Pacific Gas & Electric on the Brink

The campaign by local governments to break up and take over the utility could mark a turning point in the history of American energy.

by

In a landmark letter organized by San Jose Mayor Sam Liccardo, twenty-two California mayors and several other public officials this week asked that Pacific Gas & Electric become a community-owned entity. 

PG&E was once America’s largest privately owned utility. But it is now on federal probation stemming from felony crime convictions due to a 2010 gas explosion that incinerated much of San Bruno, killing eight people. The disaster was caused by the company’s failure to properly maintain its pipelines.  

It’s also now in bankruptcy and facing massive lawsuits stemming from equipment failures that sparked nineteen wildfires in 2017 and 2018, killing more than 100 people. 

The campaign by local governments to break up and take over the utility could become a turning point in the history of American energy. “A cooperative financial structure will save ratepayers many billions of dollars in financing costs over this next decade,” the mayors write. “A customer-owned PG&E will better focus its scarce dollars on long-neglected maintenance, repairs, and capital upgrade, and mitigating some part of the substantial upward pressure on rates.”

The push comes as PG&E’s fate rests in the hands of a federal bankruptcy judge, a federal probation officer, and a state Public Utilities Commission that must ultimately approve any final reorganization plan submitted to the court.

Governor Gavin Newsom, U.S. Representative Ro Khanna, and a number of mayors have raised the possibility of a state takeover. 

Pacific Gas & Electric has become widely hated throughout the state, but especially in the north, where its faulty, under-maintained power lines have ignited massive fires. Hundreds of pristine square miles have been turned to smoldering ash, poisoning the region’s air with toxic smoke. The utility has resorted to shutting off power to millions of people, hoping to avoid a repeat of the 2018 Camp Fire, sparked when seasonal winds toppled transmission lines. Eighty-five people died. Some 18,000 buildings were destroyed.  

To avoid paying compensation for the lives it’s ruined, PG&E management—facing a $1.6 billion-dollar third-quarter loss and $2.5 billion in charges related to claims from fires in 2017 and 2018—has fled to bankruptcy. The utility, whose CEO is paid a base salary of more than $2.5 million per year, says it is not for sale.  "Our financing strategy to emerge from bankruptcy does not envision selling off company assets," PG&E CEO Bill Johnson wrote in an October 7 letter. "We believe we can fairly resolve and fund all claims and other items through conventional financial markets."

The public fury toward PG&E is intense. California Governor Gavin Newsom and U.S. Representative Ro Khanna joined the mayors in raising the possibility of a state takeover. San Francisco has set a price for buying company assets within its borders.

For comparison, consider the privately owned Long Island Lighting Company, which New York took over in 1998, converting it to the publicly-owned Long Island Power Authority. Its barely-used Shoreham atomic reactor was retired and overall rates went down some twenty percent.  

Meanwhile, it remains unclear what will happen to PG&E’s two decrepit, under-maintained, and uninsured nuclear power reactors at Diablo Canyon, outside San Luis Obispo. 

Both Diablo reactors are more than thirty years old. They’re brittle, cracked, and badly maintained. A former Nuclear Regulatory Commission site inspector has warned that they can’t withstand a credible earthquake. There have been reports of waste mismanagement. Renewable energy proponents argue that Diablo’s power is unneeded to meet the state’s needs, and in fact interferes with grid space that would otherwise accommodate cheaper, safer, cleaner, and more reliable energy alternatives.

Once a credible force for safety, the Nuclear Regulatory Commission has now virtually disappeared. Long known as an industry rubber stamp, the NRC is currently run by three Trump appointees who are essentially doing away with regular site inspections and all but the most minimal oversight. The situation is viewed by independent experts with extreme alarm. 

A petition with more than 2,500 signatures asking that Diablo be independently inspected has gone to Newsom. Hollywood stalwarts Mimi Kennedy, Jane Fonda, Lily Tomlin, Jodie Evans, Frances Fisher, Lila Garrett, Dr. Helen Caldicott, Martin Sheen, Eric Roberts, Ed Asner, Ed Begley, Jr., and Graham Nash are among the signees.

The question of who will own PG&E and what happens to it as a unified—or atomized—entity is bound to heat up as the company faces deepening fire from its rolling blackouts, rising prices, and increasingly contentious nuclear operations. The break-up and public takeover of this gigantic private corporation would mark a major milestone in the history of U.S. business and electric power generation. 

With so many Californians still vulnerable to losing everything from utility-sparked wildfires, and with the decaying internal components of the Diablo reactors, let’s hope the political and economic earthquakes surrounding this beleaguered utility are not matched by a physical one.