THE VAGARIES OF PACIFIC GAS & ELECTRIC – UTILITIES

In this Saturday, Dec. 16, 2017, photo provided by the Santa Barbara County Fire Department, flames burn near power lines in Sycamore Canyon near West Mountain Drive in Montecito, Calif. One of the largest wildfires in California history is now 40 percent contained but flames still threaten coastal communities as dry, gusty winds are predicted to continue. Some 8,000 firefighters are deployed to the so-called Thomas Fire, which has burned for nearly two weeks and still threatens 18,000 homes. Swaths of Santa Barbara County remain under evacuation orders. (Mike Eliason/Santa Barbara County Fire Department via AP)

Pacific Gas & Electric (PG&E) last week became the largest public utility to file for U.S. bankruptcy in the past decade – a move that was largely due to the company’s role in triggering California wildfires.

Although there are currently $30 billion worth of PG&E’s California wildfire liabilities, other functions at work also contributed to the company’s downfall, among them the possibility that customers are able to meet their power needs without benefit from the company.   According to news articles, the traditional business model of electric utilities – as being a monopoly and beholden only unto themselves, with the help of state political interests, in many instances – is “under siege as homeowners, corporations, and new community groups seek to generate or purchase power for themselves – a trend that is particularly advanced in California.”   As part of this movement, PG&E  has, of necessity, become involved in the state’s renewable energy and carbon-reduction goals and this has required that the company ascribe to expensive long-term contracts while also facing political pressure to keep energy rates low.  Given those business hurdles, along with the significant wildfire liability issues, all options for the company will likely be “on the table” in bankruptcy proceedings, considered to be one of the most complicated corporate-reorganization cases in many years.  It’s particularly interesting that there is growing political pressure at the national level for other companies – that are currently stand-alone, for-profit entities – to adopt this kind of government model for the future.  It seems that this experience might alert the public to the vagaries of the model.   The case will distinctly be edifying to watch as it unfolds.  Of particular interest has been the fact that, in the past, PG&E wielded strong political power in Sacramento – after contributing $14.5 million to those in power in Sacramento between 2011 and 2018.  The company, therefore, was one of the most influential in the state, and particularly in Sacramento.  And regularly got its way on legislation and regulation.  It’s a pity that that regulation didn’t include a better way to prevent power lines from sparking wildfires.  It’s also somewhat of a pity, that, now that the other shoe has dropped, there are very few political supporters taking the side of the utility.  ALL THE MOVING PARTS  – it takes a company’s leaders, its constituents and supporters, as well as its customers and employees, all working together, to assist a company in fulfilling its goals to all – Clearly, something went badly amiss during the past several years, where lack of interest in the pubic’s welfare was much in evidence.  Among the many other transgressions that have been uncovered, U.S. District Judge William Alsup also ruled recently that the company, placed on parole for its criminal conviction in 2010 following safety violations in the case of a natural-gas pipeline explosion that killed eight people, had violated its federal parole.  This case will definitely be interesting to follow.

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