transmission, which is afaik mostly regulated by FERC and CAISO in this case, but California's weird for these sort of things so who knows. Mostly you go through FERC, sort out what transmission work you want to do, do the work and get rate recovery from your customers. That's sort of the system I've been familiar with.
But this sort of uncompensated liability just doesn't track very well. It sounds nice in a 'stick it to the man' sort of way, but doesn't fit with how transmission regulation works in the US.
If this were a government operated utility, there's no question ratepayers would be the ultimate people dealing with potential liabilities of affected parties. California's stance is that the liability is consistent between a government and non-government utility, so why isn't the recovery mechanism?
It sounds bad, but imo the proper answer is that PG&E should be able to seek recovery for equipment attributable losses not caused by negligence. Whatever form that takes, bonds, rate increases, that's sort of a secondary issue.
However, I would probably not trust whatever bill Quirk has put forth, Captain Conflict of Interest doesn't sound very trustworthy.
I'm assuming in this case all the issues are with transmission, which is afaik mostly regulated by FERC and CAISO in this case, but California's weird for these sort of things so who knows. Mostly you go through FERC, sort out what transmission work you want to do, do the work and get rate recovery from your customers. That's sort of the system I've been familiar with.
But this sort of uncompensated liability just doesn't track very well. It sounds nice in a 'stick it to the man' sort of way, but doesn't fit with how transmission regulation works in the US.
If this were a government operated utility, there's no question ratepayers would be the ultimate people dealing with potential liabilities of affected parties. California's stance is that the liability is consistent between a government and non-government utility, so why isn't the recovery mechanism?
It sounds bad, but imo the proper answer is that PG&E should be able to seek recovery for equipment attributable losses not caused by negligence. Whatever form that takes, bonds, rate increases, that's sort of a secondary issue.
However, I would probably not trust whatever bill Quirk has put forth, Captain Conflict of Interest doesn't sound very trustworthy.
> However, AB 33 could potentially mean that PG&E customers are on the hook to repay the secured bonds.
Aren't customers on the hook regardless? PG&E gets it's money from customers, which would imply that customers are paying would be the ones to pay down the debt. Maybe they mean customers are a captive audience, and rates could be raised to cover the costs of the debt without impacting PG&E's profits.
Aren't customers on the hook regardless? PG&E gets it's money from customers, which would imply that customers are paying would be the ones to pay down the debt. Maybe they mean customers are a captive audience, and rates could be raised to cover the costs of the debt without impacting PG&E's profits.
That's part of the pointlessness of allowing private monopolies. All profits go to stockholders normal losses from things like gross inefficiency are replaced with price hikes.
But a drastic expense can cause bankruptcy, taking ownership from the stockholders and cause a resale bellow book value to new risk takers that now factor in this kind of risk, pressure the new management to avoid it repeating, and are more or less happy with current rates given their lower investment.
Watch them cast that as an injustice that our corporate social net needs to prevent instead of the correct result.
Giving them a sweet bond deal essentially gives them the opportunity to turn it into longterm price hikes and reward current shareholders for owning a fire hazard (or really not claw back that reward by killing the stock price as it has already been paid out in years of higher dividends due to lower safety costs.)
But a drastic expense can cause bankruptcy, taking ownership from the stockholders and cause a resale bellow book value to new risk takers that now factor in this kind of risk, pressure the new management to avoid it repeating, and are more or less happy with current rates given their lower investment.
Watch them cast that as an injustice that our corporate social net needs to prevent instead of the correct result.
Giving them a sweet bond deal essentially gives them the opportunity to turn it into longterm price hikes and reward current shareholders for owning a fire hazard (or really not claw back that reward by killing the stock price as it has already been paid out in years of higher dividends due to lower safety costs.)
This is good analysis. Not to say that the "correct result" is the best result - we'd find a way (laws) to force profits to prevent fairly likely disasterous events from happening in the first place. In a competitive marketplace with enforcement of the spirit of those laws that would mean companies try to innovate and drive down the costs of implementing those changes. It would also mean that competition woult keep a lid on profits from becoming too great, creating motivation for companies to simply pursue the most profitable thing. As a natural market (essentially infrastructure) monopoly, things are different.
If infrastructure/natural monopolies are run by the state, that is a decent solution so long as people are elected into power that understand they're making decisions to maximize the benefit of the citizens.
What is needed is tighter enforcement or a framework which incentivizes entities for innovating ways to improve services to their customers and minimize societial impact. While bankruptcy and the bond market is a decent check on that behavior, those who enacted those policies and made more profit with them enriched themselves and simply had the clock run out on their corner cutting not causing external damage (externalities on society). It doesn't prevent that behavior but it does prevent it from continuing.. for some time until the new board looks for ways to further their return on investment. Which eventually leads to the similar damaging behavior.
If infrastructure/natural monopolies are run by the state, that is a decent solution so long as people are elected into power that understand they're making decisions to maximize the benefit of the citizens.
What is needed is tighter enforcement or a framework which incentivizes entities for innovating ways to improve services to their customers and minimize societial impact. While bankruptcy and the bond market is a decent check on that behavior, those who enacted those policies and made more profit with them enriched themselves and simply had the clock run out on their corner cutting not causing external damage (externalities on society). It doesn't prevent that behavior but it does prevent it from continuing.. for some time until the new board looks for ways to further their return on investment. Which eventually leads to the similar damaging behavior.
I'm fine with being on the hook. The fires were awful, but for me personally the smoke was the worst. I'd happily pay double my electric bill if it meant I could breathe clean air.
What's our expectation on wildfires starting versus the damage they cause? We can obviously do better to control fires started by malfunctioning power equipment, but there's natural risks (lightning) as well as other human risks. Should we plan for wildfires and take the precautions to protect buildings or sue whoever happened to start the fire this time? I guess we can have this conversation after we get what we believe is the low hanging fruit of these power lines.
If I start a fire I am responsible for either stopping it or paying the damages. I live in an apartment. If I create a cooking fire that damages my neighbors' apartments, I will be liable for the damage (well my renters insurance will be). The standard should be no different if a massive corporation started a fire.
Well, if you don't have enough money, then what's the plan? Besides, who pays for lightening?
What I'm trying to get at is that this feels like a brittle strategy for something that is as easy to start as a fire. The Chicago fire is an example.
What I'm trying to get at is that this feels like a brittle strategy for something that is as easy to start as a fire. The Chicago fire is an example.
PG&E is a breathtaking example of regulatory capture by business. This was most apparent after the San Bruno pipeline explosion, in which PG&Es undocumented and unmaintained gas pipelines killed eight people. The original penalty the California Public Utilities Commission approved was zero dollars. Then it came out that various CPUC members were very cozy with PG&E, working with them in secret to shop the case around to a friendly judge. There's various corruption investigations still ongoing. https://en.wikipedia.org/wiki/San_Bruno_pipeline_explosion#S...