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Could selling PG&E to its customers help solve California’s power problems?

During California’s recent wildfires, the intentional blackouts PG&E implemented to reduce danger frustrated residents. The utility’s poorly maintained infrastructure is blamed for at least five previous fires. Now, the mayors of over a dozen California cities are suggesting PG&E should be sold to its customers. William Brangham talks to San Jose Mayor Sam Liccardo, who first proposed the plan.

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  • Judy Woodruff:

    When wildfires broke out again in California last month, residents weren't just worried about the fires themselves. Many were angry and frustrated over intentional blackouts that were designed to reduce the risks of even more fires.

    The state's largest utility, PG&E, was the target of much of that anger. The company's maintenance of its infrastructure, or, often, the lack of it, in recent years has contributed to and sparked at least five previous wildfires, with deadly consequences.

    Now, as William Brangham tells us, political leaders in Northern and Central California are saying it's time to push PG&E aside for a different solution.

  • William Brangham:

    That's right Judy.

    PG&E is the largest investor-owned utility in any one state. They serve 15 million customers. Last year, PG&E filed for bankruptcy protection because it's $30 billion in debt because of liabilities from last years fires.

    Because of the company's poor record, mayors of more than a dozen cities and towns in California are calling for a buyout of PG&E. They want to turn it into a customer-owned cooperative instead.

    This coalition of mayors, representing a third of all of PG&E's customers, is asking the state's utility commission to consider their proposal before approving any bankruptcy plan.

    How this all would work is the subject of many questions.

    San Jose Mayor Sam Liccardo is the mayor who first proposed this. And he joins me now via Skype.

    Mayor, thank you very, very much for being here.

    For those of us who do not live in California and have not been experiencing these fires and these blackouts, can you just give us a sense of the anger and the discontent that you're hearing from people about PG&E?

  • Sam Liccardo:

    I hear a lot of frustration from residents, and I know a lot of my mayoral colleagues feel the same way.

    And they're hearing it because the wildfires, the power safety shutoffs are displacing millions of Californians, leaving millions of us in the dark. This is no way for people to live, particularly in the most advanced economy in the planet.

    We can do better, and people are very frustrated about where we are.

  • William Brangham:

    So you're spearheading this to transform from an investor-owned utility to one owned by ratepayers, just ordinary Californians.

    Why is that the solution?

  • Sam Liccardo:

    A customer-owned utility provides two advantages.

    One, it enables us to ensure that the financial interest of the company will be aligned with the public interest. And, secondly, it enables the company, when it emerges from bankruptcy, to have better access to capital markets, which will be really critical, because we will need billions of dollars of investment in maintenance and infrastructure upgrades to ensure that electrical power can be safely and reliably delivered to California.

  • William Brangham:

    Isn't it a matter of incentives, though?

    Meaning, if you're trying to please shareholders and investors, then maybe that's not the best incentive structure to deliver reliable energy to people.

  • Sam Liccardo:

    Well, that's certainly part of it.

    PG&E has provided, I believe, $7 billion in dividends to shareholders over the last decade, at a time which it has significantly underinvested in basic maintenance for vegetation and upgrades of infrastructure that, in some parts of the state, are a century-old.

    So, clearly, we need to ensure that dollars go where they're most needed.

  • William Brangham:

    But why are you confident that cities and states and counties can run that more efficiently, this enormous utility?

  • Sam Liccardo:

    Well, I certainly am not going to be running the utility, and I don't want any elected officials on the board either.

    We see plenty of examples of customer-owned businesses, particularly the financial industry, for example, credit unions or mutual insurance companies, that are very competently run. They simply have, as their boss, the customers.

    And this is not a new concept in the utility context either. There are hundreds of customer-owned utilities in this country. Most of them are very small and rural, but there are some larger ones as well. And, obviously, they will need professional management and professional boards.

  • William Brangham:

    Mayor, how do you deal with the thorny issue of liability? As you know, PG&E was saddled with $30 billion in liabilities from last year's fires.

    Are cities and counties and the state ready to take on that kind of risk?

  • Sam Liccardo:

    This wouldn't change the question of who's responsible for liability, beyond the fact that shareholders who might see their equity go to zero, as they — I think they are today at PG&E. I think they have lost about 90 percent of their stock value.

    And so it would be customers who lose equity. There's no contribution that's required from cities and counties simply because we're urging a customer-owned utility.

    The liability questions are thorny, no matter what. And, ultimately, I think we all recognize that ratepayers are paying more to deal with much of this. For example, we just had a $21 billion wildfire fund that was created by the governor and legislature. About half of that is funded by rate increases.

    So, we all know, ultimately, the ratepayers are on the hook. And if the ratepayers are on the hook, then the ratepayers should own the company.

  • William Brangham:

    Regardless of what happens with PG&E, you still have an enormous set of challenges. I mean, you have got to deal with housing and zoning hardening and making the existing grid more safe.

    Plus, you have got a warming state, you have got climate change and droughts. I mean, that is a colossal set of issues to deal with.

  • Sam Liccardo:

    Oh, absolutely.

    And there's no question that it's going to require a lot of investment, including investment in our own cities. In San Jose, we're looking at, how can we better build microgrids to ensure we have fire stations and hospitals that can be taken off the grid when problems come up?

    We will be doing a lot of that. And I know a lot of other cities will as well. And this is not going to be cheap. That's why it's important for us to have — at least to have a utility that has the ability to get access to capital markets and make those critical investments.

  • William Brangham:

    PG&E earlier this week, in response to your proposal, said that it is firmly convinced that a government or customer takeover is not the optimal solution.

    How do you respond to that?

  • Sam Liccardo:

    Well, obviously, I disagree. And I think a lot of other folks disagree as well. 4 PG&E also said that they're not for sale, but, in fact, they're in bankruptcy court. So they are. And it's going to be up to a bankruptcy judge and the state public utilities commission to determine really what this company looks like, ultimately.

    And I appreciate, obviously, there are folks within PG&E who would like things to say just as — the way they are. But, right now, the status quo is not acceptable. We can't continue in this way.

    And the cost of doing nothing is far, far greater than the cost of taking a hard look about how we can transform this company into one that would be both more responsive and more responsible.

  • William Brangham:

    All right, Mayor Sam Liccardo of San Jose, California, thank you very much.

  • Sam Liccardo:

    Thank you. It's a pleasure, William.

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