Nice write up , thanks

Thank you for the informative article. Having lived through that era, I felt like Gray Davis was the sucker who was holding the bag when the deregulation scheme collapsed. The scheme started under Pete Wilson, I believe.

Maybe Davis could have handled the crisis better, but replacing him with Schwarzenegger didn't actually help. Davis had already stabilized the situation, and Schwarzenegger was chummy with the corporations that created the mess in the first place.

Also I appreciate the nuanced take on the Gavin Newsom / PG&E relationship.

Regarding SMUD and transmission lines, they source hydroelectricity (20% of total supply) from an area outside of Tahoe. SMUD didn’t burn down significant chunks of Placer and El Dorado counties where their transmission lines traverse.

The main point is that they shouldn't have investors they have to satisfy, because something as essential as electricity should not be in the for-profit realm. Equally developed places where the government runs municipal electricity don't have these price gouging problems and they don't have worse service on average.

Ya, it's so common to hear that we would be better off with a publicly owned utility, but then you realize that PG&E has gone bankrupt twice in recent years. All of us taxpayers would be on the hook for that debt. There isn't an amazing amount of profit that would magically reduce our rates.

The reality is that delivering power to a single home in CA isn't that profitable. Thus, buying out PG&E doesn't save much if anything. If you assume governments are less efficient than private companies (not aways, but generally true) then rates wouldn't really change much assuming service is the same.

Almost all of a utility's profit comes from serving large customers. Thus, any sort of market rate structure benefits corporations and hurts single family rate payers.

In 2006 I had a summer internship at PG&E. I won’t go into all the details but I did get to see some of the OLD transmission and gas maps from like 1920-1950s. These things were barely legible and photocopies of photocopies, but in many cases were all that was left. Someone showed me the acquisition timelines of all the small municipalities and how this Frankenstein of a grid came to be. It’s a fucking mess. No one was keeping real records then as people were buying/selling and getting damn rich in those pre-environmental days. And as much as modern technology was trying to organize and keep track, the basic details were lost in the wind. I’m not defending PG&E but the modern PG&E as we know it inherited a mess that will cost billions to fix. They would literally have to open up roads and sidewalks and trails and parks just to figure out what’s really under there. Then to modernize this ancient infrastructure is another billion.

When an organization is in a complex financial situation, I want to see them investing that money into the organization, not bonuses for executives.

I will always hate PG&E for considering those kinds of compensation to be normal to “retain” or “attract” “talent” when they have the issues they have.

No, I guess millions of dollars in bonuses wouldn’t have done our infrastructure any good.. let’s raise rates, because THOSE millions will be useful…

Thank you. Great post.

It’s worth noting that most wildfires are not actually caused by power lines. They make up a pretty small portion of Wildfires. I hate PG&E but wanted to note that.

Thanks, good summary and commentary. Three questions:

* A huge amount of discussion centers on the role of high cost of rural distribution vs. urban distribution in PG&Es plight - is that really the case ?
* Haters that want to buy out PG&E or break out distribution in specific municipalities seem to neglect PG&E debt of $60B. Seems like that is a huge barrier ?
* Are there any good examples of a private utility / natural monopoly digging its way out of debt and an accumulated maintenance deficit while also transitioning to new generation sources ?

Great post! I learned a lot. Thanks.

Great Write Up! One correction, PG&E is burying Distribution Lines, not Transmission Lines.

Thank you, really good and thoughtful post.

Going back to the same era as the creation of PG&E, there was a lot of energy, so to speak, in California politics to control and regulate utilities for the public good. This had grown out of the rapacious and monopoly behavior of the Southern Pacific Railroad in the 19th century, which controlled the Legislature and much of the California economy--since railroads were the main way of transporting goods around the State.

Progressives of the era--which included many Republicans--made a reform focus on vigorously regulating public serving utilities. In 1911 there was a successful constitutional amendment to reform the toothless (and Southern Pacific controlled) Railroad Commission, which would later become the CPUC. The face of the reform was Hiram Johnson, who was elected Governor of California in 1910.

"In office, Johnson was a populist who promoted a number of democratic reforms: the election of U.S. Senators by direct popular vote rather than the state legislature (which was later ratified nationwide by a constitutional amendment), cross-filing, initiative, referendum, and recall elections. Johnson's reforms gave California a degree of direct democracy unmatched by any other U.S. state at the time. When he took office, amid rampant corruption, the Southern Pacific Railroad held so much power it was known as the fourth branch of government. "While I do not by any means believe the initiative, the referendum and the recall are the panacea for all our political ills," Johnson extolled in his 1911 inaugural address, "they do give to the electorate the power of action when desired, and they do place in the hands of the people the means by which they may protect themselves." (Wikipedia page quote)

(Johnson also had a checkered history in some aspects of his politics / policies. He signed the racist anti-Asian California Alien Land Law in 1913, and in the U.S. Senate opposed creation of the League of Nations and was an isolationist. But he did spearhead a lot of good reform in California and also in Congress.)

Johnson's close ally in California reform politics was John Eshleman, a UC graduate and lawyer and State Assemblyman from Berkeley who was elected to the Railroad Commission to reform it and break the SP control. In 1914 Eshleman was elected Lieutenant Governor and was Johnson's heir-apparent for the Governorship (Johnson had his eye on the U.S. Senate.) But Eshleman died of tuberculosis, age 39, in 1916.

If he had survived, he probably would have gone a long way in setting in place better regulation of the public utilities.

What the California Progressives were able to accomplish in the early 20th century, supported by public outrage at the behavior of massive corporations, may be a guide for what it might be possible to do with a true utility reform movement today. But in some respects we're back at square one, with the body that regulates utilities also under their political thumb.

Really great write up. Wish this could be pinned somehow for future reference - we have A LOT of PG&E threads (for good reason), and this educational/historical material would be super valuable to keep coming back to over time.

I think the biggest problem for me is because PG&E is a publicly traded the have a legal requirement to make money for investors. If they were a non profit they would not have this financial responsibility to external investors

I read the book, and still believe their greed got the best of them. If you can’t maintain and support 100k+ miles of line don’t buy it.

I understand it’s tough to operate in wildfire prone and rugged areas, but you bought it and assumed the risks and responsibilities.

So tired of the PGE apologists.

a public takeover of PG&E would cost $60-100 billion.

Excellent summary. Thank you

super informative write up. I think the best solution is allowing individual cities to buy up the infrastructure. As part of that deal, state can require them to contribute capital dollars outside of their city lines that goes directly to transmission lines capital improvements.

I think a part of the impossible equation is that California as a whole agreed to the climate change mitigation strategies - that i think is the fourth impossible problem that PG&E is delegated to handle.

People rightly talk about the affordability of electricity for the municipality ran power company in Sacramento - what people fail to account for is that the per famoly electricity usage in Sacramento is roughly double the usage in San Francisco (or other Bay Area counties). Furthermore, if you look at the average energy consumption, California and Hawaii are at the bottom of the energy consumption - guess which States have the highest electricity cost?

At the same time, high electricity cost feels bad - even if you care about the climate change concerns.

Appreciate the write up. I was familiar with the situation especially starting the Enron shenanigans. Great to read the holistic history of how we got here.

Great post OP. Just like most things in life, things are way more complex than Internet comments can handle.

I have Katherine Blunt's book but still need to read it... that said I've done a ton of reading and watching other material on PG$E and their malfeasance ever since the Erin Brockovich movie came out and even more after the pipeline explosion in my hometown of San Bruno. And yes, Erin Brockovich is no saint, is a fame-seeking money hound and the movie highly sensationalizes the reality but the core story of PG$E choosing to knowingly pollute groundwater because it was cheaper to do what they always did is true... and they also polluted the Colorado River in same fashion by disposal of hexavalent chromium laden wastewater in unlined pits at their compressor station at Topock.

And while much of your summary is accurate, your personal conclusions are letting Newsom off way too lightly... he actively colluded with PG$E for their benefit in drafting of the terms of the legislation that allowed them to be bailed out from bankruptcy after the Camp fire. I urge you to read and watch the stellar investigative reporting in Power Fire Money series https://www.abc10.com/firepowermoney

Since the spring of 2000, energy problems have plagued California. Californians have faced blackouts, seen the state budget surplus disappear, watched Pacific Gas and Electric file for bankruptcy, and listened to state officials point fingers at many organizations and individuals for allegedly causing the crisis. The chain of events began as an opportunity for California to restructure and improve its electricity system. But after political leaders mismanaged the electricity crisis, California now faces an electricity blight while it struggles to recover from its self-imposed wounds.

The California Electricity Crisis focuses on policy decisions, their consequences, and alternatives: the saga California has faced and is still facing. Throughout this saga, one policy decision led logically to another, yet at almost every juncture very different choices were possible. James L. Sweeney examines how the opportunity for restructuring was turned into risk, how challenges of increased demand for electricity and escalating wholesale costs were mishandled, and how the growing crisis ultimately turned into disaster. He documents how the California governor and legislature responded to the short-term crisis by adopting ill-conceived long-term measures—creating a harmful legacy for decades to come. But Professor Sweeney also shows how the state can still move past its difficulties by improving electricity markets, reducing risk, and appropriately managing the state's financial obligations.

https://www.hoover.org/research/california-electricity-crisis

https://web.stanford.edu/~jsweeney/paper/California%20Electricity%20Crisis.pdf

This was a delightful write up, thank you. I live in Monterey and we’ve dealt with significant outages over the last five years, and many are due to the poorly maintained infrastructure, not storms (re:trees). You mentioned aged infrastructure in rural areas but what about those in populated regions? From where we sit, PGE isn’t maintaining anything and tens of thousands of households keep getting affected.

micro grids, more local generation, and state takeover for distribution and transmission

The 1970s Energy Crisis Three Mile Island happened. Diablo & San Onofre construction costs went over budget by billions of dollars

Your chronology is flawed here, and this implication of cause and effect is misleading. You completely neglect to mention Bodega Bay Generating Station which would have been most impactful for us here in the Bay Area by providing clean cheap atomic energy generated right on the Sonoma coast with no need to import power over long distances.

The 1964 protests against Bodega Bay NGS were four years before Diablo Canyon or San Onofre even broke ground (both 1968), and was 15 entire years before the Three-Mile Island event happened (1979). They went as far as to redefine the official location of the San Andreas fault to convince people it was scary and unsafe. (PROTIP: A reactor trip can shut one down in about three seconds; not exactly scary when seismic detectors give many times more warning than that)

One can actually go visit the “hole in Bodega Head” where PG&E started excavating the reactor pit before being made to stop.

After camp fire, California should force the payment of the fines in assets, so California would own big part of them by now. 

It’s the only way to punish them when something goes wrong otherwise it’s people that will need to pay 

For Newson, PG&E will be the big obstacle for him on midterms, the big topic is affordability and Newson failed in all fronts to make California a little more affordable 

So interesting - thank you!

A rival power company - Great Western Power Company

And now they are remembered (only) by the climbing gym in downtown Oakland.

the core of the problem for PG&E is that we have a ton of transmission lines that can all spark wildfires. PG&E's struggles is that they need to allocate tens of billions to fix problems that they've neglected for decades, and that's draining from all the other parts of reliability spending.

PG&E maintains ~12,800 miles of lines vs. SMUD's 484.

Seems like the solution here is to de-energize the vast majority of those lines, rely much more heavily on microgrids and local storage, and only build long-distance transportation lines along transportation corridors where they are easily maintained. It's not the 1910s anymore, where power generation meant trucking in coal or damming a river. Solar and wind can work anywhere with reasonably self-contained generation.

I just want to add 1 important point that I don't see addressed in the post or comments, even though there are clearly many well-informed people here: PG&E's role as a middleman in distribution of SFPUC-generated power.

I'm summarizing what I read decades ago in the Bay Guardian free weekly, and also a few articles in the NYT. Feel free to correct anything I get wrong, but please don't dismiss the whole story as some myth made up by a cranky old man: there are documented facts here that are almost never discussed. Backup is easily available online from various objective sources such as wikipedia.

Long story short: the US Congress in the 1913 Raker Act gave San Francisco the right to dam the Tuolumne, flooding the Hetch Hetchy valley just north of Yosemite valley. This right was conditioned on using that public resource to provide a dependable source of water and power for SF and other communities, and the act prohibited any ongoing private profit accruing from the project.

At the conclusion of construction of the whole system in the 1920s, SFPUC's supply of copper wire for transmission lines ran out just as they reached the South Bay. PG&E came to the "rescue" offering to build the remaining lines and allow the City to use them for City projects (power for public buildings and transit), on the condition that PG&E retain rights to distribute and sell the remaining power for retail use.

Not long after this fix (in both senses of the word) was put in place, the missing copper wire was discovered in the basement of City Hall. But for a century, PG&E has retained their franchise, buying SFPUC's public hydro power cheap and selling it to the citizens of SF at retail rates. I'm no lawyer, but it sure seems like the profits PG&E takes on that franchise year after year are an ongoing violation of the terms of the original law.

• Turns out hiring a ton of consultants did not modernize PG&E as much as the C-suite would like. PG&E starts feeling the financial pressure since the CEO promised investors great dividends & returns, and starts cutting costs in areas like reliability & maintenance (e.g. inspections)

• Simultaneously, climate change is starting to (rightfully) become a big issue. Arnold makes it a big part of his agenda, and PG&E executives lean into climate as an issue since it's good publicity (e.g. CEO gets invited to the United Nations) and start to procure more renewable energy

These two points are intentionally backwards.  green power mandate in california first passed

The Renewable Portfolio Standard (RPS), was enacted in 2002 with SB 1078, requiring 20% renewable energy by 2017.

PG&E pricing (revenue and profit) is extremely regulated. They get to keep a higher percentage for building power generation than maintenance. 25% vs 10% iirc. 

When the green energy push comes, there is a legal mandate to build green production, but no price increase to pay for it. Building power generation is a massive capital expense. 

Not only is PG&E have incentive to build power generation if they can, they are required to build new power generation and they are NOT permitted to charge for it. They have a cash problem coming out of bankruptcy. They are, DIRECTLY BECAUSE OF GREEN POWER MANDATES, forced to defer maintenance. 

That is where the disasters start: cash strapped from the "Gray Out" of 2000-2001 they are then forced to use what little cash they have to deprecate working power generation and build new power generation. Which continues to be expensive, but was insanely more expensive.

Putting these points in the order you did is intentional to hide that this was entirely a regulatory and legal requirement. No utility could operate in the environment without deferring maintenance, and its why you are seeing massive fires outside of where PG&E operates. 

The only places you don't see it are where small utilities get away with having effectively few or no transmission lines. 

If you accept that we rightfully focused on green energy, we should have rightfully raised rates to allow PG&E to build out AND perform maintenance. They make profit on both. They have incentive to do both. But if available funding is short, they will follow legal mandate before replacing working infra. Ultimately everyone who died in those fires died because Green Power couldn't be sold if people knew they would have to pay for it. 

Another facet of our current difficulties is how hard it is to keep and maintain home insurance in fire-prone areas. My mom was dropped by 3 insurers in Sonoma County in a calendar year, then managed to get covered by State Farm. For a while they were the only company who would write policies in the county, and now even they’ve stopped covering Sonoma.

Read this book a few years ago, and completely agree - a great read that provides nuance of an incredibly shitty situation. I really appreciated the effort put into covering the background of how utilities came to be.

Good writeup, so many folks have moved here over the past 20 years and don't know about enron royally screwing us. I'm still mad at the feckless gray davis for not pulling a dawn raid on the energy "traders" manipulating the market. maybe they wouldn't have landed smoking gun evidence but the power would not have gone out that day or the next week. White collar crime ain't so much fun when your workday starts with cops sticking guns in your face and hauling you off in cuffs. Granted, guv davis was burdened with a republican AG who was in three monkeys mode, but there had to be some LEO agency that would be willing to act--people in the central valley die without summer AC.

It would be good to include mentioning at what point PG&E achieved regulatory capture, and that consumer billing rates have doubled over just five years.

This is a great post and very informative. I’ll check out the book. Appreciate your post.

Ok but what are we gonna do about it?

Thank you for writing this up. I appreciate the book recap and your thoughts on this.

This was a good read

The dollop has a great episode on PG&E

Great summary, much appreciated.

Record profits.

It could be worse.

You could have PSE and have your electrical utility run by foreign private equity instead!

Very well articulated. There is one omission that cannot be printed due to political correctness and to avoid getting canceled by left mobs. many members of the PUC were on PG&E pay roll and they always went out of their way and in immoral way to hep PG&E. Gov Arnold Schwarzenegger and Gov Jerry Brown fired many members for corruptions by colluding with PG&E. To be fair to PG&E, from their perspective as a business corporation, it is better to invest money on PUC members than on infrastructure for higher returns on their investment. So they did that.

This does fast-forward through the Depression (post-Great Western acquisition and a time of increasing rural electrification) and postwar years, during which time a public takeover was already being discussed, and even seen as a foregone conclusion by some. Years ago (probably sometime during the 2017-21 fire seasons), I saved this passage that I saw posted a couple times:

"Sooner or later the state or the federal government must take over P. G. & E. lock, stock, and barrel. There is good reason to believe that the astute executives who manage the company are not only fully aware of this possibility, but that their present strategy is based on the assumption that the company will some day be taken over by a public agency. The aim, therefore, is to delay public acquisition as long as possible and, at the same time, build up a book value which the government will some day have to pay for the company's properties. By tying-up contracts for the sale of power, by fighting the Bureau of Reclamation every step of the way, and by continuing to subvert public opinion in California, the company can count on a fairly extended term of existence.”

Carey McWilliams. California: The Great Exception p. 337 (1948).

How true was this back then, and has it been true in future decades? (I lean towards "yes" and "yes, but less so.") Aka, how much did "intentional grift by company execs to line their pockets during the ineluctable public acquisition" cause the crises and headaches we're dealing with today?

Great read thank you

This is a very good post. I also work in energy. I'm not even going to scroll down to see everyone arguing, I salute your patience in writing this up. It's almost impossible to explain these things to customers and sometimes to legislators as well but hopefully some will absorb this information.

One way to break the power monopoly is solar. We rely on solar and battery most of the year except in winter we have power deficit and needed to buy power from PG&E, which has been reliable in San Mateo.

The role of PG&E has changed from our only power source to winter backup. Like many others here, we were not happy with constant rate increases. But after we installed solar, we don't mind that much anymore as for most part of the year we can be self sufficient in power generation.

In fact, any future rate increases help justify our solar investment :)

Let’s just blame it all on renewables now that old reactionary white golf dudes are in power. Claim they’re expensive and ignore the actual price on the contract of 5 cents a kWh for solar+storage…

I would like to know their acquisition prices for various old power generator contracts, both renewable and fossil fuels. I can’t imagine those peaker plants are cheap to operate either.

PGE compensation is as good as the FAANGs.

There’s no way a power transmission company can be placed on the same level.

So that hook was over 100 years old that caused the camp fire as well as the one that caused the tubs fire was old as shit. Looked like a sunken ship rusted over. They were told to repair these ancient dangerous lines but decided to pay ceos and shareholders of course resulting in deadly fires that took many lives. Essentially killed people because of greed. Any public service that gets privatized is going to have this problem. We saw it with Enron, and we can see how southern California Edison is better regulated, slightly less privatized and better than PG&E as a result.

imagine if there was as much uproar about more pressing issues like homelessness and crime

When I moved to California my friend explained to me, "PG&E is the company from that Erin Brockovich movie."

I've been foisting the book on anyone who will listen; This is an excellent summary.

As you're in the biz, do you know about the progress on a Pescadero community microgrid? (https://cal-cca.org/san-mateo-county-commits-3-million-toward-pescadero-microgrid-to-curb-chronic-outages/) I was chair of the Pescadero Municipal Advisory Council for a number of years ( CZU, COVID, etc ) and power issues were a constant message 'upstream.'

What do you think about CA changing from Solar NEM 1&2 to the new Solar Billing Plan and the bill before the state to shorten or end the previous NEMs? It seems to disincentivize people from going solar.

¡I’m too poor to buy the book especially having read the summery, but I can give you an upvote!

Thanks for the detailed write up.

what I still dont understand is what part of this is unique to CA that our setup cause prices to be so expensive? It's not like other states dont have fire risk or rural areas vs cities.

https://www.foundsf.org/The_Hetch_Hetchy_Story,_Part_II:_PG%26E_and_the_Raker_Act

Had to dig around my brain for this one.

PG&E, saddled with more than $30 billion in liabilities, plunges into bankruptcy for a 2nd time

Except that they didn't discharge their wildfire liabilities during this bankruptcy, and AB1054 required them to keep paying it out. Which leads to

Admit a plummeting stock, PG&E desperately needs money to pay out wildfire victims, and to continue trimming trees & continue operations even as it is in bankruptcy. Who will provide the money?

Yeah, well, the point of bankruptcy would be to discharge existing liabilities and start a clean slate. Having been denied that, there was little chance of recovery.

Anything about the costs of data centers? I've just assumed that the massive cost of data centers for AI was also a part of this.

How about the fluctuating energy uses of the cannabis industry?

If it's $20B to upgrade the transmission lines, how about building a bunch of generation close to the load instead?

Thank you so much for the write up, I will definitely check out the book. Did the book propose a solution (no such thing as perfect, but a best case way forward?)?

very nice post

The bottom line is that in a healthy society, essential public services shouldn't be operated with profit as a motive. Investors shouldn't even be a thing.

Our essential utilities should not be a trading commodity

CA need infra improvements and PG&E cannot do it. We need to pour public money and those infra built witl public money should be public asset, not PG&E's asset. So i support making PG&E state owned and we need to put efforts to improve our decades behind infra.

Wilson created the problem, Davis got blamed and hung out to dry the moment he was elected. He just did not have the ability to combat Enron’s recall campaign.

This underplays the amount of damage Regan was personally responsible for as governor.

Get solar. I've had solar for about ten years now. I haven't paid for power since. It's nice.