PG&E’s Settlement Won’t Fix Its Problems and Consumers Deserve Choices
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Commentary

PG&E’s Settlement Won’t Fix Its Problems and Consumers Deserve Choices

Routine power outages and rolling blackouts appear to be Californians’ new normal for at least another decade.

Pacific Gas & Electric is finalizing a $13.5 billion settlement that would go to individuals impacted by deadly fires in the state in recent years, including the Camp Fire in Paradise that killed 85 people. PG&E’s recent decisions to proactively create blackouts and shut off power to various parts of the state were an effort to avoid a repeat of its deadly mistakes. PG&E’s transmission infrastructure is so outdated that many fear it could cause more wildfires.  It turns out the median age of a PG&E transmission tower is 68 years old and some are over 100 years old.  The towers have a useful life of about 65 years.

As PG&E looks to emerge from Chapter 11 bankruptcy, there’s a lot of debate about what to do now. In response to the power shutdowns that had many people comparing California’s electricity infrastructure to that of a third-world country, Gov. Gavin Newsom may have threatened a state takeover of the utility, saying, “All options are on the table.”

Similarly, two dozen mayors, including those in San Jose, Sacramento, and Oakland, are recommending converting PG&E into a publicly-owned co-op. The plan would potentially put taxpayers on the hook for damages related to future fires caused by PG&E’s equipment.

PG&E CEO Bill Johnson recently admitted that it could take another decade for the utility to improve its grid enough that it no longer has to conduct power shutoffs to avoid causing wildfires. “I think this is probably a 10-year timeline to get to a point where it’s really ratcheted down significantly,” Johnson said of the blackouts.

Thus, routine power outages and rolling blackouts appear to be Californians’ new normal for at least another decade. Rather than accept this failing status quo, and instead of increasing taxpayers’ risk or government’s role in PG&E, California should give serious consideration to an entirely different model—competitive electricity markets.

The state’s regulated monopoly approach has failed, resulting in tragic deaths, massive property damage, not to mention some of the highest energy prices in the nation, and unreliable service.

Texas offers an interesting counterpoint.  In 1999, Texas launched an effort to bring competition and consumer choice to its electricity market.  Since that time, rates in its competitive market have declined by 31 percent and Texans now have access to some of the cheapest electricity in the country.  For comparison, according to the most recent data from the US Energy Information Administration, the price per kilowatt-hour across all sectors is $0.09 in Texas and $0.19 in California.

Additionally, as competition increased in its electricity market, Texas also became a leader in renewable energy. “Texas continues to dominate the nation’s wind energy production, adding far more generating capacity than any other state last year and having more installed wind power capacity than all but five countries in the world,” the Houston Chronicle reported last year.

California’s politicians and customers may still have bad memories from the disastrous results of the state’s last flirtation with energy deregulation in the early 2000s.  But that complex effort wasn’t deregulation— it only attempted to deregulate prices on the wholesale market while holding them fixed on the retail market.  It also prohibited retail providers from signing long-term purchase agreements with power producers to safeguard against price volatility. In short, the poorly designed system paved the way for market manipulation and the rolling blackouts and high prices that consumers faced at the time.

Since then, however, a dozen states have successfully implemented consumer choice into their electricity markets.  As a whole, they’ve fared well, cutting prices and expanding options for consumers.  Instead of accepting a decade of blackouts while PG&E struggles to modernize and improve its infrastructure, this is an opportune time for California to reconsider the direction of its electricity markets.  Californians deserve better than what they’re getting, and competition would deliver choices and alternatives to consumers.

This column originally appeared in the Orange County Register.

Geoffrey Lawrence is a senior policy fellow at Reason Foundation.