Could government provide power and gas better than PG&E?

Feb. 02--Pacific Gas & Electric has long been cast as the corporate villain putting profits over public safety, from the groundwater contamination exposed by Erin Brockovich to the deadly San Bruno gas pipeline explosion and historic wildfires sparked by power lines.

Now state officials exasperated over the giant utility's serial safety mishaps and last week's filing for bankruptcy protection are floating a question as they cast about for fixes: Could the government do a better job providing power to 16 million people throughout Northern California?

"It's time for that conversation, no question about that," said state Sen. Jerry Hill, D-San Mateo, whose district includes the San Bruno neighborhood blown up in 2010 when PG&E's gas pipeline exploded, a catastrophe that led to the utility's conviction of criminal safety violations.

"An investor-owned utility is just by its nature a contradiction in safety culture because their priority is profit," Hill said. "There's always a reluctance to think that government can do better. But these are monopolies, and sometimes the government has shown it can provide a better alternative."

Others however are skeptical, blaming poor government oversight for PG&E's problems and arguing public takeovers often involve lengthy court battles over acquisition costs and in the end just replace one poorly run bureaucratic monopoly with another. Consider, they say, government bureaucrats are the ones who make you wait forever to renew your driver license and who gave us rolling blackouts.

"You're just trading one set of problems over another," said Adrian Moore, vice president of policy at the Reason Foundation, a libertarian think tank, who has studied the issue for decades. "The failing is in the state not ensuring that PG&E is doing its job and not holding it accountable."

The California Public Utilities Commission, which oversees the utility giant, in December said it is exploring "various possible approaches to address the underlying issue of PG&E's safety culture." Those include whether "some or all of PG&E" should "be reconstituted as a publicly

owned utility or utilities." Other possibilities include various corporate restructuring like splitting it into separate gas, electric and transmission companies.

The move followed indications that PG&E equipment may have sparked November's Camp Fire that destroyed the town of Paradise, killing 86 and becoming the state's deadliest and most destructive on record. That fire followed the deadly October 2017 Wine Country wildfires, many of which were caused by PG&E equipment.

PG&E, anticipating multi-billion dollar wildfire liability costs, filed for bankruptcy protection on Tuesday. The utility and its corporate parent haven't directly commented on the public takeover talk. PG&E Corp., the utility's holding company, said in a Jan. 4 statement that it is making corporate leadership changes and reviewing structural options.

"We are committed to working closely with the California Public Utilities Commission, policymakers, and other stakeholders to provide PG&E customers the safe, reliable, and affordable natural gas and electric services they expect and need," the corporation said.

Around the country there are 2,000 government-run power utilities, from little towns like Santa Clara and Palo Alto the massive Los Angeles Department of Water and Power, according to the American Public Power Association, which represents them. They serve 15 percent of U.S. electric customers compared with 68 percent served by investor-owned utilities like PG&E.

Most public utilities have been around for generations. A small but growing number of cities over the last 30 years have taken over private power utilities, from giant Long Island, New York, to little Winter Park, Florida, with others like Boulder, Colorado, exploring the idea.

A 2017 analysis of public takeovers of private power utilities by Synapse for Washington, D.C., looked at Long Island, Winter Park, Jefferson County, Washington, and the ongoing effort in Boulder.

It noted the government can deliver lower cost service because it doesn't operate for profit, can borrow at lower rates and doesn't pay private-sector level salaries. PG&E Corp. paid its last chief executive officer, Geisha Williams, $8.6 million plus a $2.5 million cash severance after giving her the boot in January. Pay and benefits for David Wright, general manager of Los Angeles Department of Water and Power, totaled $528,000 in 2017, according to Transparent California.

But the analysis also said investor-owned utilities often are large established corporations with economies of scale that can deliver lower legal, management, and energy acquisition costs. It added that a public takeover would involve steep acquisition costs that can drive up rates. And public utilities are more vulnerable to political pressures.

In three completed public acquisitions studied, the analysis found that residents generally ended up with lower rates and improved service. It noted the public Long Island Power Authority, which gradually took over the private Long Island Lighting Company from 1986 to 1998, was criticized for Hurricane Sandy outages in 2012, spurring a state reform act and restructuring. But customer satisfaction has improved since and rates are no longer highest in the New York area.

Boulder, which has been exploring public takeover since at least 2010 hoping to find cheaper, more environmentally friendly power, still is assessing details such as acquisition costs in anticipation of a 2020 public vote to move forward.

A number of other cities abandoned public takeover plans, often after negotiating more favorable terms with their private power provider.

San Francisco residents have rejected public takeover of PG&E's system within the city a dozen times over the last century, most recently in 2008. Among those who opposed the 2008 feasibility-study measure were then-mayor Gavin Newsom, now the governor. Critics feared acquisition costs would top $4 billion and push rates higher.

Many obstacles would stand in the way of any government takeover of some or all of PG&E. Hill said California is constitutionally prohibited from owning stock in corporations. So while the utility's stock price has tanked from as high as $70 a share in August 2017 to $13 last week, the state isn't in position to step in as a buyer.

Acquisition costs for the state's largest private energy utility would be staggering. PG&E in bankruptcy filings listed its assets at $71.4 billion, with $51.7 billion in debts. Mike Harris, acting chief of the Board of Equalization's properties division, said PG&E will pay an estimated $490 million in taxes on property over the next year valued at more than $33 billion. Those tax payments to local governments, by the way, would be lost after a public takeover, though many public utilities make payments in lieu of taxes to local communities.

Having cities like San Francisco and San Jose take over pieces of the PG&E operation in densely populated urban areas would raise costs for rural residents.

Moore said the success of investor-owned utility service in Texas and San Diego, where San Diego Gas & Electric made safety changes after wildfires over a decade ago and is considered well run today, show government takeover isn't needed for good service.

"The system is not inherently terrible," Moore said, "it's just been poorly managed and poorly executed."

Hill agreed that San Diego Gas & Electric shows investor-owned utilities can work well. But he said all options need to be explored and "it's really incumbent on us to now look for that best opportunity to provide better service and safer service to Californians."

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