Would you do business with someone who has declared bankruptcy twice, charges notably high prices for their product, which they regularly fail to deliver? What if their commercial practices resulted in the deaths of more than 100 people, triggering a manslaughter charge for the demise of a mother and her eight-year-old daughter? Is this somebody you’d want to patronize?
This somebody is Pacific Gas and Electric Company, which has done all the above, plus sparked wildfires that obliterated more than 23,000 homes. Why, a captive electricity user might ask, are we still exclusively relying on this 100-plus year old monopoly to provide us with one of our most essential commodities, electricity, while harnessing our hopes for a climate friendly future almost entirely to this for-profit’s ability to perform?
The simple answer is, because it’s difficult, and would require an awful lot of political courage, to do otherwise.
Breaking up is hard to do, especially when there’s a chance that the resulting divorce will make everyone worse off for a time. One almost might forgive a typically chin-thrusting governor for being timid. But, as with a toxic marriage, the status quo relationship isn’t sustainable, even setting aside the bankruptcies and murders. PG&E no longer serves its primary function of reliably, affordably, and universally providing electricity. Nor does it meet the economic criteria to be gifted political protection as a monopoly, which requires downward sloping marginal costs. And it’s only going to get worse.
PG&E customers pay roughly 80 percent more per kilowatt-hour than the national average. Historically the utility’s high rates have been moderated by California’s temperate climate, resulting in lower overall energy bills than, for instance, the Northeast or Southwest. That’s no longer the case. In many parts of Northern California this winter has been freezing, with recent summers extremely hot. PG&E’s expensive power is coupled with unpredictable reliability. Even aside from weather-related outages, to manage wildfire risks last year the utility intermittently shut off electric service to more than five million people.
Those who can are fleeing the system, a trend that’s likely to accelerate as prices continue to rise, and reliability falter.
Well-off families are installing battery-supported photovoltaics. Industrial, commercial and agricultural energy users are doing the same, at larger scales, adding wind and other resources.
Where they can’t entirely flee, captive customers add expensive redundancies. As of last year there were 9,121 backup generators (BUGs) in the Bay Area, with a collective capacity of more than five gigawatts, ninety percent diesel powered. This excludes smaller gensets located at residences. In San Francisco alone there are 1,208 non-residential BUGs, with a combined power producing capacity of 736 megawatts, enough to energize all the City’s homes and businesses on a mild spring day. PG&E’s performance is so untrustworthy that a redundant fossil fuel “shadow grid” has emerged, at the cost of billions of dollars, to safeguard reliability.
Like many a bad long-term relationship, it’s hard not to fill stuck with PG&E. A clean break isn’t possible, at least not everywhere all at once. Instead, an orderly retreat is required, one that’s place-based and sensitive to those left behind. Local governments that can should municipalize their portion of PG&E’s system, buying the monopoly out, supported by state legislation that makes the process quick and fair, with a big, ugly, stick poised over the monopoly’s head if it doesn’t cooperate. Communities vulnerable to wildfire risks should be encouraged to replace PG&E’s poles and wires with their own microgrid, islanded, where possible; if not connected at the transmission level to a substation they own. In areas in which utility distribution is best mixed with autonomous household, business, and campus-level energy systems, an open access approach should be imposed, enabling anyone to convey energy through utility wires at a reasonable price. Afterall, we paid for this infrastructure.
The retreat must be managed carefully, lest those who have no choice but to continue to pay PG&E rates are stuck with an extra burden. But hard isn’t impossible. A status quo that’s already unacceptable will become intolerable if left unmolested. Present state policy would have the state’s investor-owned utilities electrifying transportation within a few decades; upwards of $40 billion-plus in additional revenues in California alone. Do we want PG&E to take on even more responsibility, with the political power that comes with a supersized piece of the economic pie, and a full-speed ahead mandate to proceed as a for-profit monopoly? No, we do not.