How many PG&E shareholders were forced from their homes as wildfires were about to reduce possessions and lifetimes of memories to ash? Owners of small businesses without power whose customer lifeblood evaporated? Those without power for oxygen machines and refrigeration to preserve medications? Those on fixed incomes whose sparse food supplies rotted? Ratepayers now without homes waited with the tenuous hope that they might receive some compensation from their utility provider?
Virtually none: institutional investors (71.71%) and mutual funds (18.12%) largely domiciled outside California own 89.83% of PG&E’s shares -- individual shareholders just 0.52% (CNN).
California wildfires have killed more than 100 people, destroyed 20,000 structures, burned 330,000 acres in the last three years, and profoundly disrupted of the lives of millions (The Economist). In this context, Richard Kelly, PG&E’s chairman of the board, memorialized the company’s primary management value: “Bankruptcy is the only viable option to address the company’s responsibility to its shareholders (WSJ).”
California Governor Newsom set a deadline of June 2020 for PG&E to repair and/or replace elements of its electrical grid that is illusory because of structural impediments to the ability of PG&E to take the steps demanded to reduce and eliminate wildfires caused by its equipment.
One hundred thousand people living in Northern California are considered creditors in PG&E’s bankruptcy predictably giving rise to costly legal defenses that will hinder decision-making and reduce funds available for both damages and critical repairs. Evidence of this impediment is the state forcing PG&E to extend the deadline for applications for compensation to Dec. 31.
California law mandates that PG&E have 50% of its power system converted to renewable energy by 2025 and it has entered contracts to satisfy the requirement. Bankruptcy places these contracts in jeopardy and may result in lawsuits the cost of which is born by ratepayers (The Economist).
PG&E claims it will take a decade to eliminate outages in a state with a fire season 75 days longer than it was four decades ago; which is assailed by droughts; possesses flora de-moisturized by a 3-degree increase in annual temperature, and 120 million dead trees.
The structural delay in the elimination of PG&E generated wildfires is under peril because the state-mandated mutual fire aid computer program (Resource Ordering and Status System [ROSS]) is antiquated and better designed for logging pay and hours than rapidly shifting fire resources across multiple counties (L.A. Times).
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Fire Commanders say ROSS hinders getting to the scene of a fire quickly; the farther away the requests for resources goes, the less likely they are to receive a full order and the longer it will take firefighters to arrive. Crews are now deployed for fires can be away for weeks at a time resulting in a decline of volunteer firefighters. The multiplicity of catastrophic fires with extended control periods has compelled an increasing number of mutual aid fire departments to withhold personnel and equipment to ensure protection for their communities. (L.A. Times).
PG&E prioritization of needs and actions remains skewed towards its institutional absentee shareholders who derive income from Northern California’s ratepayers that should have been long dedicated to upgrading and replacing the power grid, but instead, has left millions of Californians in perpetual physical and economic jeopardy.
The tug-of-war between ratepayers and utility management can be solved through the issuance of one half trillion dollars in state bonds underwritten by nearly 40 million Californian citizens overseen by a Special Master State Board to affect not only power grid replacement and repairs through the financial take-over of shareholder-owned utilities, but vital repairs to California’s crumbling infrastructure.
California is the fifth largest economy in the world whose future remains not only under threat of wildfires, but the collapse of Central Valley levies and thus America’s fruit, vegetable, nut, and rice basket; antiquated harbors; necessary road repairs, improvements, and additions; dam restoration and replacement, and upgrades to and replacement of public buildings including schools and prisons, and satisfying financial shortfalls in public pensions.
Despite widespread agreement that for the United States to maintain its position as the largest economy and dominant political force in the world, it needs to immediately improve and restore its infrastructure (a 20% negative drag on productivity), only isolated improvements have manifested because of the lack of political will and poisoning of elemental partisan compromise often because of opinion-controlled news delivery and social media trolling by both domestic and foreign players.
The citizens of California can exercise decisive and inspirational decision-making to provide a durable foundation for future development and growth and the attendant well being of its citizens by the issuance of state bonds for comprehensive infrastructure improvement. What on earth are we waiting for -- its demise?
John D. Murphy