PG&E is incentivized to spend more money on capex because the state guarantees a return on investment, a perverse incentive which causes them to make stupid money decisions to realize more profit. For example doubling the cost of energization by having a large proportion of it done by external contractors.
24% of PG&E's revenue (that is customer rate payments) goes to wildfire related costs.
Having watched CPUC in action, it's not quite a blank check, but damn close.
Utility comes in and says "we desperately need a rate hike to fund $X00 million" then CPUC gets them down to x-1 or x-2 and the whole thing could hav been avoided by better management from the start.
if pg&e was state owned (with good management, thats the hard part) it would operate at ~zero profit and pass through all savings to customers. that means rates as low as they can possible be at the current state of the grid and generation system.
most infra projects get taxpayer money through subsidies or partnerships anyway. taking it public would only kick out the investors with misaligned goals and replace them with fixed cost debt funding. you dont need to create incentives that hurt consumers when the state can invest directly.
PG&E is incentivized to spend more money on capex because the state guarantees a return on investment, a perverse incentive which causes them to make stupid money decisions to realize more profit. For example doubling the cost of energization by having a large proportion of it done by external contractors.
24% of PG&E's revenue (that is customer rate payments) goes to wildfire related costs.
The flip side of the incentive to spend more on capex is that rates are regulated by the PUC. So it’s not like the utilities get blank checks.
Having watched CPUC in action, it's not quite a blank check, but damn close.
Utility comes in and says "we desperately need a rate hike to fund $X00 million" then CPUC gets them down to x-1 or x-2 and the whole thing could hav been avoided by better management from the start.
if pg&e was state owned (with good management, thats the hard part) it would operate at ~zero profit and pass through all savings to customers. that means rates as low as they can possible be at the current state of the grid and generation system.
most infra projects get taxpayer money through subsidies or partnerships anyway. taking it public would only kick out the investors with misaligned goals and replace them with fixed cost debt funding. you dont need to create incentives that hurt consumers when the state can invest directly.
1 reply →
What exactly does their accounting say?