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Disempowering PG&E

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SMOKED An aerial view of the smoke over Sonoma County from 2017's fires echoes the current situation. - DICK LYON
  • Dick Lyon
  • SMOKED An aerial view of the smoke over Sonoma County from 2017's fires echoes the current situation.

PQ: Assemblymember Marc Levine announced a plan to increase oversight of the utility by creating legislation to install a "responsible adult in the room to right PG&E's wrongs."

Once again, PG&E's impact on the public has brought it a massive amount of negative attention.

On Monday, as the Kincade Fire continued to rage, the investor-owned utility's stock price tumbled. A weekend of fire, widespread power shut offs and the evacuation of approximately 185,000 North Bay residents, many from Sonoma County, is the latest debacle for the bankrupt utility and its customers.

Approximately 960,000 customers across the state, including hundreds of thousands in the North Bay, sat without power due to a widespread Public Safety Power Shutoff instituted by the utility.

In recent weeks, state politicians, including Gov. Gavin Newsom, have been more inclined to publicly criticize the state's largest utility while Wall Street players continue to consider whether they're interested in purchasing the utility.

But this week has already brought multiple competing proposals by California lawmakers to drastically change the future of the utility.

Adult in the Room

On Monday, Assemblymember Marc Levine, whose district covers Marin County and the southern half of Sonoma County, announced a plan to increase oversight of the utility by creating legislation to install a "responsible adult in the room to right PG&E's wrongs."

Under Levine's legislation, which he plans to introduce in January 2020 when the state legislature returns, the California Public Utilities Commission would create a test to determine whether a Public Administrator should be appointed to oversee PG&E.

The CPUC's test would include "an analysis of PG&E's financial health, the reliability of the utility's infrastructure and its safety record," according to a statement from Levine's office.

"The Public Administrator would be authorized to work with PG&E leadership and make decisions necessary to restore critical infrastructure, ensure that proper safety protocols are followed and increase public confidence in the utility," according to the statement

Although the scope and powers of the role have not yet been fully defined, the Public Administrator would be something like that of an emergency manager appointed when a school board declares bankruptcy, Levine said in an interview with the Bohemian.

The Public Administrator would remain in place until PG&E reached requirements of the test created by the CPUC. If the utility failed to meet the CPUC's requirements again sometime down the road, another Public Administrator could be appointed, Levine says.

Wall Street Brawl

Still, with two massive power shutoffs in October and that start of several fires over the weekend that may have been tied to PG&E's equipment, the legislature's January session seems like a long way off.

Meanwhile, financial interests appear ready to take over the bankrupt utility's assets. In PG&E's bankruptcy proceedings two groups of financial interests are battling over the chance to takeover the utility's remains.

One group of bondholders, led by Elliot Management, known as an "activist investor" for its habit of using its stake in companies to push for management changes, has been clashing with major stockholders in the utility.

Now Berkshire Hathaway, an investment fund owned by Warren Buffett, may be in the running as well.

California Gov. Gavin Newsom is reportedly supportive of the idea of Berkshire Hathaway buying the utility, according to a report from Bloomberg News.

"We would love to see that interest materialize, and in a more proactive, public effort," Newsom told the business publication. "That would be encouraging to see. They are one of the few that are in a position to make a significant run at this.

Levine was not as interested, saying that Buffett's firm, nor any other investor would not single handedly save Californians from "years of misplaced priorities" by PG&E's management team. Furthermore, Berkshire Hathaway has a track record of investing in dirty energy sources, including coal. In a state focused on reducing its impact on the climate, that is a cause for concern.

"Buffett's utilities are some of the dirtiest in the country," Levine said.

Woody Hastings, an energy program manager at The Climate Center, a Santa Rosa nonprofit which advocated for the creation of Marin Clean Energy and Sonoma Clean Power, agencies that purchase their own mixture of power but still rely on PG&E's lines to distribute it, called the governor's reported endorsement of a possible Berkshire buyout "totally inappropriate."

(DISCLOSURE: This reporter completed an unpaid internship at The Climate Center in the summer of 2013.)

In April, Buffett told CNBC, a business news channel, that reports that Berkshire Hathaway was interested in buying PG&E were "100 percent not true." He has yet to comment on the Bloomberg report over the weekend.

Still, after a disastrous weekend for the utility and its customers, some analysts were speculating about whether any private bidders will still be interested.

PG&E has acknowledged that its equipment may have been involved in starting the Kincade Fire in Sonoma County on Friday and another fire in Contra Costa County.

On Monday afternoon, stock prices for PG&E Corporation, the publicly traded company that owns the utility, hit $3.80 per share, a new low.

Prior to the October 2017 fires, the company's stock price briefly topped $70 per share in September 2017. The price has fallen with each successive debacle ever since. In January, the stock hit $6.36, then a historic low, when the utility announced bankruptcy.

Jared Ellias, a bankruptcy law expert at the UC Hastings College of Law, told the Sacramento Bee that the situation may be more volatile than the private investment players may have expected.

"Whether it's turning the power off, or not turning the power off, PG&E can't do anything right," Ellias told the Bee. "That's a much riskier investment than any of these guys thought."

Meanwhile, a CitiGroup analyst told the bank's investors that "the probability of a zero equity value continues to increase," according to a MarketWatch report on Monday.

Still, the Sacramento Bee reported on Sunday that "a source close to the [PG&E] bondholders" said the group was still interested in bidding on the utility.

Watershed Moment

On Tuesday morning, U.S. Congressman Ro Khanna announced his support for a public takeover of PG&E.

"PG&E has been a disaster. When you have a state that has Apple, Google, and Tesla in it, there's no excuse for not getting power to our people," Khanna, who represents San Jose and nearby cities, said in a statement. "I'm calling on Gov. Newsom to support turning PG&E into a customer owned utility. We need to have more municipal public utilities providing energy."

While the push and pull between those calling for a public takeover of the utility and those advocating for continued private ownership has been going on for over 100 years, the current moment may be historic, according to Hastings, the Climate Center energy analyst.

"PG&E is hugely vulnerable. This is a watershed moment," Hastings, the energy analyst, said on Monday.

In the near-term, PG&E's dangerous infrastructure needs to be replaced with modern equipment, including local electrical grids, energy storage infrastructure and production capacity, Hastings says.

"Every penny needs to be reinvested into making safety improvements, developing a 21st Century system, and combating climate change," Hastings said.

In Hasting's personal view, public ownership of some sort could help achieve those goals. Although existing publicly owned utilities in the state may not be perfect, they are designed to be responsive to people, not profit, Hastings says.

Gov. Newsom reportedly does not support a public buyout, and North Bay lawmakers appear to be somewhere in between.

On Oct. 18, State Senator Mike McGuire, who represent much of the North Coast, released a statement hinting at the need for bold action.

"PG&E has become too big and has failed us too many times. All options need to be on the table – including breaking up the utility," McGuire said in the statement. His office did not respond to a request for comment about a public buyout of the utility.

On Monday, State Senator Bill Dodd, who represents parts of Napa and Sonoma counties, told the San Francisco Chronicle that he was "intrigued" by the idea of making the utility into a public cooperative, a model proposed by the Mayor of San Jose.

Levine said Monday that he does not currently support a public buyout of the utility. PG&E's aging infrastructure, including 90-year-old transmission lines in Marin County, would constitute a "massive liability" for anyone, public or private, who buys the utility, Levine says.

Levine also said that San Francisco's recent offer to purchase PG&E's infrastructure within the city would have amounted to an effort to "cherry pick the best infrastructure and easiest lines to repair."

The city's $2.5 billion offer, which PG&E rejected in mid October, could increase the burden on other PG&E ratepayers, Levine says.

Dodd is also opposed to the idea of cities like San Francisco buying chunks of PG&E's grid, according to the Chronicle.

Instead, Levine said Monday that someone acting in his proposed Public Advocate role could help PG&E "refocus its priorities on safety and increase needed public confidence in this essential public utility service."

Levine's "adult in the room" would be in a position to guide PG&E to reinvest any shareholder profits into much-needed infrastructure improvements, according to Levine.

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