Charlie Eaton, THE SACRAMENTO BEE
As the lights went out across California this month, residents wondered if we will ever fix PG&E — the nation’s largest for-profit electric utility.
Some predictably joked that we should simply unleash the power of that mythical institution, which some economists still refer to as the “free market.” But PG&E’s latest failure illustrates that markets — and how well they work for consumers — always depend on state regulation. For this reason, California must use the crisis to deeply reform its utility regulations.
A critical regulatory choice for any market is the allowed forms of ownership for organizations that sell goods in the market. California’s courts, lawmakers and regulators are confronting this very issue as PG&E seeks to emerge from a bankruptcy that stems from its responsibility for recent wildfire catastrophes. The specific questions are: Who will own PG&E? How much control will regulators give them? And how much profit can owners extract from the utility?
Any changes to PG&E’s ownership will have big consequences for consumers and communities as California tries to transition to a carbon-neutral power grid. So, policymakers should take into consideration the latest social science on how the form of ownership will affect both consumers and society.
The first big lesson from recent research is about who should not be allowed to own PG&E – namely Wall Street. Gov. Gavin Newsom and other policy players should take every step necessary to block a consortium of 24 private equity and hedge funds that are currently attempting a hostile takeover of PG&E. Why?
The interests and track record of the investors trying to take over PG&E speak for themselves. These types of funds explicitly seek to extract windfall profits from the companies they acquire, with little concern for the long-term economic viability or social importance of the company. It is telling that PG&E’s largest current group of shareholders are Abrams Capital, Knighthead Capital and Redwood Capital — a rival alliance of hedge funds that is trying to maintain control after running PG&E into the ground just 17 years since the company’s last bankruptcy.
Private equity and hedge fund ownership is especially pernicious in sectors with large public subsidies and little competition. For example, my colleagues and I show in a forthcoming article for the Review of Financial Studies that investor ownership has had dire consequences in the for-profit college sector. When federally subsidized for-profit colleges are owned by outside investors, we find that they are more likely to increase student loan debt, cut faculty-student ratios and engage in fraudulent recruitment.
Read more here: https://www.sacbee.com/opinion/california-forum/article236541993.html#storylink=cpy
Lizzie Johnson, SFGATE
PG&E and other big utilities also proposed cutting the amount of compensation that solar homeowners receive for excess electricity that they export to the grid.
The California Public Utilities Commission voted Thursday to allow a nearly 100 percent price increase on exit fees for customers leaving Pacific Gas and Electric Co. for green energy programs like CleanPowerSF and Marin Clean Energy, which will make those and similar programs more expensive.
Many of the programs — where local governments buy green electricity for their residents, while private utilities own and operate the electrical grid — will be undermined financially by the uptick in the charge, called the Power Charge Indifference Adjustment, their officials say.
“We are not surprised that the increase was approved,” said Marin Clean Energy spokeswoman Alexandra McCroskey. “We are disappointed. Our primary frustrations come from the fact that we are becoming almost liable for the market fluctuations for both ourselves and PG&E. If PG&E isn’t planning appropriately for people leaving for community choice aggregation programs, the PCIA will continue to increase. It’s poor planning.”
Read more at: Customers of clean energy programs hit with fee increase – SFGate
Mark Leno & Francesca Vietor, SAN FRANCISCO CHRONICLE
No one disputes that an exit fee paid to utilities, if appropriately administered, can be a fair way to equitably reimburse existing electric customers when others leave for cleaner energy from programs such as Marin Clean Energy, Sonoma Clean Power, or forthcoming programs such as CleanPowerSF or Peninsula Clean Energy.
What is at issue is why the California Public Utilities Commission is not asking questions expected of an oversight body or engaging in a transparent public process in this important decision. We request that the state commission reject the PG&E proposal to double the exit fee when it votes on Thursday until the commissioners can audit PG&E’s proposed rate increase and revisit the fairness of the calculation of the fee, known as the Power Charge Indifference Adjustment.
Until that audit and public discourse has taken place, we propose that the commission temporarily cap any such increases requested by the utility. The commission should then convene a series of public workshops and attempt to create a fair and balanced process that provides equity for customers who choose to remain with PG&E and for those who choose a cleaner future through community choice aggregation programs.
If PG&E’s proposed increase to $13 from $6.70 a month is approved, it would stifle efforts of California cities to receive cleaner electricity and disproportionately charge higher fees to the poorest households. California cities and counties, energy advocates and environmental organizations are demanding that the commission enforce its own rate-making rules by taking the time to properly audit and discuss PG&E’s rate proposal.
Read more at: PG&E’s huge profit from exit fee signals need for reform