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Can California Utilities Burn Down the State and Make the Public Pay For It?

Can California Utilities Burn Down the State and Make the Public Pay For It?
Mon, 9/17/2018 - by Matt Stannard

When you step back far enough to take it all in, the story is too absurd for fiction.

The fossil fuel industry knowingly alters the climate, exacerbating fire risks in the American West, including massive wildfires across California. Energy utilities (presently private corporations) play a more immediate role in sparking fires that, thanks to climate volatility, rage out of control. Then, these private corporations dodge strict liability regulations by getting the California legislature to allow them to charge customers for that liability.

The lesson is clear: Oil companies heat and dry up the planet, power companies start fires on the dried up land, and we pay the bills.

Once it is signed into law by California Gov. Jerry Brown – who is fresh off the successful Global Climate Action Summit, held last week in San Francisco – that is exactly what new state legislation will do. The law will allow investor-owned utilities like PG&E to finance their debt through the bond market and then pay off the debt through a monthly surcharge – otherwise known as a "fee increase" – paid for by California ratepayers. The cost will be considerable because several fires have already been traced to PG&E equipment.

But, you ask: Won’t the cost of that liability incentivize better fire-prevention measures on the part of PG&E and other power companies? Not all that much. As a cherry-on-top to the generous bailout, the legislation also caps how much utilities have to pay for the fires they start. If the companies can simply transfer the costs, why spend the money to modernize?

Reaction from consumer protection and utility monitoring groups has been understandably critical. Consumer Watchdog president Jamie Court tweeted that the final details of the bill were worked out behind closed doors after public hearing that allowed Californians less than one minute per comment.

The Ratepayer Protection Network, an advocacy group looking out for utility customers, has been unrelenting in its criticism of the legislation. “Californians should not be the insurance of last resort while PG&E shareholders pay nothing and profit,” the organization said in a tweet in August.

At its core, the legislation leaves neither the utility companies nor their shareholders with any incentive, other than public anger, to prevent fires. They can return higher profits to shareholders without improving their safety protocols or infrastructure. They can use bonds to cover the legal expenses incurred by the fires, and working Californians will pay the costs, over and over, as the magnitude of climate-induced fires grows.

Stories like these help us test the meaning of entities like “public utilities,” and understand the case for better public management of the commons. Utilities are supposed to be managers and distributors of public goods: things everyone needs, which in some cases require extraction from the natural commons and management of environmental impacts. Beyond mitigating those impacts, the utility industry should be the arm of a society working towards long-term sustainability and ecological integrity.

While public ownership of utilities is vulnerable to corruption or poor management (particularly when such utilities are underfunded and denigrated by right-wing governments), privatization of utilities makes democratic and sustainable management of the commons a non-starter. The case of PG&E and other private energy utilities in California serves as a good illustration of this because of how beholden such companies are to their shareholders.

In this instance, serving those shareholders – which private corporations are statutorily required to do – means not only making customers pay more for the fires started by the corporations, but also demanding and receiving government protection from liability, and legal cover to implement he surcharge. Privatization always paradoxically requires a great deal of government intervention.

Arguments for privatization also buy into the artificial fiscal limits imposed by capitalism. There’s not enough money, it is argued, to fully fund public utilities, so they slip into inefficiency and disrepair. In reality, those fiscal limits are political, not “natural,” and publicly-owned resources are allowed and encouraged to slip into inefficiency and disrepair in order to engineer evidence in favor of privatization.

In other words, first we underfund the public sector, then we accuse the public sector of inability to function.

Fiscal limits are artificial (as we learn every time Congress funds massive and useless increases in the military budget). Public banks could fund the necessary improvements and upkeep for state- or community-owned utilities, absorbing and stabilizing costs otherwise passed on to customers. And let’s not forget that the debts incurred by PG&E are being serviced by private firms making millions of dollars in fees, which will now be paid by California consumers.

All of which leaves us with the disturbing big picture: A confluence of fossil fuel and financial interests has lit the planet on fire, created huge payoffs for shareholders and debt financiers, and left people like you and me holding the invoices. Unless you’re a shareholder, a PG&E executive or a Wall Street bank, none of this makes a damn bit of sense.

Matt Stannard is the Director of Solidarity House, a policy research and media cooperative. He has worked with Commonomics USA, the Public Banking Institute, and Farm Commons. He writes and produces podcasts on cooperative economics, law, and farming.

 

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