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> Maybe this just a California being California issue again. California is a high fire risk state regardless of whether the utility is publicly owned or invest

by danans 7y ago

> Maybe this just a California being California issue again. California is a high fire risk state regardless of whether the utility is publicly owned or investor (aka privately) owned. The risk is on a level that doesn't occur in many other states. If the costs of fires are going to be socialized anyways (by immunizing utility from the liability, hence putting the burden on the ratepayers), the question of whether the utility should be publicly owned in order to reduce the obligation to shareholders is a valid one. Either that or PGE will have to dramatically increase it's expenditures on maintenance to reduce the fire risk, which will have to come from shareholders' and ratepayers' pockets (the latter of which is not permitted under current PUC rules, IIUC).

BurningFrog 7y ago
> ...or PGE will have to [...] which is not permitted under current PUC rules Sounds a lot like California being California to me...
- Dylan16807 7y ago
  Your "[...]" skips over the option where they have smaller immediate profits in exchange for securing the future of the company. Is that a bad option for some reason?
  - deleted 7y ago
    [deleted]
  - AnthonyMouse 7y ago
    A company selling shares to raise capital is an alternative to other methods of raising capital, like taking out a loan. Asking why they don't just make smaller profits is like asking why they don't just pay a lower interest rate on their loans. It presumes that someone exists who is willing to lend them the money at the lower rate of return. Companies have the option of shutting down operations and selling off their assets. PG&E presumably has a fleet of trucks and equipment, land rights etc., which were paid for with investors' money. If their profits fall below the level that could be achieved by selling off those assets and then investing the money at the market rate of return, it becomes profitable for raiders to come in and buy the company and do that with it, so the company has to stay more profitable than that in order to prevent that from happening.
    - Dylan16807 7y ago
      > A company selling shares to raise capital is an alternative to other methods of raising capital, like taking out a loan. Not selling shares. Having smaller dividends. That doesn't assume anyone is willing to loan them money. > If their profits fall below the level that could be achieved by selling off those assets and then investing the money at the market rate of return, it becomes profitable for raiders to come in and buy the company and do that with it, so the company has to stay more profitable than that in order to prevent that from happening. Ugh. I'm not sure via what mechanism, exactly, but it should not be possible for a monopoly power company to just dissolve and sell off the trucks for a tiny quick profit.
      - ncmncm 7y ago
        Yes. The State should confiscate their assets and sell them to somebody willing to meet the obligations of a Public Utility. Lots of companies do, and make tidy, predictable profits.
      - AnthonyMouse 7y ago
        > Not selling shares. Having smaller dividends. That doesn't assume anyone is willing to loan them money. They already sold the shares and used the money to buy trucks and stuff. The dividends are effectively the interest on that money. Suppose (made up numbers) that they have ten billion dollars in assets, but a twelve billion dollar market cap because of the expectation that those assets will be used to make future profits. Now you say "just make smaller profits" which means their market cap falls to eight billion dollars because of the expectation of smaller dividends. Someone on Wall St then notices that they can make two billion dollars by buying them for eight billion and selling their assets for ten. > I'm not sure via what mechanism, exactly, but it should not be possible for a monopoly power company to just dissolve and sell off the trucks for a tiny quick profit. The government always has the option to be the buyer itself, or find one that wants to continue operating as a power company. But then it either has to raise its own capital or bring about a regulatory environment that allows a private company to meet the market rate of return and thereby raise a sufficient amount of private capital.
deleted 7y ago
[deleted]

by danans 7y ago

BurningFrog 7y ago

> ...or PGE will have to [...] which is not permitted under current PUC rules Sounds a lot like California being California to me...

Dylan16807 7y ago
Your "[...]" skips over the option where they have smaller immediate profits in exchange for securing the future of the company. Is that a bad option for some reason?
- deleted 7y ago
  [deleted]
- AnthonyMouse 7y ago
  A company selling shares to raise capital is an alternative to other methods of raising capital, like taking out a loan. Asking why they don't just make smaller profits is like asking why they don't just pay a lower interest rate on their loans. It presumes that someone exists who is willing to lend them the money at the lower rate of return. Companies have the option of shutting down operations and selling off their assets. PG&E presumably has a fleet of trucks and equipment, land rights etc., which were paid for with investors' money. If their profits fall below the level that could be achieved by selling off those assets and then investing the money at the market rate of return, it becomes profitable for raiders to come in and buy the company and do that with it, so the company has to stay more profitable than that in order to prevent that from happening.
  - Dylan16807 7y ago
    > A company selling shares to raise capital is an alternative to other methods of raising capital, like taking out a loan. Not selling shares. Having smaller dividends. That doesn't assume anyone is willing to loan them money. > If their profits fall below the level that could be achieved by selling off those assets and then investing the money at the market rate of return, it becomes profitable for raiders to come in and buy the company and do that with it, so the company has to stay more profitable than that in order to prevent that from happening. Ugh. I'm not sure via what mechanism, exactly, but it should not be possible for a monopoly power company to just dissolve and sell off the trucks for a tiny quick profit.
    - ncmncm 7y ago
      Yes. The State should confiscate their assets and sell them to somebody willing to meet the obligations of a Public Utility. Lots of companies do, and make tidy, predictable profits.
    - AnthonyMouse 7y ago
      > Not selling shares. Having smaller dividends. That doesn't assume anyone is willing to loan them money. They already sold the shares and used the money to buy trucks and stuff. The dividends are effectively the interest on that money. Suppose (made up numbers) that they have ten billion dollars in assets, but a twelve billion dollar market cap because of the expectation that those assets will be used to make future profits. Now you say "just make smaller profits" which means their market cap falls to eight billion dollars because of the expectation of smaller dividends. Someone on Wall St then notices that they can make two billion dollars by buying them for eight billion and selling their assets for ten. > I'm not sure via what mechanism, exactly, but it should not be possible for a monopoly power company to just dissolve and sell off the trucks for a tiny quick profit. The government always has the option to be the buyer itself, or find one that wants to continue operating as a power company. But then it either has to raise its own capital or bring about a regulatory environment that allows a private company to meet the market rate of return and thereby raise a sufficient amount of private capital.

deleted 7y ago

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