Chapter 11. PG&E has filed for chapter 11 reorganization. This is the second time in less than 20 years that one of the largest investor owned utilities, with a monopoly handed to them by the State, has filed for bankruptcy protection. The company listed $71billion in assets and $51billion in liabilities.
Newsom Reacts. “PG&E today filed for reorganization in federal bankruptcy court. That was PG&E’s choice but it does not change my focus, which remains protecting the best interests of the people of California. My administration will continue working to ensure that Californians have access to safe, reliable and affordable service, that victims and employees are treated fairly, and that California continues to make forward progress on our climate change goals.”
My View. The issues related to PG&E are multi-faceted. First and foremost is public safety, the operator of the grid in the service area needs to do everything possible in building and maintaining a safe grid while understanding the climate change reality that will make wildfires highly likely. Next come the consumers and residents in California. What should they expect from their utility in return for handing over the monopoly which is worth tens of billions of dollars. Given that the utility controls who has access to and the speed of access for things like renewables, what kind of partner is the grid to the consumers goals in fighting climate change? Last is the relationship between consumers that want choice in energy and the transmission portion of the utility. Given the 21st century technologies and options for consumers, is it time for a reset to the monopoly model?
Post Chapter 11. As outline in the chapter 11 filing, PG&E is filing for bankruptcy in anticipation of future liabilities from the 2018 wildfires. These liabilities are largely the difference between the insurance coverage and actual damages. In short, it seems that PG&E was underinsured for the potential risks it faced. This is where the regulators and Governor need to step in and represent the consumers. Some people that lost everything could find themselves being shorted on their damages because of the PG&E bankruptcy. This is the opening that the Governor need to fulfill both of his goals as he outline in the comment above. First, ensure access to reliable service that treats consumers fairly while ensuring progress towards climate change. Through the monopoly regulation, the government will have concurrent jurisdiction on the proceedings, and keep a seat at the table.
The Structure. In order to achieve the goals desired by the legislature, Governor and consumers, the integrated monopoly model needs to glide towards an end. Other states have done this through deregulation where the IOU is focused on building and maintaining the transmission grid. For the solar space it means that the utility would operate the highway that we seek access to and in some instances priority access to the grid both in front of and behind the meter. PG&E is already (basically) out of the generation business so this would be an easy part of the reform. Then PG&E would step out of the retail service business and competition would start at the consumer level, this is already happening with CCAs and could be increased. My last reform would be around the ownership of the utility itself. Given that any reorganization effort would require legislation that would indemnify the utility from wildfire risk, the utility can no longer be owned by 3rd party shareholders. If the ratepayers have to carry the risk they should reap the benefits of proper management. The model for this type of ownership is the cooperative, a successful model running across the Country. PG&E customers would own the grid and would be able to drive the priorities that align with their goals. Through CAISO’s leadership, the new PG&E would enable renewable and energy storage integration and provide retailers a stable market to provide great electricity services to customers.
But Be Real. Risk taking and changes aren’t going to come easy, the Governor is still moving in and the legislature is upset after having bailed PG&E out last year. No-one is in a rush to make changes tomorrow.
Solarcoaster. Cypress Creek is showing that PURPA solar is hard and is cutting the team by 20%. Some of this was evident from the plethora of bounced emails I got yesterday morning. If you were affected by layoffs and looking for help, please send me an email and I will connect with folks throughout the sector. We’re a solar family and I’ll do my part to help.
Supporting Net Metering. A presidential candidate, Elizabeth Warren, name checks net metering at a rally. This may not be the first candidate that understands the policy but it is the first to make a mention of the important policy that gives homeowners the ability to choose solar.
- CNBC: PG&E, owner of biggest US power utility, files for bankruptcy
- Bloomberg: States Give Solar Industry Leader Hope Amid Era of Uncertainty
- Axios: Trump country faces worst long-term climate change
- Greentech Media: Cypress Creek Issues Layoffs in Pivot to Growth Markets
- New York Times: Elizabeth Warren’s 2020 Strategy – Stand Out by ‘Nerding Out’
- Vox: The case for “conditional optimism” on climate change
- Utility Dive: Vermont regulators advance first of 3 Green Mountain Power solar-plus-storage projects
- Solar Power World: Tax professionals provide advice on maneuvering solar tariffs
Opinion
Have a great day!
Yann