Should Cal­i­for­nia bail out PG&E?

One way or an­other, the em­bat­tled util­ity will need some help

Los Angeles Times - - CALIFORNIA - GEORGE SKEL­TON in sacramento

The scary word ev­ery Sacramento politi­cian wants to avoid is “bailout” — as in bail­ing out un­pop­u­lar Pa­cific Gas & Elec­tric Co.

It’s a dilemma be­cause PG&E is uni­ver­sally, if qui­etly, seen as too big to fail. It’s too im­por­tant. It pro­vides nat­u­ral gas and elec­tric­ity for 16 mil­lion peo­ple — 40% of the state — through­out North­ern and Cen­tral Cal­i­for­nia.

But the util­ity’s laxly main­tained equip­ment has caused many dev­as­tat­ing wild­fires. So fac­ing what it es­ti­mates to be $30 bil­lion in potential li­a­bil­i­ties for fire losses, PG&E has filed for bank­ruptcy.

The util­ity didn’t help its pub­lic im­age by ask­ing the bank­ruptcy judge for per­mis­sion to spend $130 mil­lion on em­ployee bonuses and other perks. Mean­while, burned-out vic­tims of the Camp fire are strug­gling to find shel­ter.

The state cer­tainly doesn’t want to take over PG&E and go into the business of sup­ply­ing gas and elec­tric­ity. And lo­cal gov­ern­ments prob­a­bly aren’t ca­pa­ble of scoop­ing up the util­ity and as­sum­ing its role.

“The dan­ger is that lo­cal govern­ment would take all

the good parts and what’s left would be the fire-threat­ened ar­eas,” says Assem­bly­man Chris Holden (D-Pasadena), chair­man of the Util­i­ties and En­ergy Com­mit­tee.

“The state, in tak­ing over PG&E, would have to buy all the in­fra­struc­ture. The costs would be pretty significant. And the fire risk would still be there. It would be just chang­ing jer­seys. In­stead of the [fire] li­a­bil­ity fall­ing on the util­ity, it would fall on tax­pay­ers. That’s not a very at­trac­tive deal.”

So what­ever it’s called — a bailout, cor­po­rate wel­fare or just com­mon sense — Gov. Gavin New­som and the Leg­is­la­ture need to do things to help the util­ity stay afloat af­ter it goes through its sec­ond bank­ruptcy in two decades.

“I’ve been through this dance be­fore,” says Sen. Bob Hertzberg (D-Van Nuys), who was Assem­bly speaker when PG&E filed for bank­ruptcy the last time in 2001.

That was dur­ing a hor­ren­dous en­ergy cri­sis, caused by out-of-state power pi­rates cap­i­tal­iz­ing on a dis­as­trous en­ergy dereg­u­la­tion scheme passed unan­i­mously by the Leg­is­la­ture.

“I learned you’ve got to have a fi­nan­cial sys­tem for all util­i­ties that works,” Hertzberg says. “That [1996] deal didn’t work. It caused the util­i­ties to go up­side down.”

“No­body wants to bail out PG&E,” Hertzberg adds. “Ev­ery­one wants to talk about how bad PG&E is, but it’s only the tip of the ice­berg.”

Cli­mate change with its volatile shifts in weather — drought and down­pours, dry veg­e­ta­tion and high winds — is cre­at­ing bigger, dead­lier wild­fires, ex­perts say. For­mer Gov. Jerry Brown called it “the new nor­mal.”

The con­sen­sus in the Capi­tol is that wild­fires can only be min­i­mized, not stopped.

“My big mes­sage is: Fix it now,” Hertzberg says. “I don’t want this is­sue to de­rail us [on other leg­is­la­tion]. Let’s get it done im­me­di­ately.”

If “bailout” is a word the Leg­is­la­ture fears, “im­me­di­ately” is one it doesn’t un­der­stand.

The new gov­er­nor, how­ever, wants the is­sue out of the way as quickly as pos­si­ble. The bank­ruptcy was sprung on him just as he was start­ing to roll on pet projects such as early child­hood ed­u­ca­tion and af­ford­able hous­ing. His at­ten­tion has been di­verted.

The five-mem­ber Com­mis­sion on Cat­a­strophic Wild­fire Cost and Re­cov­ery has a July 1 dead­line to rec­om­mend so­lu­tions. New­som has told them he wants their sug­ges­tions sooner.

The gov­er­nor and leg­is­la­tors ex­press sim­i­lar goals: en­sure that there’s safe, re­li­able and af­ford­able en­ergy ser­vice; that fire vic­tims get fair set­tle­ments; and that the state con­tin­ues to make progress on switch­ing to 100% clean elec­tric­ity by 2045.

The Leg­is­la­ture ac­tu­ally did a lot last year, pass­ing a mea­sure al­low­ing util­i­ties to raise cus­tomers’ elec­tric­ity rates to help cover 2017 wild­fire li­a­bil­i­ties, but not 2018’s. It may do that this year. The leg­is­la­tion also greatly in­creased the state’s fire preven­tion ef­forts, par­tic­u­larly re­mov­ing dead trees and other com­bustible fuel from wood­lands.

This year, Assem­bly­man Jim Fra­zier (D-Oak­ley) has in­tro­duced a bill re­quir­ing util­i­ties to re­move their equip­ment and trans­mis­sion lines from fire-prone wood­lands, bury it or fire­proof it.

But ex­perts say that bury­ing trans­mis­sion lines, while a pop­u­lar no­tion, is very ex­pen­sive and not al­ways prac­ti­cal, espe­cially around earth­quake faults.

Sen. Bill Dodd (D-Napa), whose wine coun­try district was charred in 2017, has in­tro­duced a bill to cre­ate a state wild­fire warn­ing cen­ter. An­other Dodd bill would strengthen en­force­ment of re­quired veg­e­ta­tion-free buf­fers around vul­ner­a­ble homes.

How about not al­low­ing homes to be built in vul­ner­a­ble ar­eas in the first place?

“Very dif­fi­cult,” Dodd says. “It doesn’t mean we can’t re­quire de­fen­si­ble space and stricter build­ing stan­dards with non-in­flam­ma­tory ma­te­ri­als.”

Sen. Ben­jamin Allen (D-Santa Mon­ica), chair­man of the En­vi­ron­men­tal Qual­ity Com­mit­tee, is propos­ing a bond is­sue to fi­nance pro­tec­tions against all types of nat­u­ral calami­ties — wild­fires, floods, drought, sea rise. He hasn’t de­cided on an amount.

How about in­clud­ing money to help PG&E with its fire preven­tion tasks? A tiny bailout?

“This is a tricky po­lit­i­cal and pol­icy balance,” Allen says. “It would hurt our chances of get­ting the bond passed.”

The most prob­a­ble out­come is re­quir­ing much bet­ter PG&E main­te­nance and a lot more in­de­pen­dent in­spec­tions. Home­own­ers in risky ar­eas might be re­quired to buy wild­fire in­surance — like earth­quake or flood cov­er­age.

But no po­lit­i­cally un­pop­u­lar bailout.

One way or an­other, how­ever, the state needs to help PG&E sur­vive. And the util­ity needs to re­or­ga­nize. It can start by chuck­ing those crazy bonuses.

Kent Nishimura Los An­ge­les Times

A RES­CUE crew in last year’s Camp fire. PG&E es­ti­mates it could face $30 bil­lion in li­a­bil­i­ties for that and other fires, push­ing the util­ity to file for bank­ruptcy.

Kent Nishimura Los An­ge­les Times

IF CAL­I­FOR­NIA were to take over PG&E, li­a­bil­i­ties for blazes like the Camp fire could fall on tax­pay­ers. “That’s not a very at­trac­tive deal,” one law­maker said.

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