California Gov. Gavin Newsom. Photo by Gage Skidmore.
It isn’t appropriate for the hired help to give away the store, but when Gov. Gavin Newsom and other California politicians bluster about taking over the Pacific Gas & Electric Co., PG&E’s top managers must be sorely tempted to hand them the keys.
Misguided policies and politically driven mandates, combined with the company’s own mismanagement, have helped put PG&E in bankruptcy for the second time in less than 20 years. The company faces an estimated $30 billion in liabilities for the death and destruction caused by wildfires in 2017 and 2018. That figure does not include the damages from the still-ongoing 2019 fire season. Millions of Californians have had their power cut off, in some cases for days, as a preventive measure to avert still more fires.
Municipal leaders from the Bay Area to the state’s Central Valley are agitating to take over their local distribution systems. The Wall Street Journal reported that the mayors of more than a dozen cities have launched a campaign to turn PG&E into a giant customer-owned cooperative. Some municipalities have made offers to buy outright the slice of the utility that operates within their borders. This would amount to cherry-picking the beleaguered utility’s larder, as it would leave most of the sourcing and long-distance transmission of electricity – the areas where the most costly problems arise – to PG&E, or possibly someone else.
California lawmakers set a June 30 deadline for PG&E to exit bankruptcy, but the governor is already impatient. Newsom, whom voters might blame as the front man for their misery, has blustered about taking over the entire kit and caboodle if PG&E and its creditors can’t quickly come to some arrangement. Presumably, that arrangement would result in someone pouring vast new sums into the utility to fix its problems without doing anything to change the state policies that helped bring it low in the first place.
There are a few clear-eyed parties in California who can see the implications of these political ultimatums. PG&E’s unions, sensing a threat to their members’ contract benefits and livelihoods, came out solidly against San Francisco’s proposal to take over the electric system in the city limits. And state Sen. Bill Dodd, a Democrat whose district is north and east of San Francisco, cautioned that the utility’s liabilities could threaten the state budget, The Wall Street Journal reported.
Dodd isn’t wrong. On the other hand, as California earns a reputation as the sort of place where basic necessities such as safety from infernos and reliable electricity cannot be taken for granted, the long-term health of the state’s budget (not to mention its residents) is in question anyway.
Newsom and his peers have shown no interest at all in modifying policies that force PG&E and other California utilities to move to solar and wind power generation (at higher than market prices). These policies force the utility to carry increasing amounts of power long distances through combustible forests and wildlands. Refusing to change the regulations will rule out a movement toward relatively clean, yet still carbon-emitting, gas-powered generation nearer to the state’s population centers.
Meanwhile, the resulting fires largely offset the state’s carbon-reduction activities. This means the money spent on renewable energy does little or nothing to affect climate from a net perspective. According to the U.S. Geological Survey, wildfires released 68 million tons of carbon dioxide in 2018. This represented about 15% of the state’s total emissions for the year. The California Air Resources Board, which enforces the state’s green-generation mandates, takes the nonsensical position that carbon emissions from the state’s massive fires don’t count against its reduction targets because the fires are part of the natural cycle. Guess what? The atmosphere responds to all carbon dioxide the same way, no matter where it comes from.
The state of California’s current policy is that someone should dump money into the state’s utilities to fix the problems that policymakers and regulators themselves have fostered. That reality is probably the best argument in favor of Newsom’s threat to socialize PG&E. He and his fellow travelers helped break the utility. If they aren’t going to fix it, they ought to buy it.