Mayor’s PG&E plan deserves serious consideration by PUC
San Jose Mayor Sam Liccardo’s proposal to explore transforming PG&E into the nation’s largest, nonprofit, public utility deserves serious consideration.
The plan, which has the backing of five county supervisors and 22 mayors — including Oakland’s Libby Schaaf, Hayward’s Barbara Halliday, Sunnyvale’s Larry Klein and Berkeley’s Jesse Arreguin — faces major challenges. But significant change is in order. PG&E has proven time and again over the last 10 years that it can’t be trusted.
The utility’s ongoing maintenance failures and its massive, poorly implemented shutdowns further illustrate its inability to provide a reliable source of power for its 16 million customers in Northern and Central California. As Liccardo recently told the Wall Street Journal, “I’ve seen better organized riots.”
PG&E will fight the notion of a publicly owned utility, as will the hedge funds currently bidding to control PG&E as it emerges from bankruptcy proceedings. But as the coalition said in a Monday letter to the PUC, “what has dominated the proceedings so far is simply a battle being waged between Wall Street titans for control of the bankruptcy process, control of the company, and the ability to control exit financing. This is merely spectacle, without regard for what will be left behind when the financial players inevitably leave the scene.”
The state Public Utilities Commission has the authority to reject any proposal emerging from the bankruptcy court. It should acknowledge that Liccardo’s plan is the only one to date that puts safety and reliability first, where they belong.
A customer-owned utility of this scale would face immense challenges, including coming up with the financing necessary to buy PG&E and cover its massive liabilities, estimated at $30 billion. It also would have to devise a management system that didn’t fall victim to the kind of special interest politics that dominate California. But those challenges are offset by the potential advantages.
A nonprofit utility is exempt from federal taxes and wouldn’t have to pay the $1 billion in dividends that PG&E gave to shareholders in 2016 and 2017. And a public utility can borrow capital at roughly half the cost of PG&E. All told, the utility’s current ratepayers could realize savings in the neighborhood of $14 billion over the next 10 years.
Gov. Gavin Newsom last week threatened to create a government-led plan to restructure the state’s largest utility if the parties involved in the bankruptcy proceedings can’t reach an acceptable agreement.
“It is my hope that the stakeholders in PG&E will put parochial interests aside and reach a negotiated resolution so that we can create this new company and forever put the old PG&E behind us,” Newsom said in a statement. “If the parties fail to reach an agreement quickly to begin this process of transformation, the state will not hesitate to step in and restructure the utility.”
Even if the hedge funds vying for control of PG&E reach a resolution of some sort, it’s unlikely that they will emerge with the resources necessary to address its massive safety challenges.
Liccardo’s alternative needs further study to determine its viability. But it stands as the only plan that puts the needs of Californians first.