PG&E Has Failed…..What is Next?

Pacific Gas & Electric–also known as the “Firestarter” for causing too many fires this past decade–has announced that it intends to split off its natural gas division and/or file for bankruptcy protection.  This is a direct result of actions taken Thursday, January 3rd, by the largest insurance companies in the state; Allstate, State Farm General, and USAA filling suit to recover damages incurred by the Camp Fire. 

Insurers sue PG&E over damage caused by Camp Fire

PG&E following Toys R Us and Sears?

The Camp Fire for those of you who; live under a rock, vote democrat, or are related to a Park Brother, is the fire that burned all of Paradise and Magalia late last year.  The fire was started by a spark at a PG&E power generating facility, which had a myriad of maintenance issues by the way.  The utility could be on the hook for over $15 billion in damages from fires over the last two years alone, an amount that could well exceed the company’s total value.

Camp Fire, Paradise , CA 2018

How did we get here you may ask?  In short, California has a strange law (only 1 other state has it as well) called inverse liability.  This law applies to utilities in the state, basically saying, if there is any chance your power lines/equipment may have caused the fire, you are 100% liable for all the damage.  In the fires in Sonoma and Napa in 2017, as well as the Camp Fire in 2018, it appears PG&E will be liable for all damages under this law.  So, whether the cause was sparks from a generator in Concow this year, a tree falling on a transmission line in Napa, or a short in the line in Sonoma, PG&E is on the hook, not your insurance company.  Additionally, because this is set law, no judge will overturn this, or rule in the utility’s favor.

As a result of these liabilities, PG&E late Friday night began to look to implement “Project Falcon” named for the Peregrine Falcons that land on top of the San Francisco HQ’s roof.  Project Falcon includes selling off their prime real estate in San Francisco and relocating elsewhere in the Bay Area.  Maybe they should relocate somewhere less expensive…like I don’t know….ANYWHERE ELSE!  It includes finding additional board members and directors with a background in safety…..yeah probably should have done this after San Bruno, but ok.  In addition, they are looking to sell off/spin off their natural gas operations; i.e. the gas part of your bill. 

Is PG&E Dropping The ‘G’? Source Says The Utility Is Exploring Selling Off Natural Gas Division

This I have no opinion on, the entire company is ethically and morally bankrupt so I don’t know if two companies are better than one, but I digress.  Actually, they lobbied State Senator Bill Dodd (D-Soviet Berkeley) to pass legislation to absolve them of all liability from fire stemming from their electrical lines.  While Dodd may have been their puppet for a year, the bill went nowhere, and he has since reversed his stance calling PG&E one of the most corrupt companies he has ever dealt with.  I guess the check never cleared the bank?

This issue is actually very complex, and I see it two ways:

On one hand, PG&E like other utilities are a legalized monopoly governed by a state regulator who essentially tells them how much they can charge and how much they can make.  The other problem is their service territory is very large; they have over 5 million electricity customers in their territory.  In addition, most of their territory is rural, meaning they must bury their lines (very expensive) or have them on towers running through heavily wooded areas or rugged terrain. 

Electric Utility Service Area

For example, PG&E must somehow get power to the town of Biggs. Since this is part of their service area, they must run power lines there or have a generation plant for this community.  Let’s say that they run electrical transmission lines there and create a defensible space of call it 20 feet on both sides of the lines. In theory, that is all well and good, but along the route of the transmission lines are 100-foot-tall trees. When the trees fall or large branches break off and knockdown the lines, perhaps as the result of a storm or disease, not only could they disrupt power but might start a fire.  Since the transmission lines belong to PG&E, they own the resulting repair costs even if it was not directly their fault. While I do not feel sorry for them, the job is not very easy, especially when you are a monopoly and have no choice but to provide electrical and natural gas service.

On the other hand, I’m sorry; you are without a doubt the most ethically bankrupt company in the state, and by a wide margin.  When the San Bruno pipe blast occurred, your company never admitted or accepted blame, they passed it off and gave traditional corporate speak answers. 

San Bruno pipe blast

That pipe rupture and explosion killed people, and you were caught lying to a judge when they discovered the pipe was essentially “frankensteined” by welding together a bunch of scrap pieces. 

“frankensteined” pipe welds

You decided to save face by running a bunch of feel good ads on TV essentially saying you are working harder than ever to keep our communities safe….liars!  The fires in Sonoma, Napa and Paradise killed many people.  This is a direct result of a total lack of maintenance and integrity.  As much as I do not wish to see my gas provider go bankrupt or be split up/sold/etc. they need to be held accountable.  So far, they never have been.  I had to watch your annoying commercials then watch a town go up in flames because of your equipment and lack of accountability to your rate payers.  When it came time for maintenance or tree trimming, I’m sure you just had a single employee check it, initial a log and move on to the next site.  Rather than have a cross checker or someone to make sure the work was actually done, it was ignored, and people lost lives/homes and possessions as a result.  Shame on you.  You never learned your lesson, you just continue to repeat the same mistakes just hoping for a different outcome.

The Blog Father and I agree on several things involving this corporation.  First, it will be interesting to see how the bankruptcy proceedings handle what is likely a much-underfunded union pension plan for employees.  This state is very pro-union, and like most utilities, PG&E is very heavily unionized.  If the state swoops in and takes them over, do the union pensions get bailed out by the taxpayers?  Does the state bail the company out?  It will be fun to watch.  If the company splits, how does the gas company make it on its own?  Natural gas prices are literally at their lowest levels and it has been this way a long time.  Also, what happens to both companies?  Splitting up is an easy temporary solution but the problems will still exist.  Finally does the company even know what it actually owns or has infrastructure wise?  Some of these lines were laid decades and decades ago underground.  As a matter of fact, PG&E scoped the sewer lines in both our neighborhoods recently for some unknown reason.  As I stated earlier no one even knows what this company has infrastructure wise or the length of time it is guaranteed to work for. My suspicions are that huge portions of underground infrastructure in this state are decades past their useful life and in need of replacement.

Here is what needs to happen:
CEO Geisha Williams needs to be led out in handcuffs, she may not work in the field but she as CEO is the captain of the ship and sadly the ship has been taking on water for too long.  The failures happened under her watch.  Come out and admit your failures and shortcomings in the maintenance division.  Allow a judge to investigate the senior management including any supervisor in the areas where the issues occurred.  The Public Utility Commission (PUC) should be allowed nowhere near this, they have direct oversight of all CA utilities and have been asleep at the switch.  Talk directly to the ratepayers, PG&E’s electric rates are among the highest in the country, yet the upkeep has lacked badly.  In addition, please stop running your statewide propaganda commercials about how safe you are and how you are removing tree branches to keep us safe.  They are just that…propaganda. Thanks to your negligence, many people lost everything, some even paid with their own lives.  Oh, and take a look at what you have done to your stockholders this past year. In addition to a free-falling stock price, your bond rating was cut to junk, and you eliminated the dividend–a traditional hallmark of all utility stocks…good thing I was never an owner!

Geisha Williams presides over PG&E’s scorching of California

What is going to happen:
Xavier Becerra is going to take a break from suing Donald Trump and the feds for a minute to take up an investigation and sue PG&E.  I guess that’s a good thing because he won’t be wasting taxpayer dollars for a bit, but isn’t this too little too late?  I thought the job of government was supposed to be oversight?  Instead they just read and react, suing after the fact to get their pound of flesh.  Apparently, even your corporate record of supporting Liberal causes with large campaign contributions can’t buy you enough goodwill to get out of this mess. I’m still angry that you gave large sums of ratepayer money to fight against traditional marriage back when we were voting for Prop 8. Any linkage between electricity usage and what ratepayers do with their reproductive organs is beyond my comprehension, but then I don’t live in San Francisco.

Xavier Becerra

Becerra is talking about criminal charges against the corporation…how does that work?  Send the transformer to jail? Put the power lines on supervised probation?  Get it together!  Sadly, I forsee a government owned utility coming soon to every part of the state near you, that includes you Southern CA Edison customers, your utility is in only slightly better shape.  I offer up this evidence, PG&E wants to split into 2 companies as discussed above; gas and electric being separate.  This runs against the current trend of electric utilities buying gas utilities, also both companies have a record of serious neglect for safety of its customers.  The state knows this. They also know that PG&E has a very underfunded pension, and its bond credit rating has been cut to junk, essentially meaning the company faces insolvency very soon.  Enter the State of California, coming in hot with a bailout, keeping the union workers happy, just simply folding them into CALPers.  I’m sure the state looks at the electric rates charged by PG&E and salivates over being able to add that kind of coin to the general fund each month.  Gov. Newsome is on his way to state run healthcare, might as well make utilities the same way, this way they can make you install solar, and simply take it and not pay you. 

I think the answer lies somewhere in between these two scenarios.  I see the state essentially “parting out” PG&E. In the past (2005), SMUD put out a study and a ballot initiative to annex Davis and Woodland as mentioned above. PG&E spent big to defeat it. I think this plan could come back to fruition.  I could see the State selling off the territory to SMUD under an agreement that SMUD also take the surrounding rural areas and agree to a massive overhaul of the maintenance of existing infrastructure. 

I see this scenario playing out all over the state to be honest.  I don’t really see criminal charges, but I do see a major fine coming.  When you look at PG&E’s service territory you can also see a case to break up the company into about 3 – 4 smaller companies, similar to AT&T’s breakup.  Bottom line, this company needs to be gone ASAP and take all their employees with them. This has to be the most corrupt company in CA history.