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Comment by goler | Hacker News Reader

Are the associated costs passed to ratepayers at cost or is there some allowance for a positive investment return for PG&E shareholders?

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In theory rate hikes have to go through California regulators but, at the same time, the company is allowed a certain rate of return.

In practice I have no clue how it works out though.

Typically in markets like CA and TX you will have a rate case go to the public utility commission. I'm more familiar with Texas' approach (it was a data source for my dissertation); the idea is to let the companies charge enough to cover reasonable costs.

Shouldn't "won't be sued for negligence" cover the investment, given that they know their equipment is a fire hazard?

No, it won't, because PG&E doesn't have the money to do this, and the company is already majority-owned by the PG&E Fire Victim Trust after emerging from bankruptcy.

There are no rich shareholders to foist the costs on. No investors are going to pay tens of billions of dollars, more profit than PG&E generated over several decades, to pay for 10% of the electric wires to be buried. If there were any investors on the hook for this, they would simply declare bankruptcy and walk away.

The only option here is that the costs are paid by ratepayers, or taxpayers. There is no other option available.

I see, thanks for explaining. That would have made for a nice addition to the article. :)

IMHO an infrastructure of this size & importance might just as well be state owned, but I guess rate hikes will also do. As long as there is some mechanism to help (yes, probably with tax money) those who might not be able to afford them...

A federal grant might work too. Wildfires on this scale affect more than just Californians.

in that case why have owners at all? it should basically be nationalized then. otherwise taxpayer paying the cost without really reaping profits (if there are/will be any)

Because government-run electric utilities are a mixed bag too. "Public" utility monopolies like PG&E are an attempt to get some of the benefits of a market system from what is fundamentally a government service. The utility can raise money from investors, who expect a modest but stable return. In theory, the profit motive gives the utility an incentive to keep costs in check.

It's far from perfect, but actually-public utilities are responsible for a lot of disasters too. It's not obvious that nationalizing PG&E would be good for anyone.

Except they have regulated profit margins - it's cost-plus. So they have an incentive to make everything as expensive as possible to maximize their take. And the CPUC rubber stamps everything the utilities ask for.

CA has some of the most expensive electricity in the nation. So it doesn't seem like the idea worked out.

California winds up being in the middle for avg money residents spend on household energy, but mostly because they don’t use AC or heat very much. https://wallethub.com/edu/energy-costs-by-state/4833

Sure, but I said most expensive electricity, not highest monthly bills.

You'll have to verify this yourself, but my understanding is that there is no clear winner on the public choice issue of public vs private electrical. There are well-run and poorly-run examples on both sides.

In PG&E's defense, it's not literally cost-plus, and the CPUC doesn't always rubber stamp everything. Imagining the government alternative, what would really be different? There will still be a big bureaucratic organization full of imperfect humans with muddy incentives and limited resources. Would PG&E be better if the board of directors was appointed by politicians instead of elected by shareholders? I doubt it.

The most expensive energy would be Alaska and Hawaii for obvious reasons. California’s rates are similar to northeastern state rates (a bit lower than their average) but is definitely high for a western state that benefits from a lot of cheap hydro.

I can’t find it now but a while back someone posted the meeting minutes from the CA PUC review of PG&E’s budget. It had stuff like “request to replace chain link fence for $175k - denied” and it was a 1,000+ page document.

PG&E has to get approval for their spend from the PUC and for any rate hikes.

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