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Comment by dragonwriter | Hacker News Reader

> PG&E is being turned into a witch to hang on the stake.

Are you saying that they didn't neglect preventive maintenance while returning billions to shareholders in dividends?

> California is going to catch fire whether the power is on or not.

That California is going to—as it always has—havr fires, including major ones, with or without utility mismanagement is not the issue in dispute. PG&E isn't being blamed for that.

PG&E is being blamed for the degree to which it's failure to maintain it's infrastructure while returning profits to it's investors has contributed to the amount of fire damage. And, yes, climate and other factors which increase overall for risk are a multiplier on that, but if the hadn't been deferrring maintenance for years, that would be a multiplier on zero.

> There's at least a decade of completely piss poor forest management responsible

That's hardly the reason for the fires that aren't forest fires.

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> Are you saying that they didn't neglect preventive maintenance while returning billions to shareholders in dividends?

While that’s literally true, it falsely implies that the former is related to the latter.

See: https://www.cpuc.ca.gov/uploadedFiles/CPUC_Public_Website/Co... (page 18)

“The CPUC sets rates according to the following formula:

Revenue Requirements = O&M + Taxes + Depreciation + Rate Base * r - OR

Where: O&M = normal business expenses for running a utility company,

Taxes = Federal, state and local taxes,

Depreciation = accumulated depreciation of plants used to produce and deliver the utility’s product,

Rate Base = net value of plant in service plus working capital, r = rate of return on invested capital, and

OR = other operating revenue.”

When you pay $100 on your electric bill, part of that goes to operations and maintenance. If PG&E cuts that line item, it’s profits don’t go up. It’s profits are a separate line item calculated as a percentage of its invested capital. That’s where the dividends come from. Indeed, if PG&E can enhance fire safety through capital investments, such as by replacing worn out equipment, and the CPUC lets them make those investments, then PG&E’s profit would go up.

PG&E can’t pay out more in dividends by shortchanging operations and maintenance.

> PG&E can’t pay out more in dividends by shortchanging operations and maintenance.

They have before.

https://www.sfgate.com/bayarea/article/PG-E-diverted-safety-...

edit: obviously this is a lot more nuanced than simply eliminating the O&M line item and diverting that income into dividends. In this instance, they had higher than expected income resulting in a positive cash value which was due to MANY factors, but they simply decided to add it into the dividends rather than into O&M, which they knew was running lean.

edit 2: You're working on the assumption that they are operating at a 100% accurate estimation schedule. You know that this is an impossible task, and so I think we are arguing that the delta between the actual operating costs and the estimated operating costs, when it has been a positive value resulting in unexpected monetary value, has typically been diverted in this case to dividends rather than to maintenance. Even if that value has been 2 to 5% per year, it's still millions of dollars. The fact that it was diverted to compensation rather than maintenance indicates a tendency of the PG&E entity to value it's corporate officers over the public (eg, spending money on maintenance is investing in the public safety, whereas spending money on dividends is the officers cashing out and taking a personal win). This is I think the biggest breakdown of how public utilities operate in this economy. They are largely private companies with a mandated monopoly, so despite being a private or publicly traded company, they _should_ act like a publicly owned or municipally operated company. We (the people) have given them an extremely liberal license to operate, and they should return that favor in kind. When they don't, they've broken the social contract.

But that article doesn't say anything about dividends? It mentions profits a few times but gives no details about that aspect of the story. Instead the only specific examples of spending that it gives are employee bonuses.

Employee bonuses are dividends.

in what world? The two words have completely different meanings.

In PG&E's world in context of this comment thread. Dividends are any payout amount that was not captured in the regulatory framework. Salary is a captured expense. Bonuses are paid from a pool when a surplus is created, or rather a profit is made, or more bluntly when dividends are earned.

Legally, you're correct. PG&E has been operating counter to those rules for a while.

http://investor.pgecorp.com/news-events/press-releases/press...

https://www.kqed.org/news/11737336/judge-pge-paid-out-stock-...

More specifically, the bonuses were to higher management, not to line workers.

Being cheap is how this problem started. You want to get more cheap?

You have to know the context. The bonuses weren't to the PG&E workers that maintained the lines. The bonuses were to the higher managers who made the "clever" cost-cutting decisions.

PG&E can’t pay out more in dividends by shortchanging operations and maintenance.

Not legally. But they have been charged with illegally doing this. The judge at their bankruptcy hearing described them as doing exactly that. Does PG&E have to take your wallet at gunpoint before the idea they're thieves makes sense?

I mean, PG&E was aware of necessary expenditures, suppressed knowledge of those needed expenditures and instead continued to pay standard dividends[1]. Saying this isn't taking money from mainteninance and giving it to shareholder is the worst kind of newspeak.

And sure, PG&E get the profits the PUC thinks they should get for whatever needed expenditures they might make. BUT this has two wrinkles. A) It's hard to argue you deserve a lot of money for doing what you should have done earlier. B) This is just ordinary profits, a percentage of the expenditures you make but just taking money that's lying around and giving it to share holders is much more profitable, you don't need any more "upfront" here - there's long terms consequences but in today's environment, management seldom faces these consequences, just all the entities a given company deals with. Of course, any company that says capital investment be damned, I'm giving the whole flow to the stockholder will look more profitable tomorrow and even the possibility of good future investment doesn't look as good as this tomorrow. Unfortunately, we are now living in the "next week" of such decisions.

[1] Non-paywalled version of WSJ article: https://www.marketscreener.com/PG-E-CORPORATION-13946/news/P...

> The judge at their bankruptcy hearing described them as doing exactly that.

I went looking for a source here. You're right; Judge Alsup, overseeing the bankruptcy hearings, had some pretty damning words for PG&E: https://www.kqed.org/news/11737336/judge-pge-paid-out-stock-...

The arguments upthread pointing the finger at CPUC were somewhat persuasive to me before seeing this, but after reading these words from Alsup—a reasonable judge from what I've seen of him—what the California politicians are saying make a lot more sense to me. Sounds like PG&E does need to shoulder a good deal of the blame here.

> You're right; Judge Alsup, overseeing the bankruptcy hearings,

As described in the article you cite, Alsup is overseeing their criminal probation resulting from their multiple felony convictions for the San Bruno gas explosion in 2010, not the bankruptcy case.

Dennis Montali is the judge in the bankruptcy case, see, e.g., https://www.nytimes.com/2019/10/09/business/energy-environme...

You're right. Thanks for the correction.

> The judge at their bankruptcy hearing described them as doing exactly that.

I know that William Alsup, the judge in their criminal probation hearing did so (and this was relevant to why their fire responsibility was held to be a violation of their criminal probation.)

I'm not aware that the same thing came up in their bankruptcy hearing (which has a different judge), but then again it wouldn't be surprising.

Thank you! I'm surprised your comment even needed to be made, but some people really do walk around with the mentality that, "The law/textbooks say things are supposed to happen this way, therefore, that is definitely how they are being carried out, and in good faith. These commenters must simply be uninformed and in need of some citations."

That article doesn’t prove your point. It faults PG&E (and other utilities by the way) for delaying replacing steel towers and instead upgrading substations. Why is it picking? Both are capital investments, and doing both at the same time would result in a larger base of invested capital and thus a larger profit. Why didn’t it do the thing that would make it more money?

There is a real irony to denouncing a company as being profit motivated, but then articulating a theory of what they did wrong that is premised in them leaving money on the table.

The CPUC has rejected PG&E requests to spend more on maintenance. But the government doesn’t like to point that out. Utilities are highly regulated.

They pretty much refused to invest in and install any forward looking technologies (microgrid tech, tech to quickly cut off power to damaged lines, battery storage, more distributed generation, more switches to help isolate parts of the grid, etc.). They just wanted to continue building new natural gas plants and to fight against distributed solar.

They could have spent the last 20 years working to make the grid for nimble, flexible, and safe. They also could have actually done the tree trimming they were supposed to do. Instead they slow walked all innovation and are now scrambling to make up for it.

> They just wanted to continue building new natural gas plants and to fight against distributed solar.

Money for generation is an entirely different bucket of money recovered through an entirely different regulatory regime than money for distribution.

As to slow walking stuff like battery storage, why would they? PG&E earns a return on invested capital. Investing billions in batteries means more money for them.

I am talking about investing in battery installations for grid services (i.e. buying and building battery installations) instead of building natural gas peaker plants or building other more tradition infrastructure. I am not saying they should have made equity investments in battery startups.

I don't see a reason why they couldn't rate base and make a return on battery installs. Instead they only wanted to building the same stuff they always built (more power plants and more transmission).

There may be ways of doing and recording which differentiate sufficiently to compensate specific stakeholder interests.

Dividend payouts aren't the only way of generating extractable rents. LIBOR comes to mind.

What kind of preventive maintenance are you accusing them of neglecting? Because it appears to me they were under immense pressure to stop wildfires without actually cutting down any trees. Cutting down trees is something California went to great lengths to stop doing around 2007 or so, by ending logging and forest brush operations/controlled burns, and are now reaping the rewards.

https://www.sfchronicle.com/california-wildfires/article/Rad...

The Camp Fire, which killed 85 people, started due to neglected protective maintenance around their power poles which allowed uncut brush to burn at an extreme rate.

> Because it appears to me they were under immense pressure to stop wildfires without actually cutting down any trees.

You provide no evidence of that being the cause of their deferred maintenance, only a news article that critics exist (not even that they are significant in number or political influence) that don't like the way PG&E is handling the catch-up work of maintenance it is now doing because of the liabilities it has incurred through deferred maintenance.

> Cutting down trees is something California went to great lengths to stop doing around 2007 or so, by ending logging and forest brush operations/controlled burns

The extent to which that is a factor in the magnitude of some of the fires is a legitimate issue to discuss, but forest management by other entities is a separate issue from power line safety maintenance by PG&E and it's role in starting fires. The agencies that make those forest management decisions do not govern PG&E's maintenance decisions.

You provide no evidence that PG&E deferred maintenance and I can't find anything online except people repeating your unsubstantiated claims. I'm merely pointing out that the state drastically reduced forestry operations, there was a large public outcry against forestry operations, so it isn't a huge leap to conclude PG&E was under pressure to minimize its own tree trimming/removal operations.

And state agency mismanagement of forests absolutely has literally everything to do with a random power line sparking and causing a small local burn vs burning down a city.

https://www.cbsnews.com/news/pacific-gas-and-electric-camp-f...

> Pacific Gas & Electric knew for years that dozens of its aging power lines posed a wildfire threat yet failed to replace or repair them, it was reported Wednesday. The company also reportedly spent $5 billion on shareholder dividends despite the need for repairs to decades-old equipment.

https://www.kqed.org/news/11737336/judge-pge-paid-out-stock-...

> At a probation hearing related to the utility’s deadly 2010 gas pipeline explosion in San Bruno, Judge William Alsup said the embattled utility hasn't done enough to prevent wildfires through tree trimming and other maintenance work — even while its shareholders made millions.

> “PG&E pumped out $4.5 billion in dividends and let the tree budget wither,” Alsup said.

The degree of the fire is determined by the forest. California needs to get to the point where people can light a random tree on fire and not have a total catastrophe occur. You can't outlaw fires, they are inevitable and the forests have evolved to burn regularly.

How do you know it is their responsibility to trim trees? It all depends on the easement legal details. In some cases, they may be, but in others the property owner would be. The lines were fine until the vegetation got in the way!

I don't know anywhere in the world where a utility is responsible for events like these as CA has made PGE to be. Really makes you think. Why the sudden change when fires have been happening since the dawn of time? Why care so much so suddenly?

> How do you know it is their responsibility to trim trees?

Legally? Because of the massive liabilities and parole violations in their ongoing criminal parole for the San Bruno gas explosion they've racked up for their failure to do that trimming.

> I don't know anywhere in the world where a utility is responsible for events like these as CA has made PGE to be. Really makes you think. Why the sudden change when fires have been happening since the dawn of time?

Maybe the change is the same culture of neglect at PG&E that got them a number of federal felony convictions for the 2010 gas explosion manifesting through neglect of maintenance.

> Why care so much so suddenly?

Caring about fires isn't new.

Three consecutive years with major fires attributable to maintenance neglect by the same utility is new (and those starting the year after the same utility was criminally convicted for a major urban gas explosion 6 years prior isn't a great look, either.)

You can't say that for sure until you've read the document that allows PG and E to utilize the land. Each and every agreement is different.

> You can't say that for sure until you've read the document that allows PG and E to utilize the land.

I'm kind of assuming that their own lawyers in assessing their probable liability for the 2017 and 2018 fires that led to the bankruptcy filing, and the federal judge who assessed that their failures to do what is legally required were, on top of any civil violations, a violation of their criminal probation, and so on, have done their homework on what the legal requirements are.

If you've got some reason to think they're all wrong, though, I'd be interested to hear it, but as far as I can tell there's not really even a serious question on the legal responsibility issue.

Even if they aren't explicitly required to trim back brush in an easement, they likely have a professional duty of care to ensure that their lines are safe.

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

I'm not completely sure this is indeed what we're talking about, but in Quebec, Hydro Quebec clears the forest around their power lines [0][1]

0: https://imgur.com/a/P5boTGD 1: https://imgur.com/a/judq7zj

Yeah same in BC. My old place used.to have a bunch of trees in the front yard. BC hydro used to show up regularly to cut branches on them that interfered with powerlines.

It does appear to be their responsibility.

https://www.sfchronicle.com/business/article/PG-E-tells-judg...

Elsewhere in the world most power lines are buried.

Actually long distance power lines aren't buried in any country (there are some exceptions).

But they either

- put so hight the air that taking trees don't affect then

- have trees around then cleared out, which implicitly also acts as a (slight) fire gap in case of Forest fires

This is blatantly false for HV, I don't get why this is so persistent.

>Are you saying that they didn't neglect preventive maintenance while returning billions to shareholders in dividends?

I'm not saying they aren't responsible for creating a source of ignition. However, the overwhelming majority of people are focusing on PG&E as if they were running around with gasoline and matches and not also examining California's much wider issue that needs attention sooner than later.

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