Could selling PG&E to its customers help solve California’s power problems?

Could selling PG&E to its customers help solve California’s power problems?


JUDY WOODRUFF: When wildfires broke out again
in California last month, residents weren’t just worried about the fires themselves. Many were angry and frustrated over intentional
blackouts that were designed to reduce the risks of even more fires. The state’s largest utility, PG&E, was the
target of much of that anger. The company’s maintenance of its infrastructure,
or, often, the lack of it, in recent years has contributed to and sparked at least five
previous wildfires, with deadly consequences. Now, as William Brangham tells us, political
leaders in Northern and Central California are saying it’s time to push PG&E aside for
a different solution. WILLIAM BRANGHAM: That’s right Judy. PG&E is the largest investor-owned utility
in any one state. They serve 15 million customers. Last year, PG&E filed for bankruptcy protection
because it’s $30 billion in debt because of liabilities from last years fires. Because of the company’s poor record, mayors
of more than a dozen cities and towns in California are calling for a buyout of PG&E. They want to turn it into a customer-owned
cooperative instead. This coalition of mayors, representing a third
of all of PG&E’s customers, is asking the state’s utility commission to consider their
proposal before approving any bankruptcy plan. How this all would work is the subject of
many questions. San Jose Mayor Sam Liccardo is the mayor who
first proposed this. And he joins me now via Skype. Mayor, thank you very, very much for being
here. For those of us who do not live in California
and have not been experiencing these fires and these blackouts, can you just give us
a sense of the anger and the discontent that you’re hearing from people about PG&E? SAM LICCARDO, Mayor of San Jose, California:
I hear a lot of frustration from residents, and I know a lot of my mayoral colleagues
feel the same way. And they’re hearing it because the wildfires,
the power safety shutoffs are displacing millions of Californians, leaving millions of us in
the dark. This is no way for people to live, particularly
in the most advanced economy in the planet. We can do better, and people are very frustrated
about where we are. WILLIAM BRANGHAM: So you’re spearheading this
to transform from an investor-owned utility to one owned by ratepayers, just ordinary
Californians. Why is that the solution? SAM LICCARDO: A customer-owned utility provides
two advantages. One, it enables us to ensure that the financial
interest of the company will be aligned with the public interest. And, secondly, it enables the company, when
it emerges from bankruptcy, to have better access to capital markets, which will be really
critical, because we will need billions of dollars of investment in maintenance and infrastructure
upgrades to ensure that electrical power can be safely and reliably delivered to California. WILLIAM BRANGHAM: Isn’t it a matter of incentives,
though? Meaning, if you’re trying to please shareholders
and investors, then maybe that’s not the best incentive structure to deliver reliable energy
to people. SAM LICCARDO: Well, that’s certainly part
of it. PG&E has provided, I believe, $7 billion in
dividends to shareholders over the last decade, at a time which it has significantly underinvested
in basic maintenance for vegetation and upgrades of infrastructure that, in some parts of the
state, are a century-old. So, clearly, we need to ensure that dollars
go where they’re most needed. WILLIAM BRANGHAM: But why are you confident
that cities and states and counties can run that more efficiently, this enormous utility? SAM LICCARDO: Well, I certainly am not going
to be running the utility, and I don’t want any elected officials on the board either. We see plenty of examples of customer-owned
businesses, particularly the financial industry, for example, credit unions or mutual insurance
companies, that are very competently run. They simply have, as their boss, the customers. And this is not a new concept in the utility
context either. There are hundreds of customer-owned utilities
in this country. Most of them are very small and rural, but
there are some larger ones as well. And, obviously, they will need professional
management and professional boards. WILLIAM BRANGHAM: Mayor, how do you deal with
the thorny issue of liability? As you know, PG&E was saddled with $30 billion
in liabilities from last year’s fires. Are cities and counties and the state ready
to take on that kind of risk? SAM LICCARDO: This wouldn’t change the question
of who’s responsible for liability, beyond the fact that shareholders who might see their
equity go to zero, as they — I think they are today at PG&E. I think they have lost about 90 percent of
their stock value. And so it would be customers who lose equity. There’s no contribution that’s required from
cities and counties simply because we’re urging a customer-owned utility. The liability questions are thorny, no matter
what. And, ultimately, I think we all recognize
that ratepayers are paying more to deal with much of this. For example, we just had a $21 billion wildfire
fund that was created by the governor and legislature. About half of that is funded by rate increases. So, we all know, ultimately, the ratepayers
are on the hook. And if the ratepayers are on the hook, then
the ratepayers should own the company. WILLIAM BRANGHAM: Regardless of what happens
with PG&E, you still have an enormous set of challenges. I mean, you have got to deal with housing
and zoning hardening and making the existing grid more safe. Plus, you have got a warming state, you have
got climate change and droughts. I mean, that is a colossal set of issues to
deal with. SAM LICCARDO: Oh, absolutely. And there’s no question that it’s going to
require a lot of investment, including investment in our own cities. In San Jose, we’re looking at, how can we
better build microgrids to ensure we have fire stations and hospitals that can be taken
off the grid when problems come up? We will be doing a lot of that. And I know a lot of other cities will as well. And this is not going to be cheap. That’s why it’s important for us to have — at
least to have a utility that has the ability to get access to capital markets and make
those critical investments. WILLIAM BRANGHAM: PG&E earlier this week,
in response to your proposal, said that it is firmly convinced that a government or customer
takeover is not the optimal solution. How do you respond to that? SAM LICCARDO: Well, obviously, I disagree. And I think a lot of other folks disagree
as well. 4
PG&E also said that they’re not for sale, but, in fact, they’re in bankruptcy court. So they are. And it’s going to be up to a bankruptcy judge
and the state public utilities commission to determine really what this company looks
like, ultimately. And I appreciate, obviously, there are folks
within PG&E who would like things to say just as — the way they are. But, right now, the status quo is not acceptable. We can’t continue in this way. And the cost of doing nothing is far, far
greater than the cost of taking a hard look about how we can transform this company into
one that would be both more responsive and more responsible. WILLIAM BRANGHAM: All right, Mayor Sam Liccardo
of San Jose, California, thank you very much. SAM LICCARDO: Thank you. It’s a pleasure, William.

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