Parliaments of the Earth
logicmag.io
logicmag.io
There have been some calls to turn PG&E into a coop or a municipally owned utility. I would not want to be part of the management team that tries to pull that off. No governance model in the world can make deferred maintenance magically disappear, or balance the demands between urban and rural customers in PG&Es giant service territory.
[0] https://www.jdpower.com/business/press-releases/2020-electri...
That out of the way, the article says:
> Nonetheless, the logic of profit maximization generally holds ... [and o]ne direct consequence is that infrastructure is allowed to fall into disrepair.
This isn't the default consequence of profit maximisation. People who think this way go broke and don't make money as capitalists. In a free market, one of the key objectives of a capitalist is to preserve their very expensive physical capital. There is quite likely some quirk of California's regulation that is causing perverse incentives, because capital catching fire and customers dying/going broke is profoundly unprofitable. Greedy people like healthy, happy customers and working capital, which is why capitalism is so good at controlling expensive things.
And, taking a political pot shot, if anyone thinks California the state could run capital better than capitalists, go look up 2017 Oroville Dam crisis. The fact that a project is run by government doesn't stop people scrimping on maintenance - it just means the controlling party doesn't feel any serious pain when a crisis hits.
EDIT And, in fact, PG&E did go broke in 2019. They seem to have a 3-5% dividend yield - so anyone who bought & held them after their 2001 bankruptcy, in theory, has lost money. The natural incentives in this instance aren't the cause, the incentives are to spend more on maintenance than PG&E did.
It's interesting the author spends several paragraphs lauding Rural Electric Cooperatives, these are the model of the future. And waves away the idea that the cooperative model has problems too.
Limited-Liability corporations are incentivized, by their legal structure, to disregard liability for damages over a certain threshold which would bankrupt the company.
If they could cause damage worth 10 billion or 100 billion say, these would get treated the same if the company's position is such that a loss of 5 billion would bankrupt the company. In a just world they should be working to ensure the "100 billion damages event" is 10 times less likely than the "10 billion damages event", however under limited-liability rules they all blur together as "5 billion or company bankruptcy" and don't get any extra attention as the level of damage (to the company itself) is the same.
No they aren't, they have an incentive to make a profit. Going bankrupt is not a cheerfully accepted outcome.
Bankruptcy means the concern has failed. The owners should lose all their capital (I say should, I don't know the details of how the US and/or California implement this). It is a catastrophic outcome for the owners.
The fact that there is a cap on the downside doesn't mean that relying on the cap is incentivised. Losing all the money invested is not an outcome greedy people ever want to happen.
One of the biggest profit centers esp for regulated monopolies (which have barriers to entry and often regulated profit) is to make someone else pay for your expenses and or cost cutting. Whether that's the world via pollution, or wildfires in CA or freezing to death in TX.
After years of neglect and profit taking PG&E if forced, will claim it needs government subsidies and rate increases to pay for infrastructure overhaul. Or it will go bankrupt. The "capitalists" will take their golden parasites (or stock dividends, using any loses from stock sales to offset tax liability but more likely their connections let them sell before crash) and move on to running the next company. Employees will suffer, retail investors might get screwed. Two other popular and profitable externalities.
Cooperatives can provide an alternative to that. At least in areas where that is actually still allowed (which of course is not the case everywhere). There are a few countries in Europe that turned their state run infrastructure companies into a free market in the last few decades. Or tried to; as it failed in quite a few cases. Some countries are even trying to roll that back, because it clearly did not work as advertised.
However, the smarter approach is to turn those markets into actual markets. With actual competition and customers voting with their feet. That takes a bit of political courage and creativity usually. Some of the former state monopolies on post and phone were successfully broken up in e.g. Europe. This worked better in some countries than others. E.g, Germany is a mess when it comes to having good options for country wide mobile internet or having fiber optic to homes. etc. But most of their neighbors have decent options for connectivity from multiple providers.