Public utilities should not be for profit companies, especially public listed companies. They shouldn’t aim to maximize profits. If they were to instead maximize utility, they may re-invest in infrastructure more heavily and put power lines under ground. Maybe I am missing something and someone can offer a counter argument.
My general metric for whether something should be a function of government (or so heavily regulated by government that the distinction is moot) is "Does this business function best as a monopoly?" By default, I assume everything that does should be a government function, and everything that shouldn't should be regulated to avoid becoming a monopoly.
So by default, I would assume that electricity distribution should be a government function, but electric generation could probably work fine as a set of non-monopolies competing to feed energy into the publicly-run grid at the lowest prices.
I agree that distribution should be gov regulated, and it is. I also agree that generation should be open market (it is, and those companies are still regulated by NERC, etc). That said, the distribution companies in CA are publicly traded... and that is a problem IMO.
They're regulated in such a way that they basically print money, in certain circumstances. I do agree though, power companies should not be publicly operated at this point in time. It might have made sense when electricity being delivered to homes and businesses was a new and somewhat optional concept, but we've reached a point where it's exceedingly rare to _not_ have electricity available at all times. I believe PG&E is essentially telling the state of California, "So, you're going to sue us for billions of dollars because of wildfires you think our transformers caused? I guess we'll have to retalia...er, shut off the power sometimes in order to prevent fires."
They should be what they used to be, pre-regulation. Boring companies that generate a near fixed return in assets, enforced by a heavy regulatory hand.
I don’t know about PG&E specifically, but in my region deregulation led to an attritted workforce and suspension of capital improvements. Shockingly, the infrastructure is a dumpster fire 20 years later.
Putting power lines underground is very expensive - meaning, very nearly prohibitively so. Or actually prohibitively so when you consider that PG&E has to serve vast areas of wilderness in California.
Paradise (Camp fire) was sufficiently west that I think its own power lines did not travel through Natl Forest however if I'm not mistaken it was hit by fire from the east (pushed by a wind out of the east), further up into the Sierra, and almost certainly there power lines were in the wilderness.
Unlikely to happen (at least now) in a place that's, uh, culturally like the US.
We're in California and are in a community that was affected by PG&E's power shut off.
I think one problem in California is that since I first arrived in the 1980s, the population has grown from 22 to close to 40 mln. And given, again, US cultural proclivities, there's a significant number of people who'd love to move out into at least near-wilderness - but they still expect to be provided with their utilities. Some may be fine living off-grid - but not others. And there's no way, in the US, you can tell them that they can't have their cake and eat it too. Especially if they're rich and some portion of those people moving out into their dream home in or near wilderness are rich and figure that entitles them to having it all.
They are welcome to pay for it, especially if they are rich and want it bad.
Why shouldn't PG&E pay for it? They blew their safety budget on executive bonuses. Hell, look at how many hundreds of millions PG&E spends annually on stock buybacks to appease the shareholders.
The other poster is talking about people moving into the near wilderness.
Define wilderness, there are plenty of people not in dense urban cities in California.
I doubt you do either.
When you assume you make an ass out of "u" and "me". I think rural electrification is important. More important than stock buybacks, executive compensation, and astronomically expensive lobbyists like Willie Brown. Rural service and higher rates don't necessarily go hand in hand.
That said I'd be more okay with paying increased rates for more comprehensive service than I am with paying increased rates to fund PG&E negligence.
No, what just happened is PG&E was forced to cut power because it has for years prioritized dividends over it's safety obligations, not because there are places to which power cannot be safely delivered.
This isn't a can't be done safely problem, it's a private firm gambling to squeeze out more short-term profits and hoping it doesn't blow up in their face problem.
I assume the denser the population, the more it makes economic sense to put power lines underground.
The particular problem though is wildfires and they're more slowly caught, and can become larger and more destructive, the further away they are from population.
San Diego (SDGE) has a plan to bury most lines in the next 50 years. I feel like this would happen faster if they were not beholden to shareholders (NYSE:SRE). Distribution and the charges associated with it are government aided monopolies... Should a publicly traded company have a gov granted monopoly?
As far as I can find, SDGE is only burying their distribution lines. Their 1900 miles of transmission lines (which often cut through flammable wilderness areas) will remain above ground.
I think one glaring hole is that it’s very hard to incentivize people to maximize someone else’s utility. You don’t just say the words “maximize utility” and it just gets done.
This is a good point. What is utility here? I think the primary utility is highly available electricity. How is that maximized? I don't know how to do that tactically, so I should stop talking... but strategically it's about minimizing risk. I suppose that involves having a highly connected grid to many power sources (solar, wind, nuclear, hydroelectric, etc) to mitigate a SPOF. It should also involve low risk transmission (underground where possible, multipath, etc). This all comes at a great cost... but if profit is important (or required for the CEO to keep his job), not all money goes to improving the system, but to lining pockets of investors. So yeah, there needs to be a plan, but the current plan is keep things working and yield dividends to shareholders.
I keep coming back to; simpleton economic incentives can't fix a lack of good faith. I first noted that when reading Samuel Pepys diary entry where he crows both about the fat kick back he got on an order timber for ships masts. And the really good price he got as well.
You'll say that until the company is full of public service workers who dont care and electricity costs 3x as much. Pretty much every developed country has privatized electricity generation to keep prices down.
This isn't accurate. In the Bay Area some cities have decided to run their own public utilities instead of relying on PG&E.
For example, Santa Clara runs their own public utility[2]. The average resident pays about 10.4 cents per KWh. That's about 30 percent less than rates PG&E charges.
Also, their energy is greener and their infrastructure is better maintained.
The problem with for profit utilities is that they are incentivized to keep things as lean as possible. They neglect maintenance of their infrastructure and use that money for bonuses and dividends. You can see that played out here [1].
Arguably this is Santa Clara skimming from the system. Carve out a high density environment and let them pay just for themselves and you’re definitely going to come out ahead of trying to electrify rural California.
> The problem with for profit utilities is that they are incentivized to keep things as lean as possible. They neglect maintenance of their infrastructure and use that money for bonuses and dividends.
They aren't incentivised to be excessively lean. The incentive structure for someone who has spent a fortune on expensive capital investment is to maintain it.
There is no point incentive to build a vast system of poles and wires then letting it degrade over time.
Anyway, it won't be capitalist incentives at work; it will be something in the details of the regulations. In Australia, due to poor market regulations, we have the opposite problem where our utilities spend far too much on grid maintenance.
That isn't an incentive, that is just greed. And not actual "make the most money" greed, but stupid greed where that is the choice that they would make if they don't think at all and nobody points out the obvious to them.
Making a long-term investment to squeeze it for unsustainable short term profits is genuinely stupid. There is no incentive to do that. They would make more money milking the grid for long-term profits.
Making a long-term investment to squeeze it for unsustainable short term profits is genuinely stupid.
If you've got a better name for it I'm all ears. But PG&E has been neglecting their infrastructure at least since the early 90s when their lackadaisical approach to clearing brush led to the Sierra Fire in '94.
Keep in mind that PG&E's record keeping was so lax that they blew up a neighborhood in San Bruno after increasing the pressure on a gas pipeline without knowing if the line could support such pressure. Apparently PG&E also got sued a couple years ago by shareholders alleging gross mismanagement and demanding safety reforms. I'd say there's plenty of stupid and greed at PG&E to go around.
> If you've got a better name for it I'm all ears.
'Incompetence' would be the normal choice. And standard run-of-the mill incompetence has nothing to do with profit motives or incentives.
You can get incompetence with any governance structure; it isn't related to profit motives. If they are being sued by their own shareholders that is quite solid evidence that it isn't capitalist incentives that are the problem.
There are numerous public utilities in California, and elsewhere.
Generally the costs are lower and service levels higher than privately-held corporations.
Granted, most munis don't have to deal with long-distance distribution, though there are four federal power administrations which do, the Bonneville, Southeastern, Southwestern, and Western Area Power Administrations. Also the Tennessee Valley Authority.
> Granted, most munis don't have to deal with long-distance distribution
That really seems to be the only thing that matters here, given that the issue is about the liabilities fires due to lack of line maintenance in forested areas.
Why do we have to assume a publicly owned utility wouldn’t be able to focus on safety and efficiency at the same time? I mean, there’s data on Medicare being more efficient than private insurance[0]. Why is this different? I’m not sure I’m convinced that the profit incentive needs to exist for them to worry about costs.
The key is regulation, we have privatised utilities in the UK and although they aren’t perfect they appear to be much better than what Californians are putting up with. Before they were privatised they suffered from terrible under investment as every right wing government would squeeze their finances.
It is not so much about being "public utility", it is about competition, if you can't have competition there is no point giving the rights to some private company which acts like a monopoly. Transportation is also public utility and yet it makes sense to have different taxi companies or airlines.
The interesting question is when you got something that you can't compete with directly like a train line but can compete using other methods like buses or airlines. In that case there might be more incentive to a train line operator to give a good service because of the competition.
