SAN JOSE, Calif. - Mayor Sam Liccardo, (D) San Jose, is garnering support for his proposal to have a customer-owned Pacific Gas & Electric. However, the real question facing customers is, will such a move send rates higher?
“The reality we all have to accept is that as rate payers, as customers, we are all on the hook for this. And if we’re on the hook, we better own it,” said Liccardo from an 18th-floor conference room at City Hall.
Thursday morning he announced 114 local leaders across most PG&E territories have signed on to a plan to put control in ratepayers hands. He also unveiled seven guiding principles that would govern the purchase of the bankrupt utility.
“At the root of all of this the need for tens of billions of dollars in investment in this grid. It has suffered from years from lack of maintenance,” said Liccardo.
Among the seven principals, the existing PG&E workforce labor contracts will remain in place. The new company will operate as though it is a public agency for greater transparency. In addition, the customer-owned utility will be able to invest more post-bankruptcy dollars into infrastructure.
“It looks like a serious effort to address the problems,” said Dr. Robert Chapman Wood, a business and strategic management professor at San Jose State University.
He said customer-owned utilities could be run better, or more poorly. Wood points to a worst-case scenario from New York— the Legacy and failure of the Long Island Lighting Company. “Lilco” as it was known, was private and went bankrupt two decades ago before being publically owned.
“When Superstorm Sandy came through, they were completely unprepared to take care of anybody. My mother lost power for two weeks and had to move to New Jersey,” said Wood, adding that the new Long Island public utility, the Long Island Power Authority, was forced to ask for help from PSE&G Electric, a privately controlled company, in the Garden State.
PG&E officials gave Liccardo’s latest salvo a cold reception. In a statement, officials said in part, “A government or customer takeover is not the optimal solution that will address the challenges and sever the long-run interests of all customers.” And, PG&E is, “…Committed to working with all stakeholders to make the necessary changes moving forward to build a stronger and safer PG&E.”
But the mayor is immoveable in his belief this utility has run out of chances, and customer’s faith.
“My residents want power that’s delivered safely and reliably. And that doesn’t cause fires. And doesn’t get shutdown without warning,” Liccardo said.
The mayor said state law doesn’t allow for a public take over, and that’s why it’s a customer or ratepayer takeover. The biggest obstacle to his plan is New York hedge fund companies who want to buy the failed utility for pennies on the dollar, and then turn a profit.
In the next couple of weeks, Liccardo said discussions with lending institutions will begin about a $50-to $60 billion buyout of PG&E.