Public Ownership

PG&E's record is clear: They disastrously cut safety to boost profits. This is no fluke.

Investor-owned utilities (IOUs) like PG&E always face a fundamental pressure to prioritize investor profit above all else. Simply put: If utility executives do not deliver consistent returns for their Wall Street shareholders, they're out. This is the problem with private ownership, and it’s a feature, not a bug: the company will always prioritize actions that benefit the investors, not the public it serves.

A Source of Revenue

Under California law, IOUs like PG&E are supposed to be regulated by a governor-appointed agency, the California Public Utilities Commission (CPUC). In addition to (nominally) setting and enforcing safety protocols, the CPUC sets rates and oversees a process called “decoupling.”

Essentially, this means that PG&E doesn’t get more revenue when it sells more electricity, like most other service providers do; instead, they get a predetermined return on investment, which is set by the regulators. This strategy was meant to dissuade PG&E from encouraging inefficient and excessive use of electricity. Unfortunately, when investor profit is still the overarching goal, PG&E finds new ways to create a margin, like skipping mandated inspections and maintenance, then falsifying records to evade regulatory oversight.

PG&E's Influence

In many cases, PG&E has been able to rewrite the rules themselves via regulatory capture: the regulated industry has so much economic and political power that it can control (either directly or indirectly) the agency tasked with overseeing it. As a private company with annual profits in the billions, PG&E has the ability to use its money to influence politics not only in the legislature but even the CPUC, its own regulating agency, to ensure rulings in its favor.

And it has. PG&E spent over half a million dollars in 2017 alone to lobby the CPUC and donated hundreds of thousands of dollars to gubernatorial candidates, who appoint the regulators. Indeed, over the past century, PG&E has poured an enormous amount of money into ensuring that utilities are not made public and has solidified its position as a private provider and profiteer of one of the most essential modern needs.

Another Bankruptcy

Yet, despite all of its attempts to reap profits and claims of foresight and improvement and know-how, PG&E has still managed to go bankrupt for the second time in less than 20 years. And what will be the result of this private mismanagement? The CPUC has already authorized rate increases to cover damage liability, which means that your bills will go up to cover CEO bonuses and Wall Street payouts.

In bankruptcy, PG&E also seeks to have their fire damage liabilities forgiven, meaning they won’t have to pay for damages caused by their own negligence. Furthermore, PG&E has announced cuts to rank-and-file worker pay and bonuses, harming those who were not responsible for PG&E’s failure. To put this another way: investor-owned utilities expect to privatize gains and socialize losses.

A Public Alternative

A publicly owned utility, on the other hand, would prioritize the public interest and prevent the anti-democratic abuses that occur in a private-ownership model. Unlike private ownership, where decisions are made by a small group of wealthy elites without meaningful public input, a public utility would be more transparent and would be more open to public comments and pressure. The quality and cost of service would enter the political realm, allowing the public to engage in a meaningful dialogue about how this essential good should work.

Public ownership would, additionally, greatly expand the options available for the energy grid. Options such as expanding infrastructure or converting to renewable resources would become viable paths to consider, since the state government would not be limited to those options that immediately generate profit.

Public Goods in Private Hands

Private companies function in the interest of private incentives. It is a hallmark of capitalism. Why, then, would this change when those private companies are providing public goods?

The answer, of course, is that it doesn't. Private companies run public goods for their own private profit. If we want a safe, affordable, just, and sustainable electrical utility, we need to own it ourselves.