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Comment by dstroot | Hacker News Reader

It will be interesting watching how all this plays out. As others have noted the liability math has certainly changed. Enough to bankrupt one of the largest utility companies in the country.

One the other hand this is also a political statement. They are clearly signaling to the politicians that they better shield them from further liability or expect more of this behavior. Shut the power down when the wind blows, after each earthquake until the lines can be checked, etc. My money is the politicians fold. The stock rose 3% Friday.

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My money is they get taken over by the state. Privatizing a utility was always a stupid move to begin with and they are finally proving it beyond any reasonable doubt. It's time we get to fixing all the damage Regan did to this country.

How did president Regan privatize a California utility?

Not sure I’m this particular case but I’m going to go with Reagan did it when he was California’s Governor.

You're going to "go with" something... that never happened?

Reagan was governor of California at one point in the 70s.

However, I'm not clear whether PG&E was ever actually nationalised?

1967 and 1971.

PG&E was never a public utility.

I suspect the harm meant was more of the general form of "government is not the solution to our problems, government is the problem".

http://factmyth.com/factoids/reagan-said-government-is-the-p...

Except that poster wanted the utility to be taken over by the government. Thus the comment was in favor of increasing government.

Which could well be a good thing. Reagan's dictum is often invoked to mindlessly reject any such possibility.

Private utilites work just fine in every other state. Maybe this just a California being California issue again.

No need to throw the baby out with the bathwater...

> Maybe this just a California being California issue again.

California is a high fire risk state regardless of whether the utility is publicly owned or investor (aka privately) owned. The risk is on a level that doesn't occur in many other states.

If the costs of fires are going to be socialized anyways (by immunizing utility from the liability, hence putting the burden on the ratepayers), the question of whether the utility should be publicly owned in order to reduce the obligation to shareholders is a valid one.

Either that or PGE will have to dramatically increase it's expenditures on maintenance to reduce the fire risk, which will have to come from shareholders' and ratepayers' pockets (the latter of which is not permitted under current PUC rules, IIUC).

> ...or PGE will have to [...] which is not permitted under current PUC rules

Sounds a lot like California being California to me...

Your "[...]" skips over the option where they have smaller immediate profits in exchange for securing the future of the company. Is that a bad option for some reason?

A company selling shares to raise capital is an alternative to other methods of raising capital, like taking out a loan. Asking why they don't just make smaller profits is like asking why they don't just pay a lower interest rate on their loans. It presumes that someone exists who is willing to lend them the money at the lower rate of return.

Companies have the option of shutting down operations and selling off their assets. PG&E presumably has a fleet of trucks and equipment, land rights etc., which were paid for with investors' money. If their profits fall below the level that could be achieved by selling off those assets and then investing the money at the market rate of return, it becomes profitable for raiders to come in and buy the company and do that with it, so the company has to stay more profitable than that in order to prevent that from happening.

> A company selling shares to raise capital is an alternative to other methods of raising capital, like taking out a loan.

Not selling shares. Having smaller dividends. That doesn't assume anyone is willing to loan them money.

> If their profits fall below the level that could be achieved by selling off those assets and then investing the money at the market rate of return, it becomes profitable for raiders to come in and buy the company and do that with it, so the company has to stay more profitable than that in order to prevent that from happening.

Ugh. I'm not sure via what mechanism, exactly, but it should not be possible for a monopoly power company to just dissolve and sell off the trucks for a tiny quick profit.

Yes. The State should confiscate their assets and sell them to somebody willing to meet the obligations of a Public Utility. Lots of companies do, and make tidy, predictable profits.

> Not selling shares. Having smaller dividends. That doesn't assume anyone is willing to loan them money.

They already sold the shares and used the money to buy trucks and stuff. The dividends are effectively the interest on that money.

Suppose (made up numbers) that they have ten billion dollars in assets, but a twelve billion dollar market cap because of the expectation that those assets will be used to make future profits. Now you say "just make smaller profits" which means their market cap falls to eight billion dollars because of the expectation of smaller dividends.

Someone on Wall St then notices that they can make two billion dollars by buying them for eight billion and selling their assets for ten.

> I'm not sure via what mechanism, exactly, but it should not be possible for a monopoly power company to just dissolve and sell off the trucks for a tiny quick profit.

The government always has the option to be the buyer itself, or find one that wants to continue operating as a power company. But then it either has to raise its own capital or bring about a regulatory environment that allows a private company to meet the market rate of return and thereby raise a sufficient amount of private capital.

For a utility, "keep being a utility" needs to be above "larger profits" on the list of core objectives, and shareholders need to accept that before buying in.

Whether that's just by writing it down, or having 30 billion in penalties if they stop delivering power, or by making dividends vest over 20 years...

But we live in a free market of ideas. No reason to have one state operate it’s utilities like every other, except to satisfy social memes.

We’ve done the privatize it all experiment even given evidence that services like Medicare can be run pretty cheaply, and, well, Kansas and Oklahoma.

I’d be curious to see if California could save rate payers money. My guess is the conventional finance wisdom about big government spending is more like fear mongering to protect special interests.

Given how California’s HSR project recently exploded due to run away costs, calling the concern about the state take over more things “fear mongering” is pretty dense.

CAHSR died the death of a thousand paper cuts (e.g. SF and south bay routing, grade separation, signalling, trump). All of that created an untenable situation.

The closest equivalent with municipal power is the gobs of money PG&E has spent trying to kill local and statewide public power legislation.

> CAHSR died the death of a thousand paper cuts

CAHSR is surprisingly alive and active for something that died.

It exists, and they’re building, but it’s only linking the powerhouse cities of Merced, Fresno and Bakersfield. So I’m sure it’ll be packed 7 days per week.

It’ll remain a hilarious monument to the state government’s incompetence, right in the heart of a region that “voted for the other guy.”

In one comment chain, we have Regan (sic) blamed for "privatizing" CA utilities and Trump blamed for CAHSR.

In one comment chain, we have Regan (sic) blamed for "privatizing" CA utilities and Trump blamed for CAHSR.

Whether or not you agree with his actions Trump absolutely tried to kill CAHSR.

https://www.latimes.com/local/lanow/la-me-high-speed-rail-20...

Trump didn’t derail the project as originally envisioned. He tried to kill it after the governor declared that the project that had originally been pitched to the federal government had become infeasable.

So what you're saying is that trump is trying to kill CAHSR? Got it.

  trump is trying to kill CAHSR?

No. CAHSR is probably dying but due to CA's own lies and ineptitude.

All the Trump administration did is say, "you were promised funding conditional on it being spent on X, Y, and Z. Instead, CA spent that money on the infrastructure equivalent of hookers and blow[0]. Therefore, we are simply cancelling the funding per the agreement and the law because essentially none went to X, Y, or Z."

CAHSR is free to proceed (as far as the Administration is concerned) however they want with their own funds and the promised investor funds. In other words, pay for your own hookers and blow.

[0] 'In one especially egregious case, in 2017, the CHSRA hired an external consultant to check the work of Parsons Brinckerhoff (now WSP USA), which had been paid $666 million for engineering consulting. The external consultant found that the CHSRA had not received finished work for 145 of 184 tasks that Parsons Brinckerhoff had called “complete.”'

https://www.city-journal.org/californias-high-speed-rail-pro...

And within this article alone, you find specific references about how CAHSR failed to comply with the conditions of the funding:

'Ronald Batory, (the Obama Administration's) chief of the Federal Railroad Administration, the transportation agency that made the grants in 2009 and 2010, laid out a lengthy legal argument Tuesday for why the state was out of compliance with the grant agreement. Batory said in a three-page letter to California High-Speed Rail Authority Chief Executive Brian Kelly that the state “has materially failed to comply with the terms of the agreement and has failed to make reasonable progress on the project.”

Batory alleged that the state had failed to spend required matching funds, falling short by $100 million as of December. He argued that it will fail to complete the Central Valley construction by a 2022 deadline required by the grant. Batory also said the state has not submitted required financial information — such as reports on what has been delivered to date — that would allow federal regulators to oversee the grants. It also has failed to take corrective actions after regulators raised concerns in 2017 and 2018.'

Routing, grade separation, and signaling are things any train system must deal with. The lesson from CAHSR is that the California government was too incompetent to be able to handle something that many governments around the world handle just fine.

As to Trump—CAHSR had already failed by the time Trump took office. He simply demanded the federal government’s money back.

The lesson from CAHSR is that the California government was too incompetent to be able to handle something that many governments around the world handle just fine.

How do you get incompetence from being sued at every turn by people trying to micromanage the CAHSR project? The trump approach of ruling by fiat doesn't work in the real world.

Given that clinic in Oklahoma that posts prices methinks you made a Freudian slip there

Private utilites work just fine in every other state.

Do they? The feds already had to step in when private companies deemed large swaths of the United States unprofitable (see also: rural electrification and the TVA).

> Do they?

Yes, they do. ERCOT, as one example, is doing just fine, many of the southwest power companies are private and aren't having issues.

Yes, having whole towns on fire works just great.

https://en.wikipedia.org/wiki/Merrimack_Valley_gas_explosion...

Do you see a legal pathway for this to happen?

In one scenario, CA keeps legislating more and more liabilities to PG&E until it goes bankrupt, in which case the state could take it over, but would also be saddled with those same liabilities.

Alternatively, they step back the liabilities and try to negotiate a deal with PG&E to take over, which would essentially be a buyout. However, what would the incentive be to sell a profitable company with a natural monopoly in one of the nation's largest power markets? I'd imagine the investors would price it so high that the deal would quickly become unattractive to the state.

If they went the expropriation route, that would be a hell of a court case to watch.

Use the threat of liabilities to get a sweetheart price from the hedge fund owners whos hands are tied. Offer bondolders a good deal, and refinance using state bonds to handle the liabilities.

Don't forget the "legislate away the liabilities after you become owner" part.

No. Maintain, and let the previous owners pay for their own liabilities.

My view is that transmission and distribution of electricity are natural monopolies and therefore should be government-owned.

Generation however should be opened up to market mechanisms that find a price for power, reliability/dispatchability, and emissions.

Some forms of generation; the ones that aren't tied to specific geographic circumstances or LARGE heavily regulated super-industrial sites (that I personally recommend are secured by the military due to high energy densities).

Private companies electrified the US. This model was pioneered by Samuel Insull.

https://www.masterresource.org/insull-samuel/insull-rural-el...

FDR didn't like competition for attention, and hounded Insull in court for years.

Private companies electrified ... specific high-profit regions of the United States. They were profoundly indifferent to most rural regions, leading to the Rural Electrification Act (1936).

https://en.wikipedia.org/wiki/Rural_Electrification_Act

Thomas Edison's first power plant, the Pearl Street Power Station (1882) powered just 82 customers initially, largely commercial and industrial users.

Large-scale electrification within the US was developed through public works including the Tenessee Valley Authority, Bonneville Power Administration, Hoover Dam, and numerous others. Four federal regional power administrations, the BPA, Southeastern, Southwestern, and Western Area Power Administrations, still exist.

Many rural regions are served by electric (and telephone) cooperatives:

https://en.wikipedia.org/wiki/List_of_utility_cooperatives#U...

Texas was largely transformed by the Rural Electrification project of LBJ. Wouldn't have happened without the government.

Samuel Insull developed the public utility model and proved it to work by extending publicly regulated utilities into 30 states prior to the advent of the New Deal.

Insull was put out of business by New York bankers who wanted to take over his business.

http://blog.heartland.org/2013/07/samuel-insull-getting-the-...

FDR needed enemies to blame to get his New Deal, and he had Insull hounded in the courts. Insull was found not guilty of any wrongdoing, but died penniless.

If you want to know history, you have to find better sources than wikipedia. There are plenty of books about this great man and this interesting period of history.

Wikipedia isn't my source. It is, however, a reliable reference for well-established facts. Such as the identity and general background of government utilities.

> My money is they get taken over by the state.

A number of their operations are being taken over by local public utilities in the current bankruptcy.

> Privatizing a utility was always a stupid move to begin with

PG&E isn't the result of privatizing a public utility, it's always been private.

> It's time we get to fixing all the damage Regan did to this country

If you mean Ronald Reagan, PG&E (or it's predecessors before various mergers and name changes) has been a private energy company since before he was born, so while there is lots you can blame him for, PG&E existing as a private energy firm isn't among them.

Transmission is not being localized. AFAIK, PG&E still owns the vast majority of lines.

>My money is they get taken over by the state

This is the same as the "shielded from liability" option, just in a roundabout way.

This may be a naive question, but why aren't they being bankrupted (or hurt financially) for cutting off the power voluntarily? Their nominal job is to provide power, not doing so for reasons that aren't acts of god should open them to liability and/or (severe) penalties for violation of contract.

If the appropriate legal framework doesn't currently exist I can't imagine a 'The lights stay on' bill would be all that unpopular politically.

No, the bankruptcy is due to the wildfires from last year.

Remember that CA impeached the governor Gray Davis in 2000 for power outages .. I bet that PG&e is thinking of doing the same thing today to Gavin Newsom!

How do you figure that?

Point of clarification: It was a recall, not impeachment. Impeachment is an act of the legislature, recall is an act of the voters.[0]

[0].https://en.wikipedia.org/wiki/California_gubernatorial_recal...

Furthermore, he was not recalled for the power outages. His recall was bankrolled by those he was fighting having California pay the $80Bn embezzled with the aid of Enron and Dynegy.

Arnold Schwarzneggar stole the governership, and promptly made the state pay the $80Bn. Californians paid through the nose for going along with the recall.

If Gavin gets hit with a recall, it will be more of the same. Californians will be the poorer for it. There are a lot of billionaires here, but also widespread extreme poverty. No coincidence, that.

It is very cheap to run a recall campaign in California.

> This may be a naive question, but why aren't they being bankrupted (or hurt financially) for cutting off the power voluntarily?

Well, lots of reasons, but one absolute blocker is that they are already bankrupt because of their liability for wildfires in 2017 and 2018.

https://en.m.wikipedia.org/wiki/Pacific_Gas_and_Electric_Com...

Do they have contracts saying they will provide power 100% of the time?

Is them shutting the power off different from a tree falling on the line cutting power off? What if power went out due to some equipment failing that they didn't perform proper maintenance on?

They are a Public Utility, granted a monopoly in exchange for providing reliable power distribution. If they can't do that, they have no reason to exist at all, certainly not as a monopoly.

Like all service providers in every industry, you can probably get an SLA from them if you really want one. Otherwise you're stuck with Best Effort service. If that doesnt meet your expectations, you're free to shop around and pay for better service. Choice is good.

Historically, aren't most earthquake fatalities due to fires? Cutting off electricity and flushing all gas lines with an inert gas seems like a prudent thing to do after a significant earthquake. Particularly in an environment like California, where it is unlikely anybody will freeze to death (keep the drinking water flowing though.)

Everybody thinks they need six nines.

I'm really a fan of this bit:

https://www.lowtechmagazine.com/2018/12/keeping-some-of-the-...

Those accepting less than “six nines” are trading for some other features. I’ll take less uptime but only to eliminate dependency.

We struggled to reach “six nines“ for a reason.

PG&E doesn't know where is gas lines are nor what they're rated for — that's how/why they blew up a San Bruno neighborhood.

> They are clearly signaling to the politicians that they better shield them from further liability or expect more of this behavior.

It's not exactly hard to fight back against that.

Make fires cost them enormous sums of money, and make outages also cost them enormous sums of money. Give them extremely clear monetary incentives to improve as many lines as possible and make shutdowns as small as possible.

If spending the money on infrastructure without a rate increase bankrupts them, keeping the lights on without spending the money bankrupts them and turning the lights off bankrupts them then the result is always that they go bankrupt.

It's not possible to get around "totally reliable, totally safe, inexpensive; pick two" by passing a law mandating all three.

Is there no desire to take the path that bankrupts them the least?

> It's not possible to get around "totally reliable, totally safe, inexpensive; pick two" by passing a law mandating all three.

Oh I'm not asking for that at all. They used to be pretty reliable, pretty safe, kind of expensive. After neglecting lines they got to pretty reliable, not very safe, kind of expensive. With the shutdowns they shift to not very reliable, pretty safe, kind of expensive. They need to go back to where they started.

> Is there no desire to take the path that bankrupts them the least?

They would presumably take whichever option bankrupts them the slowest, but if all the roads lead to the same destination, eventually you end up there.

> They used to be pretty reliable, pretty safe, kind of expensive. After neglecting lines they got to pretty reliable, not very safe, kind of expensive. With the shutdowns they shift to not very reliable, pretty safe, kind of expensive. They need to go back to where they started.

I don't think that's even really what happened. It's not as if the occasional power line never caught fire thirty years ago.

The reason the Camp Fire was so destructive has more to do with climate change than PG&E maintenance. It could as easily have been a cigarette or a lightning strike and it would have been the same result.

But that's likely to continue to be the case. Fires in California are going to be more severe than they used to be.

Which may justify them being more conservative or spending more on maintenance than they ever did historically. But that isn't going to be free.

> Which may justify them being more conservative or spending more on maintenance than they ever did historically. But that isn't going to be free.

It looks like their vegetation management budget was less than 2% of revenue from 2013-2017.

Doubling or tripling that, well, it wouldn't be free but it wouldn't be a huge hardship either.

Keeping the lights on didn't bankrupt them. Paying billion-dollar dividends while neglecting maintenance bankrupted them.

There are plenty of utility companies who manage to make a profit, deliver reliable service, and not start wildfires. If PGE can't, others would be happy to step up.

Looks like you’re out of the loop. They are already in bankruptcy negotiation

For residential customers that can afford it - battery backed solar installs will be on the rise.

For industry, they will likely install their own generators, either diesel or natural gas. Which raises environmental concerns - it's no good having clean hydro or wind power, if you can't get it to where it's needed.

>The stock rose 3% Friday

After crashing 30%+ the day before. They are essentially bankrupt.

PG&E filed for chapter 11 bankruptcy protections on Jan. 29th of this year. https://en.wikipedia.org/wiki/Pacific_Gas_and_Electric_Compa...

So Will this make it worse?

> They are essentially bankrupt.

No, they are actually bankrupt.

Filing for bankruptcy protections != "bankrupt" in the conventional liquidation sense of the word.

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