SAN FRANCISCO (CN) – Widespread power blackouts and years of destructive wildfires have brought California to a place where it has never been: Lawmakers are looking at replacing the nation's largest utility with a public entity. Could such a plan overcome the regulatory, legal and political barriers, and if it did, would it be a better system than the one we have now?
Frustration toward Pacific Gas & Electric has boiled over in recent weeks, leading California Gov. Gavin Newsom to insist the company's entire system must be "reimagined" and the potential for a government takeover should be explored as part of that process.
Shanin Specter, a Stanford law professor and partner at the firm Kline & Specter, has reservations about a government-run utility. He thinks free-market principles make utilities more efficient and that political considerations can taint a government-run utility's decision making.
But he also believes PG&E's repeated failures and a pattern of "negligent and reckless conduct" make a public-run utility look more appealing.
"They seem to be so endemically incompetent, that maybe the government would do a better job," Specter said of PG&E.
The company declared bankruptcy this past January, facing a potential $30 billion in liability for more than 20 wildfires allegedly caused by its equipment in 2017 and 2018. It recently announced it could be liable for more damages as a broken jumper cable is suspected of causing Sonoma County's Kincade Fire on Oct. 23, which scorched more than 77,000 acres and destroyed 374 buildings.
PG&E insists its infrastructure "is not for sale" and changing the company's structure "would not create a safer operation." But with a continuing pattern of utility-caused wildfires and widespread prophylactic power outages, calls for radical change are growing stronger.
"It's hard to imagine anyone doing a worse job than PG&E," said Mindy Spatt, spokeswoman for The Utility Reform Network (TURN), a ratepayer advocacy group.
PG&E and its shareholders are currently locked in a bankruptcy court battle with hedge funds vying for control of the company. But a growing number of Californians are pushing for a new path forward, one that would replace PG&E with a public entity or customer-owned cooperative.
Legal and political hurdles
Seizing an investor-owned utility's power system through eminent domain has been done before, but the process is neither simple nor easy. It requires lengthy reviews by state and federal regulators, gobs of cash from state or local governments and court battles that can last years.
With PG&E already embroiled in the Chapter 11 process, such a plan would require approval by the bankruptcy court and California Public Utilities Commission, which is reviewing PG&E's bankruptcy plan for its impact on rates, reliability and service.
The first step would be to create a public entity endowed with billions of dollars to buy PG&E's assets and perform necessary upgrades and maintenance in the future. Such funding must be approved by legislators or come from bonds issued by local governments, which often require voter approval.
State Sen. Bill Dodd, Democrat from Napa, thinks it would be a hard sell in the Legislature to get Southern California politicians to authorize billions of dollars for a state-run utility to replace PG&E.