What happens if California takes over PG&E

“There’s going to be a new company or the state of California takes it over.” Governor Gavin Newsom wants to take state control of PG&E and refocus the company on becoming a provider of safe, reliable, and affordable electricity. Governor Newsom has vowed to block PG&E’s emergence from bankruptcy unless the company either reforms itself to his satisfaction or submits to state control. Newsom began takeover efforts last year after poorly managed public safety power shutdowns plunged much of Northern California into darkness for long periods of time last year.

Taking over PG&E would cost $60 billion

The first thing that would happen if the state takes over PG&E is that the state will have to raise a lot of money. Buying out PG&E shareholders is estimated to cost at least $60 billion dollars. A big pill to swallow for a state with roughly $18 billion in its rainy day fund. Furthermore, PG&E’s bankruptcy could further complicate the sale.

Option one: Break PG&E up into customer-owned collectives

One option that has been proposed by a state senator is to spin parts of PG&E off to local municipalities. That would result in customer-owned collectives that would provide power through their own generating infrastructure, or from the power they purchased elsewhere. Spinning PG&E off to local municipalities could result in electricity being generated and consumed much closer to home. 

Option two: A state-owned utility 

San Francisco State Senator Scott Wiener introduced a bill to turn PG&E into a publically-owned utility. The state would acquire PG&E’s transmission lines and power production facilities. PG&E has pushed back on this idea however, it has said that its facilities are not for sale.

Wiener’s plan would establish a state power authority that would be led by a board that is appointed by the governor. The new publicly-owned company would be called the Northern California Energy Utility District. A public benefit corporation called Northern California Energy Services would manage day-to-day operations.

Option three: A customer-owned co-op

San Jose Mayor Sam Liccardo wants to transition PG&E from investor ownership to customer ownership in the form of a collective. Liccardo notes that this is not a new idea. There are over 900 utility cooperatives that serve 19 million customers nationwide. According to Liccardo:

 “A customer-owned cooperative would encounter sharply lower capital costs than PG&E does today because it would not need to pay dividends to shareholders or federal taxes to Uncle Sam. By saving billions in interest payments, a customer-owned company would devote more of its resources to improving the company’s infrastructure and service.”

Option four (the radical option): Take over transmission lines and treat them like public highways

It is well known that PG&E’s power transmission lines need to be buried. But burying power lines is expensive, and PG&E has over 120,000 miles of power lines. All three of the state’s major utilities have nearly 250,000 miles of power lines combined. Burying all those power lines is estimated to cost over a trillion dollars. It will also take a lot of time, Northern California is expected to continue to have blackouts for the next 10 years while the lines are being buried.

Dan Freeman, who headed the Los Angeles Department of Water and Power has a radical idea. Take over all the poles and wires in California and treat them as a public good, similar to roads, highways, and bridges. The utilities would continue to be in the business of generating and selling power. The state would own all the transmission lines. According to Freeman: 

“I think the governor and many other people in California are just lacking in vision. I think we’ve reached a fundamental tipping point. I think we need to be thinking of the electric delivery system as perhaps even more important than our highways.”

Governor Newsom: PG&E as a company no longer exists

Governor Newsom says that there’s going to be a new company when PG&E emerges from bankruptcy, or the company will be state-owned. Newsome tasked a lawmaker with creating a plan to form that new company, but that plan hasn’t yet been revealed. PG&E is scheduled to exit bankruptcy on June 30th, 2020.

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