California mayors propose turning PG&E into a cooperative - Activate World

California mayors propose turning PG&E into a cooperative

San Jose Mayor Sam Liccardo wants to turn embattled Pacific Gas & Electric into a massive, customer-owned cooperative. He first proposed this radical re-imagining of the utility in October, and its gaining traction. Last Tuesday, more than two dozen other California mayors signed on in support.

Lunchtime conversations:

  • All members of cooperatives take part in shaping policies and influencing the business. With commercial utilities, only shareholders have any say in running the company.  How could a stakeholder versus a shareholder approach transform PG&E?
  • Governor Gavin recently named an energy czar to develop a backup plan in case the bankruptcy process does not produce a satisfactory approach to improving PG&E’s operations. What would be your top priorities if you were the CA energy czar? 
  • Will the recent outages be a pivotal moment in transforming California’s power grid? How could solar or wind energy transform PG&E?

Noteworthy:

  • “PG&E as we know it cannot persist and continue,” Governor Newsom said last week. “It has to be completely transformed. There will be a new entity. It will be reimagined.”
  • The team currently running PG&E lacks corporate responsibility by trying to hand out $16 million in bonuses to top executives months after filing for bankruptcy and wining and dining employees at a posh venue before enacting mass blackouts.
  • Calls for alternatives to PG&E’s existing structure have grown louder over the last month after the utility intentionally blacked out millions of customers — some without warning — to prevent wildfires as fierce winds swept through Northern and Central California.

Storyline:  

PG&E, which filed for bankruptcy protection in January after accumulating an estimated $30 billion in liabilities from wildfires caused by its equipment, is widely expected to emerge with a different structure. Any bankruptcy plan requiring a rate increase is subject to approval by the utility commission.

In a letter delivered Tuesday to the California Public Utilities Commission, the local officials embraced a proposal by Mayor Sam Liccardo of San Jose to create a cooperative that would use their collective resources to take over the utility.

The government officials stated in the letter, “This situation requires a full and comprehensive effort to chart a sustainable course for the future of PG&E, one that will serve the interests of its customers, and position the company to meet the challenges we will face from a changing climate.”

Liccardo, a Harvard-educated former prosecutor, argues that going customer-owned would make the utility better able to meet customers’ needs, and enable them to raise capital from a broad pool of debt financing at a lower cost and in greater amounts than an investor-owned organization. It would also be exempt from federal taxes and unburdened from the need to pay dividends to shareholders.

PG&E told the Journal Tuesday that it is “firmly convinced that a government or customer takeover is not the optimal solution that will address the challenges and serve the long-run interests of all customers in the communities we serve.” 

According to the Wall Street Journal, “While electric cooperatives are common, especially in rural parts of the U.S., the one proposed by the California mayors would be the nation’s largest by a long shot.”

Sources:  Los Angeles TimesThe balanceThe New York TimesThe Wall Street Journal

Photo by Max Unicorn on Unsplash