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The impending bankruptcy of Pacific Gas and Electric Company, California's largest public utility, raises a serious question: who will supply the natural gas and electricity that PG&E has provided for decades? In the wake of the disastrous financial burden that now falls on utilities when they are responsible for starting wildfires, it is unlikely any group of investors will subject themselves to potential liability that, in the case of PG&E, may be as high as $30 billion.

after pge folds

PG&E was in part the victim of the effects of climate change. Global warming has impacted this state's forests and brush lands. Less rain over a period of several years and higher annual temperatures have created conditions that made the fires that hit Paradise, and Santa Rosa earlier, possible. These conditions will not change in the foreseeable future, and any investors who might consider assuming the power grid developed by PG&E will not find the prospects attractive.

Public utilities have long been considered a sound investment for those who desire a regular income from the dividends that were considered a sure thing. The company's stock would probably not increase significantly over the years, but the dividends were virtually assured. Utility stock was just right for widows, orphans and retirees. No longer, in light of what has happened to PG&E.

If other private utility companies are unwilling or unable to assume the responsibility of maintaining the power lines, then there is only one other realistic option.

But the lights must stay on and machinery powered by electricity cannot halt. The economy of California is tied to the power lines that were responsible for the disastrous fires in the northern part of the state in 2017 and 2018. PG&E will fold, but the power it supplied must be available from some other source.

If other private utility companies are unwilling or unable to assume the responsibility of maintaining the power lines, then there is only one other realistic option. The state of California must operate the system this failed utility company created and ran for over a century. The size of the area covered by PG&E eliminates the possibility of a city or county taking over the job.

There is a long, successful history of government-owned utilities in California. In the early 1920s, Sacramento voters created a utility district that provides electricity to the entire county and to small areas in an adjacent county. About the same time, voters in Alameda and Contra Costa counties established a similar agency to provide water for the entire region. Both Sacramento Municipal Utility District and the East Bay utility, affectionately referred to as East Bay MUD, have demonstrated the feasibility of government ownership and operation of utilities.

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But the best example is the city of Los Angeles, whose Department of Water and Power has provided both electricity and water for over a century. Although privatizes would like to dismantle the DWP and turn it over to private enterprise, the successful operation of its power system over the decades has left little desire on the part of Angelenos for privatization.

The advantages of government ownership of utilities are self evident. Management has no investors to satisfy with growth in stock value and with increasing dividends. That alone reduces the pressure for cutting costs by cutting corners in matters of safety, such as PG&E has been charged with doing. Furthermore, a government owned utility, responsible to the ratepayers rather than stockholders, is much more amenable to consumer concerns. If not, politicians lose their jobs. In a private utility, customers can't vote.

The DWP's principal counterpart in the southern part of the state is Southern California Edison. SCE, like PG&E, is currently in litigation as a result of regional wildfires perhaps linked to failure of he utility's power lines a few months ago. While the monetary amount involved is far less than that facing PG&E, the likelihood that future fires may place that company in financial danger remains.

DWP, unlike SCE and PG&E, has largely avoided the cost of claims from wildfires, mainly because the city doesn't provide electric service in areas subjected to wildfires. While it does have power lines that traverse hundreds of miles in eastern California, the areas the lines pass through are largely unpopulated and the vegetation in many sections, which are deserts, is sparse.

It's time for Northern California voters to establish a regional electric utility district, or, and this is more likely, for the state to create that agency. The power will stay on, and the tragic destruction of vast areas of the state due to faulty management of power lines will be less likely to occur.


Ralph E. Shaffer

Ralph E. Shaffer is professor emeritus of history at Cal Poly Pomona.