Lack of political will tanked ex-San Jose leader’s PG&E idea
In this file photo, a PG&E worker walks in front of a truck in San Francisco. (AP Photo/Jeff Chiu)

Former San Jose Mayor Sam Liccardo once called for Pacific Gas & Electric—one of the largest public utilities in California—to be “customer-owned” through a nonprofit, cooperative firm.

His idea was quashed when the company emerged from bankruptcy in 2020, but the concept might still be possible if the circumstances are right.

PG&E began to spiral toward bankruptcy following the 2018 Camp Fire, which killed 85 people and destroyed 18,000 structures. The company was held liable for the lost lives and damage to properties, which was nearly $17 billion.

The utility filed for bankruptcy, claiming liabilities in excess of $30 billion from the 2017-18 wildfires. The company reorganized under bankruptcy and paid out $13.5 billion to the victims. As part of the agreement, PG&E was required to follow a certain set of customer service and safety standards. The utility began implementing public safety power shutoffs, which prompted Liccardo to propose a customer takeover.

“I expect that perhaps a few years from now, this idea will reemerge when PG&E next goes bankrupt,” Liccardo told San José Spotlight. “I say ‘next,’ not because I’m any financial expert, but a lot of smarter folks I talk to are, and they’re not impressed with how PG&E came out of bankruptcy.”

PG&E emerged from the bankruptcy with more debt than it had before bankruptcy, he said, which puts it in a financially perilous position. In addition, the company is spending $40 billion to move its energy transmission and distribution lines underground, which have driven up electricity rates for residents, Liccardo said.

“Customers will keep paying, no matter how much they gripe, because they’re captive and have no choice,” he said. “The PG&E stock price will continue rising as a result of the growing revenue, and everyone in Wall Street and Sacramento will say, ‘Isn’t PG&E doing great?’ Until the next disaster.”

A PG&E spokesperson acknowledged local governments have proposed municipal or customer takeovers of the utility company.

“We study and analyze each proposal, and at the core of our assessment is how to best serve our customers in terms of safety and affordability, and in line with PG&E’s and the state’s shared clean energy goals,” the spokesperson told San José Spotlight. “We remain focused on the safety of our customers and communities.”

San Jose has explored other means of separating its electrical supply from PG&E. As part of its massive Downtown West project proposal, Google wants to build its own microgrid, which the city would operate after forming its own utility. However, that idea will likely be postponed following Google’s announcement that it’s reconsidering its timeline for Downtown West.

The idea of converting PG&E into a customer-owned cooperative drew support from local officials across Northern California, including Sacramento Mayor Darrell Steinberg. But “politically powerful groups” put pressure on Gov. Gavin Newsom to resist the proposal, Liccardo said.

Hunter Stern, an assistant business manager for electrical workers union IBEW 1245, said that even if the proposal had enough political support, it would have been costly to implement. As a publicly-traded corporation, PG&E’s shareholders would have to be bought out before anyone could assume ownership of the firm, he said.

“Shareholders would need to be paid $20-plus billion for the value of their shares,” Stern told San José Spotlight. “Their idea was completely unworkable.”

Liccardo said a takeover would have been financially feasible had customers purchased PG&E shareholders’ equity at the time of its bankruptcy. Shareholder equity is defined as the value of a company’s assets, minus its liabilities. Due to the high value of PG&E’s debt at the time of its bankruptcy, the value of shareholders’ equity in the firm was likely close to zero, Liccardo said.

Dan Richard, a former PG&E senior vice president of public policy and governmental relations, agreed with Liccardo and said a customer-owned takeover could have worked had there been enough political will.

“The state protected the Wall Street equity guys to the detriment of fire victims and customers,” Richard told San José Spotlight.

California’s political leaders aren’t interested in changing how PG&E runs its firm when communities aren’t suffering from wildfires or power shutoffs, Liccardo said.

“The (California Public Utilities Commission) and elected leadership in Sacramento isn’t interested in changing much about PG&E when the company isn’t in the headlines for burning down a town,” he said. “When PG&E is doing so, we see lots of press conferences demanding changes, until the problem goes away. It’s all pretty performative.”

Contact Sonya Herrera at [email protected] or follow @SMHsoftware on Twitter.

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