San Jose Mayor Sam Liccardo is leading a coalition of local government leaders in a push to transform PG&E into a customer-owned utility.
The mayors of Sunnyvale, Oakland, Sacramento and about 20 other cities have joined Liccardo in urging the California Public Utilities Commission (CPUC) to restructure the bankrupt PG&E from an investor-led company to one that’s customer-owned.
“There’s no question that in whatever form this company comes out of bankruptcy, ratepayers are paying more,” Liccardo said at a press conference earlier this week. “We know that because we see the size of the debts and liabilities. The question is: are you going to be paying more for the same broken investor-owned utility that will be controlled by an out-of-state hedge fund seeking to maximize profit … and leave the carcass for taxpayers and ratepayers to pick up?”
The mayor acknowledges that the process would be a tremendous undertaking, as PG&E estimates it needs to invest tens of billions of dollars to upgrade its aging infrastructure. But Liccardo said a customer-owned utility would be cheaper to operate because, as a not-for-profit entity, it would enjoy exemptions from federal tax. Plus, it wouldn’t need to pay dividends to shareholders, allowing the utility to divert resources on maintaining and repairing old transmission lines.
Over 900 utility cooperatives exist across the nation, most of them in rural areas deemed unprofitable to serve by investor-owned utilities. Utility cooperatives either invest their profits in its infrastructure or distribute them to members.
“I'd like to believe that if it was customer-owned, it won't be contemplating $11 million in bonuses to corporate executives in the year it went bankrupt,” Liccardo said. (A judge ultimately rejected the utility’s planned bonuses).
The mayor estimated that his proposal would save the public $14 billion.
Liccardo said he wouldn’t want elected officials to serve on the ratepayer-owned utility’s board of directors; the governance of the proposed customer-owned entity has yet to be decided. However, the mayor added, “it needs to be run like a business.”
“Certainly it needs to be efficient and invest ratepayer dollars effectively,” he said. “That means it should not be a political animal.”
Since Gov. Gavin Newsom signed AB 1054 in July, PG&E must exit bankruptcy by June 30, 2020. CPUC is reviewing two proposals to restructure to utilities. But the city-led coalition criticized the proposals up for consideration, saying in a letter to the CPUC that “both vie for ultimate control, and both reflect a short-term desire to maximize financial gain for their proponents.”
Major lenders proposed a $30 billion plan that would set aside $18 million for customer claims from the 2017 and 2018 wildfires and rebrand PG&E as Golden State Power Light and Gas Company. The coalition of city leaders, however, slammed the pitch as the “product of distressed asset bondholders.”
Meanwhile, PG&E put forward a proposal to pay a $1 billion legal settlement by raising up to $14 billion of equity financing and compensate wildfire victims with an amount that doesn’t exceed $8.5 billion. Again, the coalition denounced the proposal because it would allow hedge funds to continue to finance the utility’s operations.
“To the extent that the public continues to believe that a profit motive has dominated PG&E’s decision making, the enterprise will never regain the trust of its customers, its regulators, and public policy-makers,” the coalition wrote to the CPUC. “It is time to pass control of the company from geographically distant investors to its customers.”
Echoing Newsom’s declaration that PG&E should become a “completely re-imagined company,” the coalition expressed hopes of restoring public confidence by turning it into a collectively owned organization.
Since the utility’s power shutoff left millions of Californians in the dark last month, state leaders have implemented a series of initiatives trying to rein in PG&E’s abuses and failures. Newsom recently announced plans to allocate $75 million of state funding to reimburse cities’ for the power shutoffs, with $500,000 going to San Jose.
Meanwhile, Santa Clara County will explore options to repay costs incurred from the power outages. In addition to calling for a ratepayer-owned PG&E, Liccardo also announced that San Jose will explore investment in micro-grids and energy storage.