David Griscom

Private Utilities Are A Racket

David Griscom
Private Utilities Are A Racket


The 2018 Campfire that ravaged California was likely caused, or at least made much worse, by the neglect of the largest utility company in the nation Pacific Gas & Electric (PG&E). The company has as much as admitted this when announcing a likely bankruptcy filing in January claiming they’re expecting to pay out $30 billion in litigation costs and damages. Earlier today, a group of hedge funds, including American billionaire Paul Singer’s Elliott Management, have proposed a $4 billion financing proposal to California’s PG&E, to avoid bankruptcy. This is not the first time the publicly traded company has been responsible for catastrophe. The 2017 wildfires too, were likely made worse by neglect by PG&E even though they were not found legally culpable, and in 2010 a gas pipeline exploded in San Bruno killing eight people. Recklessness is the companion of profit-seeking. The people of California are well-positioned to make the argument that PG&E be put under public-ownership to provide clean, efficient, and affordable energy to California.  

Over the past few decades of market fundamentalist euphoria, state and municipal governments promoted private utilities as a way to keep costs low and to increase efficiency. In the case of PG&E, the company is regulated by the government’s California Public Utilities Commission (PUC), who must approve any proposed rate increases. Otherwise, PG&E acts like a private company. As an investor-owned utility, it trades on the NYSE exchange and is focused on providing profit for itself and its shareholders. In neoliberal parlance ‘efficiency’ means one thing, profit. It’s investors have enjoyed 11.35 percent return on equity from 2007-2012 and 10.4 from 2013-present. The executives of PG&E enjoy six-figure salaries, not including their share of equity in the company. And in 2018 lobbyists raked in $10,550,000 in payments from the company.  Meanwhile, the people of California enjoyed “efficient” energy prices nearly twice the national average. In 2016 in their own findings they revealed that the cost of natural gas had gone down 36%, but they didn’t give these saving to the consumer, they rose gas prices along with electricity costs for consumers. Squeezing money from the people, to give to the rich, the kind of efficiency we can believe in.

But there is a problem when efficiency is measured by profit, which means lowering internal costs and increasing revenue. Not only is it rational from a profit-making perspective to raise prices on consumers, there is also an incentive to put off investment and repair. The people pay for this with their livelihoods, their homes, and in tragic cases their lives.

In 2010 a gas pipeline in San Bruno exploded. Eight people died, nearly 50 were injured and the flames destroyed over a hundred homes. Before the explosion residents complained of a gas smell, and even though the pipeline was put into place in 1948 PG&E neglected to act. PG&E knew people were at risk of disaster. As far back as 2007, internal documents listed the pipeline as a risk. They even got approval for a rate increase from PUC to replace it. But they used the money to pay executive salaries and shareholders. Because in capitalism profits are always more important than safety. When the costs of a private system lead to death and higher prices for consumers why shouldn’t the public demand its end?

We will wait for further investigation of Campfire before we speak definitively of PG&E culpability. But we do know that 15 minutes before the first fire was reported PG & E reported an “electric incident” and because they believe they are liable for an estimated $30 billion the company announced they will be filing for bankruptcy.

The solution in California and across the country is simple, there is no place for the profit-motive in delivering utilities to the people. It leads to higher prices, neglect, and in the worst cases death and destruction of the planet. How we power our society should be the most public of industries because the effects are always communal and will not be mitigated with individual choice.

The sycophants and the Right will complain. This is exactly what happens when you do not allow for competition, prices get higher and competition would be the solution. Well, in my home state of Texas, deregulated energy became the norm for much of the state in 1999. Immediately in the areas served by these competing interests, the price of electricity increased. But it would be unreasonable to expect the market forces to deliver benefits immediately. In capitalism, patience is no virtue and twenty years later, those in Texas who receive their electricity from the deregulated market pay higher prices than those who get their electricity from publicly owned and co-ops in Texas. I’ll put it simply, private utilities are a racket.

Political economy makes the problem of the profit motive in utilities much easier to understand. It’s basic capitalism really, to make a profit you need to charge more than what it takes to create, obtain, and deliver, energy to the community. The profit motive will always encourage higher prices, especially if it is tied to the never satisfied stock market. It is logical for any CEO of an energy company to want to increase usage (which kills our planet) and to increase profit, which means higher prices for less energy. The planet cannot sustain either of these inclinations and the people should not stand for it either. Given the destruction of our planet both through climate change and the neglect by these companies we need public ownership of all utilities. Public ownership with a commitment to pursue clean, renewable energy, and lower prices for the people who need it most. The first step will be to trim the fat and waste from our energy sources, capitalism.