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PG&E Bankruptcy and Wildfire Liability: Time to End Government-Sanctioned Monopolies?

Is it time for state governments to stop granting electric utilities effective monopoly status?

by Countable | 1.15.19

  • Pacific Gas and Electric (PG&E) is filing for Chapter 11 bankruptcy protection, raising serious questions about who will shoulder its $30 billion of liabilities associated with the 2017 and 2018 wildfire seasons.
  • PG&E’s insurance isn’t enough to cover its liabilities for wildfires for which it’s partly to blame, and regulators are currently examining how much of that cost can be passed on to ratepayers.
  • Ratepayers in PG&E’s service territory have no choice in utility providers because of PG&E’s status as a government-sanctioned monopoly, prompting debate over whether it’s fair to hold them financially responsible for the company’s history of neglecting the risks associated with wildfires.

Recent fires

According to The New York Times:

“Fire investigators determined PG&E to be the cause of at least 17 of 21 major Northern California fires in 2017. It is also suspected in some of the 2018 wildfires that have been described as the worst in state history, including one that killed at least 86 people and destroyed the town of Paradise.”

While all of California’s utilities have lobbied for protection against wildfire liability, PG&E has been the most aggressive in that endeavor. Last year, the state’s investor-owned utilities won a legislative shield from having to bear the cost of 2017 fires, which allows them to pass the cost of wildfires to their customers in the form of higher rates. Now they’re seeking the same for last year’s fires. 

Monopoly status

PG&E, along with some other investor-owned utilities in the U.S., is granted an electricity monopoly for a particular region, and then is guaranteed a rate of return for the infrastructure investments it makes. PG&E’s rates are among the country’s highest.

The original intention of this model was for government regulators to look after consumers’ best interests where a vital resource – electricity – was concerned. However, a growing chorus of experts sees California’s model straying into what Nobel Prize laureate George Stigler describes as “regulatory capture,” wherein oversight agencies are dominated by the industries they regulate.

Climate change

Energy experts say PG&E’s bankruptcy is one of the first major financial casualties from climate change, and it won’t be the last. Decades of data show that declared natural disasters are becoming more frequent, especially fires, and that human-caused climate change is one of the primary drivers of the increase in wildfires.

Indeed, in its Securities and Exchange Commission filing announcing its bankruptcy plans, PG&E specifically identified climate change as one of the causes of its current predicament. The company further called out “the potential for future catastrophic wildfires, stemming in part from climate change” as one of the “fundamental issues and challenges PG&E faces.”

Fallout

Perhaps ironically, PG&E’s bankruptcy filing could threaten some renewable energy contracts that developers hold with the utility. Indeed, the bankruptcy could put California’s ability to meet its broader climate-change goals at risk.

California law requires the state to get 60 percent of its electricity from climate-friendly sources by 2030 and 100 percent by 2045. Developers say meeting those targets depends on financially viable utility companies that can sign long-term contracts to buy electricity from solar and wind farms or from other clean energy facilities.

What do you think?

Is it time for state governments to stop granting electric utilities effective monopoly status? Do you favor some other solution? Tell your reps what you think, then share your thoughts below.

—Sara E. Murphy

(Image Credit: iStock.com / Anne Belden

Countable

Written by Countable

Leave a comment
(70)
  • Jeffrey
    Voted Maybe
    01/16/2019
    ···

    I’m still trying to figure out how wildfires are an electric companies fault. Even if it’s due to limbs being on or near electric lines does it still fall to the electric companies of something out their control causes their lines to break or spark a fire? We as a society are so quick to accuse and convict with a thorough comprehensive investigation it’s not even funny. I for one think that natural occurrences can be be partly to blame for the fire as well, what ya gonna do sue nature...grow up America

    Like (11)
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  • William
    Voted Yes
    01/16/2019
    ···

    While this won’t help respect ideas of free economy it still should be necessary that states don’t grant companies this status. Companies like this can choke out competition and could screw over consumers as they have few alternative options.

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  • Lonesomelight
    01/16/2019
    ···

    The issue here is that even with climate change causing increased frequency and severity of fires, PG&E was GROSSLY negligent in upkeeping their system, resulting in many many preventable fires. Why? So that they could have a bigger profit. Many people have died and a whole town has been wiped off the map so that they could have their precious monopoly! This is no better than feudalism. We've seen this before in US history when companies owned water, and more recently when Flint had their water poisoned (which still hasn't been restored by the way. Does that sound like democracy to you?). When lives are on the line, no profit motive should be active. Utilities need to be publicly owned!

    Like (7)
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  • Vanessa
    Voted No
    01/17/2019
    ···

    They’re already highly regulated by government on what they can charge consumers, inserting smaller companies would only open the door for higher costs and power going to the highest bidder..

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  • Tinee
    Voted Yes
    01/16/2019
    ···

    Yes the utility monopolies need to be broken up. Their main goal of getting as much money out of people as possible for their services has to be stopped. Peak & Super Peak pricing is price gouging people when they need power the most. Utility companies know customers will have to choose between a comfortable environment & price. No one should have to freeze or bake trying to avoid peak & super peak prices. There should only be affordable rate.

    Like (5)
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  • Janet
    01/16/2019
    ···

    PGE needs to be accountable. Bankruptcy for them just to get out of paying the money for the victims of fire

    Like (4)
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  • Ray
    Voted Maybe
    01/16/2019
    ···

    We can’t regulate everything a utility does and then ask them to act as private entities when it comes to risk. There is a cost to negligence but normal risk associated with issues outside of entity’s control like drought or climate change should not cause the entity to go bankrupt. If utilities were allowed to pass on their cost of doing business we would have expected to have their costs spread among their products by clients. If drought hits say onion harvest, all of us would have to pay more for onion. I see the same situation here with a difference that our society and economy is dependent on electricity and what happens there should cause us all concerns. Who pays, if there is a rupture in the city’s main water line. All of us pay.

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  • ConservativeGuy
    Voted Yes
    01/16/2019
    ···

    Big government is bad. Climate change is a convenient excuse for poor risk management.

    Like (3)
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  • Delmar
    Voted Yes
    01/16/2019
    ···

    Back in 1983, the government broke up AT&T because it was a monopoly and so Ma Bell broke up. Then in 1996, the Telecommunications act that Bill Clinton administration put together and let competition between the baby bells start but instead they bought each other and is now what we have again as a monopoly because of AT&T buying up all of the baby bells and now it's back to high prices and little innovation coming from the telecommunications sector! This also snuffed out any competition between the rest of the bells and its now that AT&T and Direct TV and Time Warner have been bought and merged it makes it even more so that no competition for services. So yes we need to break up all monopolies to prthis from happening again

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  • Judith
    Voted Yes
    01/16/2019
    ···

    You congress apes better get some green energy laws passed DOUBLE TIME ASAP ! And get green mass transit then DITCH FRACKING ! We have LESS than TEN YEARS TO ROLL BACK EMISSIONS as much as possible to somewhat SLOW OUR DEMISE as an ape species ! MOVE ! MOVE ! MOVE ! YOUR BOOTIES !!!! BIG TIME !!

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  • Dale
    Voted Yes
    01/16/2019
    ···

    Without different choices, we become victims to the the machine of the utility giants.

    Like (3)
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  • Deirdre
    Voted Yes
    01/16/2019
    ···

    Monopolies are never good to the economy

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  • BoldlyGo
    Voted Yes
    01/16/2019
    ···

    It way past due End the Government-Sanctioned Monopolies now! One of many examples is the PG&E Bankruptcy and Wildfire Liability, pharmaceutical companies, insurance companies, etc.. Please govern and protect the American public🗽

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  • Martha
    Voted Yes
    01/16/2019
    ···

    Public utilities should not have a strangle-hold on its customers via a monopoly.

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  • BeStrong
    Voted Yes
    01/16/2019
    ···

    Dear Mr Trump, it appears that ‘sweeping the forest floor’ would not have prevented this devastating fire. Why don’t u stop stalking all things Bezos and talk about PG&Es Responsibility For this tragedy. Human loss property loss communities lost, shame on PG&E and it’s reckless disregard for the condition of its power infrastructure. If u accept the money u must accept responsibility.

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  • KansasTamale
    Voted Yes
    01/16/2019
    ···

    All our utilities were developed to be PUBLIC Utilities. They were developed to make people’s lives easier & more comfortable. Sometime along the way Corporations took over the Public utilities and then began making a profit off the people they were supposed to make their lives better. We went through monopolies before & all public companies - electricity, gas, phones etc. were divided up we used to be Southwestern Bell. Then all of s sudden those were all gone & we had AT& T. The other electric & gas companies are creating monopolies too. ALL MONOPOLIES SHOULD BE BROKEN UP. It’s the only way to recreate competition.

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  • Marylynn
    Voted Yes
    01/16/2019
    ···

    I'm fed up with utility companies getting away with murder!!! They ask for increases whenever they want and are usually granted by our lawmakers. This should make us all take pause. When a utility company is responsible for disasters, they have no qualms about passing on their expenses to consumers and we're stuck footing the bill.

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  • Terry
    Voted Yes
    01/16/2019
    ···

    There should be a criminal investigation into this company and it’s leadership for failure of public trust and fraud.

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  • Nick
    Voted Yes
    01/16/2019
    ···

    Considering I live in the Duke Energy area and there have been coal ash deposits that they have made and not cleaned up or even compensated properly, I agree that government-backed monopolies are bad on a personal level. In terms of our capitalist model it’s entirely uncapitalistic and quite mercantilistic, an economic system that is dated and not as relevant as it used to be. Unless the government intends to seize control of the energy firms it promotes and publicize it similar to how we receive mail, then let the invisible hand handle the energy companies and regulate them as necessary.

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  • Sandra
    Voted Yes
    01/16/2019
    ···

    Monopolies have always been bad and are the antithesis of a free market, that said....I don't know how you can put the horrendous wildfires at their door and the article didn;t really explain that one....Finger pointing would lay in the lap of Climate Change...but then, you can't sue Mother Nature and she is getting more pissed off every year.

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  • eliyak
    Voted Yes
    01/16/2019
    ···

    Yes, and people should be able to opt out of utility service if they wish. There are alternatives out there for water and electricity, even sewage if you can stomach it.

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