SAN FRANCISCO (CN) – Citing destructive wildfires and mass blackouts that have plagued Northern California for years, a state senator proposed legislation Monday that would turn the nation’s largest private utility into a publicly owned entity.
Senate Bill 917, proposed by California Sen. Scott Wiener, D-San Francisco, would convert Pacific Gas and Electric into a government entity and give local governments a chance to take over the company’s assets and launch their own public utility districts or customer-owned cooperatives.
“This legislation is long overdue,” Wiener said during a press conference on the steps of the state building in San Francisco on Monday. “It will improve the quality of life of Californians and lead to safer more reliable and more affordable energy.”
Insisting that PG&E’s business model is “broken,” the state senator argued the company consistently prioritizes profits over the safety.
PG&E provides natural gas and electricity to 16 million residents in Northern California. The company has been accused of neglecting maintenance and failing to clear vegetation around power lines in the years leading up to destructive wildfires in 2017 and 2018 that killed 129 people and destroyed nearly 28,000 buildings.
Wiener also decried the company’s response to those wildfires – instituting preventative mass power blackouts in dry and windy weather – as “ham-handed.” He noted how such events can cause low-income people to lose all food in their refrigerators, force small business to shut down, make struggling parents miss work and threaten the lives of those who rely on powered medical equipment and refrigerated medicine.
Despite all those problems, Wiener noted, PG&E still charges customers some of the highest rates for gas and electric service in the nation.
PG&E responded in a statement Monday that its facilities are not for sale and “changing the structure of the company would not create a safer or cleaner operation.”
After facing pressure from Gov. Gavin Newsom, PG&E unveiled an amended bankruptcy plan Friday that seeks to appease governor’s demands for changes in corporate governance and an increased focus on safety and accountability. The plan includes a partial shakeup of the board of directors, appointment of an independent safety adviser and oversight committee and establishing new executive roles focused on risk and safety.
“PG&E is committed to working with all stakeholders to make the necessary changes moving forward to build a stronger and safer PG&E and be the company our customers and communities want and deserve,” PG&E spokesman Paul Doherty said.
PG&E declared bankruptcy in January 2019 as it faced a potential $30 billion in wildfire liabilities. The company has agreed to pay $25.5 billion in settlements, including $1 billion for 18 public entities, $11 billion for insurers who covered wildfire losses and $13.5 billion for all other wildfire claims.
Under Wiener’s proposal, PG&E would be transformed into a publicly owned entity called the Northern California Energy Utility District, which would contract with a public benefit corporation to manage day-to-day operations. The utility’s leadership would be appointed by the governor.
Members of the IBEW Local 1245, which represents PG&E employees and contractors, attended the press conference Monday to oppose the legislation. Despite Wiener’s promise to protect PG&E workers, they argued the state cannot guarantee 25,000 PG&E employees’ pensions and jobs will be preserved.
The union put out a fact sheet with 24 bullet points detailing arguments on why a state takeover would be bad for PG&E customers, taxpayers, fire victims and workers.
Hunter Stern, assistant business manager for IBEW Local 1245, estimated it will cost taxpayers about $100 billion for the state to purchase PG&E’s assets. He said there is no mechanism under state law to convert a private ERISA pension into a publicly held pension fund, and funding pension liabilities would require approval by voters.
CalPERS, the largest public retirement fund in the United States, had $139 billion in unfunded liabilities in 2017, according to the Public Policy Institute of California.
If local governments like San Francisco and San Jose decide to launch their own public utility districts of customer-owned cooperatives, the union argues that employees would “lose bargaining power by being in smaller units.”
Transferring PG&E assets to a public entity would also cause local governments to lose $388 million in property taxes and franchise fees currently paid by PG&E, the union insists. In past transitions, including for the Long Island Power Authority which took control of a private utility in 1998, public entities have made payments in lieu of taxes to local governments.
Opponents also point out that under California’s inverse condemnation laws, ratepayers or taxpayers would be required to cover all damages from wildfires caused by a public utility’s equipment. Private utilities are not allowed to automatically pass those costs on to ratepayers.
Furthermore, a public entity would lose access to a $21 billion insurance fund established last year to help investor-owned utilities deal with future wildfire liabilities, even though PG&E customers have already paid premiums to fund that account.
Wiener’s office did not immediately respond to a request for comment on IBEW’s criticisms against the legislation.