What you are about to read is not a joke unless you consider being set up for a legal shakedown by the California Legislature and Governor Gavin Newsom is funny.
PG&E — on their watch — is on course to make in excess of $600 million in profit from their role in killing 85 people as well as destroying 14,000 homes plus another 5,000 structures while wiping four fifths of the Town of Paradise off the face of the earth. And if the Wall Street lackeys taking over PG&E have their way the company will turn a $900 million profit from the severe safety situation they created and the death and destruction they caused.
PG&E — as well as other state sanctioned and protected quasi-public utility monopolies — enjoys a business model that allows them to turn at least a 10.5 percent profit for blowing up and burning their customers to death.
Under state law, all of the rate hikes PG&E received in the past — and will receive in the future — includes a guaranteed 10.5 percent return. That means on everything. That includes lawsuit settlements and doing safety work they secured rate hikes to perform previously but instead diverted the money to fattening their bottom line, sweetening executive bonuses, and paying obscenely fat golden parachutes for departing CEOs after they’ve either managed to plunge the company into bankruptcy, make wantonly careless decisions that jacked up the price of consumer power or simply doing what PG&E is known best for these days — killing off customers and destroying the property of those ratepayers who managed to get away with their lives.
The Wall Street types believe this is not enough. They want a 16 percent guaranteed rate of return so they can attract investors to underwrite settling $30 billion in fire claims and $2.3 billion in urgent safety upgrades that wouldn’t be needed had PG&E did them when they were asking for rate hikes and not worried about squeezing more out of ratepayers than their guaranteed 10.5 percent profit.
Meanwhile Newsom and the legislature are playing the deer-in-the-headlights act. Sure, they talk a tough game but do you see any of them taking steps to pull the plug on PG&E? Not only is PG&E not in a position to be a viable company financially to be entrusted with a critical public need such as electricity but they are a step away from being a criminal company.
Let’s not forget that the 2010 Citizens United ruling by the United States Supreme Court extended a number of rights to corporations as if they were people.
No one would allow a bankrupt person facing felony charges that could include 85 counts of either manslaughter or second degree murder to control a public utility that 15 million Californians have no choice but to rely on so why should PG&E be allowed to?
Yes, you’re innocent until proven guilty in a court of law but given that PG&E has conceded their equipment was the likely cause of the Camp Fire and the fact they’ve filed bankruptcy no one in their right mind would think they are stable enough to be entrusted with providing a key ingredient to the economic and physical health and well-being of 15 million Californians especially since the state has effectively eliminated all competition on their behalf to maximize their profitability.
It would be difficult to get anyone to invest money in PG&E if they could not expect a return. But the fact Wall Street is so eager to do should tell you a thing or two about how the CPUC — the California Profit Upkeep Commission — operates.
Having the CPUC as a watchdog for your best interests as a consumer is akin to being locked in a room with a pit bull with rabies and a Great Dane with distemper. It isn’t going to end well for you.
It is true that unless PG&E can keep piling on the profits that they won’t be able to secure loans to settle lawsuits or to secure the $2.3 billion they say the need now to make their system safe. Of course that money will be paid off over the years by increased rates on consumers with the built in 10.5 percent profit margin — or if Wall Street has their way — a guaranteed 16 percent return.
One estimate puts the average cost on PG&E customers for safety improvements alone of $200 a year going forward. That includes an additional tidy profit of $23 more a year off of the typical customer.
Those who have solar side deals with PG&E may think they will escape such a charge. But this has nothing to do with the buying and selling of electricity. It involves the transmission system. They are separate charges on your utility bill. You will not escape PG&E tentacles for the added safety charges nor likely the impact of lawsuits.
Investor dollars are needed so PG&E can leverage the money they need in a relatively short period of time to make the system work given they can’t be trusted to do it in a pay-as-you-go basis.
If we’re paying anyway, we might as will get ownership of the PG&E system so we can eliminate 10.5 percent of our future costs for power to cover guaranteed profits that could go as high as 16 percent after Wall Street gets through sweet talking the CPUC.
What Newsom and the Legislature should be doing now is carving up PG&E to protect the public interest. The City of San Francisco is willing to step up as is South San Joaquin Irrigation District, and the Sacramento Municipal Utility District for starters.
If you equate that to cherry picking then use the Trinity Public Utilities District as an example. The small rural concern in the Trinity Alps broke away from PG&E decades ago in a bid to lower power costs as not to cripple the local economy. That example can be repeated throughout the PG&E service area in low to no growth regions.
A consortium could be created that all of the public power companies pay a prorated share into for the purpose of maintaining and operating the transmission systems.
The receipts from the sale of the system to PG&E can pay off fire victims, cover the costs of decommissioning Diablo Canyon as well as its Humboldt Bay nuclear power plants, and pay for natural gas system upgrades that they could be allowed to retain providing they make it safer.
Their hydroelectric plants and natural gas plants also would be sold with the new entities — including the consortium — getting first crack.
The value of the system and power plants — given ratepayers in many cases have paid for them twice on top of PG&E avoiding tax bills by depreciating them twice thanks to the wonderful loophole PG&E helped engineer with the partial deregulation move that gave California sky high power costs and rolling brownouts at the start of the century — would be based on book value and not replacement value or market value.
By sitting around and doing nothing the governor and legislature will be nothing more than PG&E lapdogs who will go down in history as enabling a company likely to receive felony criminal status to rape, plunder, burn, and blow up two thirds of California.
This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at dwyatt@mantecabulletin.com or 209.249.3519.
