California’s large investor-owned utility, Pacific Gas & Electric (PG&E), announced it would be filing for bankruptcy by the end of the month after being faced with $30 billion in damages related to a series of fires over the past two years, including last fall’s deadly Camp Fire, which was allegedly sparked by the utility’s old, faulty transmission lines.
That fire killed 86 people, destroyed 14,000 homes in the town of Paradise, and stands as the deadliest and most destructive fire in the state’s history.
PG&E’s bankruptcy forces a critical choice for new California Gov. Gavin Newsom and other state leaders. They could opt to bail out PG&E, or break up the gargantuan company into presumably more manageable pieces.
Or they could do the right thing and take the utility into democratic, public ownership.
A public takeover is not outlandish, but rather, is a common-sense proposal for the future of Californians. With the company’s value dropping precipitously, this is a key moment for the state to step in, take over, and design a utility system that centers affordability, reliability, resiliency and leadership on climate change. Public ownership could also help secure the priorities that bankruptcy puts up in the air — such as pensions, union contracts and renewable energy investments — that the for-profit utility might not value saving as much as it would CEO bonuses.
The idea of public ownership is getting traction. California communities are tired of dealing with the consequences of a company designed to deliver maximum shareholder returns, constant growth and big-dollar CEO paychecks rather than safe, affordable power that does not put people and the planet at risk.
As an Oakland attorney of a group suing PG&E describes, “Rather than spend the money it obtains from customers for infrastructure maintenance and safety, PG&E funnels this funding to boost its own corporate profits and compensation.” The utility has been under scrutinyfor its safety culture for years, including a gas explosion in 2010 that killed eight people.
In November, protesters shut down a California Public Utilities Commission (CPUC) meeting, calling for a public takeover of the company and to reject a bailout that puts the brunt on ratepayers (for which PG&E has lobbied hard). After the protesters were escorted out, CPUC President Michael Picker said that the commission is investigating the company, leaving all options on the table — be it bailout, break up or even public takeover. In the investigation, CPUC even names the option: “Should some or all of PG&E be reconstituted as a publicly owned utility or utilities[?]”
State Senator Scott Wiener from San Francisco announced a proposal for San Francisco energy municipalization in reaction to the bankruptcy news. “As disruptive as it is, PG&E’s bankruptcy creates an opportunity to form a comprehensive publicly owned electric utility in San Francisco,” he said. State Senator Jerry Hill, an outspoken critic of PG&E, has championed a call to hold PG&E accountable for its actions and is now also considering a public takeoveroption.
California already has a flourishing form of quasi-public power ownership, called Community Choice Aggregation (CCA). This program allows local governments to pool electricity customers from their jurisdiction and take over the procurement of energy generation for their communities. There are already 19 CCAs operating in California, serving a total of 2.6 million customers. Advocates for CCAs argue that they allow their communities to transition to 100 percent renewable energy more quickly, enable more community control and charge lower rates.
So how could a state-owned utility work?
California could take over PG&E and build a fully reimagined energy utility system based on 21st century grid realities and community needs, with any money made reinvested back into the grid or the larger community rather than shelled out to shareholders. State-owned regional grid operators could manage the energy delivery throughout different regions of California, focused on keeping the grid safe, investing in modernization and accelerating electrification of new sectors of the economy, such as transportation.
Local government CCAs could take on building or procuring energy generation, prioritizing locally owned renewables and so-called “non-wires” alternatives to create a more climate-resilient energy system, such as solar panels and battery storage, that don’t require the kind of transmission lines implicated in the Camp Fire and other large fires. The CCA could also take on reducing energy burdens — particularly for low-income residents who are often people of color — by integrating plans for energy efficiency with local plans for affordable housing.
East Bay Community Energy’s CCA serves as a clear example of how public ownership can be democratically governed and its benefits distributed, as well as a testament to the power of grassroots organizing by Local Clean Energy Alliance to keep the CCA centered on climate justice. For example, the CCA adopted a local development business plan to promote local renewable energy projects and jobs. It is also democratically run, with a board of directors consisting of accountable elected officials from the different jurisdictions, and monitored by a community advisory committee of rotating community stakeholders.
Utilities across the US are faced with a business model that is insufficient for the challenges of the 21st century and for delivering a public good. Taking over PG&E is not just crisis control; it is a pathway to a more democratic energy system that values local workforces, spreads the wealth and accelerates the energy transition.
Municipal enterprise
One of the earliest municipal enterprises were public power companies. As early as the 1880s, local governments began forming them to provide electricity in areas that investor-owned utilities considered unprofitable. Today in the US, more than 2,000 community-owned electric utilities serve more than 49 million people, provide 93,000 local jobs, and invest more than $2 billion a year back into local communities. Many local governments, under pressure to improve services amid declining tax revenues and public resistance to tax increases, have launched enterprises in sectors traditionally dominated by private firms, including hotels, golf courses, composting, real estate, and—notably—cable and broadband service. Frustrated with slow broadband speeds and high prices, about 750 communities now operate publicly owned networks.
Potential Impact
Municipal enterprises offer a way for municipalities to provide quality, affordable goods and services while creating jobs and boosting incomes for local residents without additional expenditures on social programs. City-owned ventures can also improve the stability of local economies by decreasing their dependence on corporations prone to relocate in order to lower expenses and maximize profits. Municipal enterprises hold considerable potential to provide important services to communities that for-profit providers are unwilling to serve, such as what the Federal Communications Commission says are the 14 million rural residents—nearly 30 percent of all rural households—who lack broadband access. Similarly, as local employment translates into increased tax revenues and reduced expenditures on social programs, municipal enterprises have a strong incentive to hire area residents and give back to the community. Public power utilities, which on average return 33 percent more to their communities than private companies, provide powerful evidence of this.
Transformative Characteristics
Municipal enterprises are motivated to provide quality, affordable services because they are publicly owned entities run by local officials accountable to area residents. Municipal enterprises are able to prioritize vital public goals and set guidelines around local sourcing, local hiring, sustainability, and related practices to maximize their positive impact on the community. They do this while maintaining a track record of more reliable service: households powered by public electric utilities, for example, experience outages on average less than half as often as customers of private utilities—59 minutes a year compared to 133 minutes—while paying nearly 15 percent less. Moreover, municipal ownership not only makes a venture unlikely to leave a community in search of higher profits but also offers governments a way to ensure enterprises meet critical local needs.
Examples
PIKE PLACE MARKET, SEATTLE, WASHINGTON
To achieve scale, municipal enterprises must overcome public perceptions that public ownership is inherently inefficient and bureaucratic. While data and real-world experience sharply contradict these stereotypes and demonstrate the model’s capacity to generate a range of positive community benefits, significant education is needed to reverse such long-standing beliefs. Furthermore, like for-profit businesses, municipal enterprises can lose money: Baltimore’s city-owned 757-room Hilton hotel, which opened in 2008, lost more than $84 million before it turned a profit in 2017. Despite the years of losses, officials say the hotel has helped draw additional convention business to the city and has supported spin-off businesses.
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