California’s PG&E Corp., the largest power provider in the U.S., garnered a lot of attention when it officially filed for bankruptcy yesterday. Critics of the bankruptcy include activist hedge fund shareholder Blue Mountain Capital and famed environmental crusader Erin Brockovich, who had joined the legal team representing more than 1,500 North Bay residents suing PG&E over wildfires that occurred in 2017.
However, what may be lost among all the headlines is a filing by PG&E last week that seems to be flying under the radar. Back on Jan. 9th, a US District Court Judge ordered PG&E to inspect its energy grid and clear trees that could fall into its power lines. In the court filing on Jan. 24, 2019, PG&E said that it can’t afford to perform the work ordered by the judge claiming that the work would cost between $75 billion and $150 billion.
PG&E claimed that the work is so labor-intensive and costly that compliance is technically and operationally infeasible. Furthermore, PG&E would need to substantially increase the rates to ratepayers by more than five times current rates.
This is a public admission of a dirty secret that most utility customers are not aware of.
In New Jersey, utility companies are granted a franchise and allowed to operate as a monopoly with public interest. Utility companies are required to properly maintain the lines and equipment that are part of their electrical system. Proper maintenance includes vegetation management (aka tree trimming). In fact, there is a NJ BPU requirement for utility companies to inspect an area (& properly trim trees) at least once every four years.
However, like PG&E, it appears that many utility companies including Jersey Central Power & Light (“JCP&L”) in New Jersey do not properly maintain their electrical system. See the link below for my Nov. 14, 2018 article on JCP&L and CHARGE’s opposition to their latest petition.
I have previously written that for-profit utility companies have inherent conflicts of interest that have led to actions with adverse consequences for its customers. See the link below for my Jan. 15, 2019 article entitled “It Finally Happened” for a more detailed discussion.
In New Jersey, the under-investment in the distribution system by utility companies has led to frequent power outages which are further exacerbated in the wake of storms. However, in California, the under-investment in vegetation management (which is generally required) for transmission lines have led to devastating wildfires that have dire consequences for many California residents, often involving deaths or total destruction of homes.
More recently, there has been a movement to rethink the issue of overhead power lines versus burying them. See the link for my Jan. 12, 2019 article entitled “To Bury or Not to Bury?”
Because of the Industrial Revolution and the historical development of the electrical/utility industry, much of our nation operates under the business model whereby an essential public service (electrical power) is provided by for-profit companies.
This model appears to have inherent conflicts that benefit management and shareholders at the expense of captive customers who cannot switch their utility company. History is replete with stories that for-profit utility companies have worked against public interest despite their mandates to operate otherwise.
Given all the recent events, the question has to be ask - Is the social costs under this business model to society too high?
Perhaps it’s time for federal and state lawmakers to start to examine and rethink this critical issue.