Last week, State Senator Scott Wiener unveiled his plan to convert PG&E from an Investor Owned Utility to a ward of the state. Those paying close attention quickly noticed that Wiener’s plan bears striking similarities to another well-known Publicly Owned Utility (POU), the Long Island Power Authority in New York. Similar to LIPA, Weiner’s bill creates a Finance Authority to issue bonds, and two public entities to operate the utility.
LIPA started in the late 1980s as a state agency serving Long Island and the Rockaways portion of Queens. It had problems from the outset, and despite earnest attempts to fix them, they kept getting worse. By the mid-2000s, LIPA customers rates were the highest in New York state by 22% (and were some of the highest in the country). Management attempted to cut costs by limiting maintenance and reducing the workforce, which did not help.
According to news reports, a study from 2006 recommended that LIPA take several critical steps to harden its grid and update its emergency operations for storm response. The utility ignored it, failing to implement even the most basic, low-cost recommendations. Then Hurricane Irene hit in August of 2011, followed by another major winter storm later that year, exposing major issues with the utility’s power outage management system and its 25-year-old computer mainframe. In 2012, the state’s Department of Public Service issued a scathing report highlighting LIPA’s many failures related to Irene. Just a few months later, when Hurricane Sandy knocked out power for 82% of LIPA’s customers, many were left in the dark for two weeks or more — once again exposing the grievous lack of grid maintenance, as well as the system’s other shortcomings.
In 2013, the state tried to take over by enacting legislation to stabilize rates, and improve service and accountability. But they were not successful, and the New York Comptroller subsequently issued a report outlining these failures.
In 2014, after significant cost escalation, asset mismanagement and widespread reliability issues, LIPA was required to select a local Investor Owned Utility to manage its electric system. Since then, LIPA’s customer service has improved significantly, and large scale improvements have been made – for example, over 700 miles of distribution lines were rebuilt to improve reliability.
As Californians evaluating a path forward for PG&E, we face many unknowns. But one thing we know for sure is that LIPA’s structure failed, and following Scott Wiener down this path will lead us to failure – to dangerously unreliable power, to escalating costs, and then, finally, back around to where we stand now. It’s clear that LIPA’s POU management team and elected board were more concerned with spending money than they were with providing reliable and safe service. This is all too common among POUs, especially ones with high debt — and under Sen. Weiner’s proposal, a California state POU would likely incur debt of $80-$100 Billion from buying out PG&E’s assets.
As the head of the union that represents more than 12,000 frontline workers at PG&E, I can tell you that PG&E has many, many problems. It is far from perfect and real reforms are needed now. But conferring the company to state stewardship would be a serious mistake, and would undermine one of the few structural assets it has left.
I have an enormous amount of respect for our elected leaders and government, and believe there are some functions that only the government is truly equipped to handle. But I do not want the same bureaucrats who manage Hetch Hetchy and the Central Subway, with their infamous delays and budget overruns, taking on the additional responsibility of providing electric and gas service to 16 million Californians and businesses. PG&E’s investor-owned financial structure has been a source of strength and stability over two tumultuous decades – not a weakness.
The California legislature should vote down Sen. Weiner’s bill. We must learn the lessons of the past if we are to move forward. And lesson number one is not to do the same thing over and over while expecting a different result.
— Tom Dalzell, IBEW 1245 Business Manager