How does PG&E set your rates?
Utilities are generally considered natural monopolies because the high cost of infrastructure strongly discourages competition. This means that rates are set by a complicated dance between utilities and regulators. PG&E makes a plan for all its costs for a rate period, infrastructure investment, and maintenance including transmission, distribution, and generation. This is called the “rate base,” or the value of property that PG&E needs to do its job. PG&E then works with California Public Utilities Commission (CPUC) and Federal Energy Regulatory Commission (FERC) to set a specified rate of return, for example 10.25% in 2020.
Simple and straightforward, right? This incentive structure is fundamentally flawed because PG&E (and other IOUs) are incentivized to spend more money than may be necessary to get the job done in order to inflate rates (aka your monthly bills).
PG&E has an established track record of misusing ratepayer funds while paying out investors and executives. The profit-seeking structure of an IOU is fundamentally at odds with providing essential services to customers at the least cost.
Why Public Ownership?
We can eliminate the waste of ratepayer money that is profit and dividends. Profits represent a double slap in the face to average ratepayers. First, they directly make your bill more expensive and represent a wealth transfer to stockholders. Second, profits impose incentives which are at odds with the safe, cheap provisioning of essential energy services. PG&E is incentivized to spend wastefully and cut corners during maintenance.
Another significant cost that is not reflected in rates is wildfire damages, which have been estimated at $16.5 billion for the Camp Fire alone. This is not to mention the unmeasured health costs of breathing smoky air for weeks at a time.
Public ownership will result in the elimination of profit, directly saving ratepayers money, as well as a realignment of incentives so that PG&E spends our money in ways that benefit safety, reliability, and efficiency.