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Cities can cost effectively start their own utilities

420 points by kevinburke 2y ago

deleted 2y ago
[deleted]
rangestransform 2y ago
Can the CA govt just impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free?
- kevinburke 2y ago
  PG&E already went bankrupt recently, and taking over the whole state wouldn't really help very much. The problem is largely liability rules that make it very expensive to provide power to wildfire zones and rural areas. PG&E and the state have decided to pay for that by charging people who live in cities very high rates for electricity. It's perverse that people who live in safe, urban areas are subsidizing people who live in wildfire zones. The savings come largely from not doing that anymore.
  - CobaltFire 2y ago
    I bang this drum all the time, but you are the first other person I've seen state it online. If we stop subsidizing the foothills by creating urban utility districts it would solve the PG&E problem. We would have a new problem of causing a ton of people to be unable to continue living in those areas without some kind of off-grid program. Long term I think this is the only sane way forward though.
    - thatguy0900 2y ago
      Long term I don't see how it's possible to continue to let people live in areas so fire prone that insurance cannot be done, it seems to me. Unless you want to live in a concrete castle or something
      - mindslight 2y ago
        Construction itself isn't that expensive. It's certainly possible to self insure and accept that living in an area prone to fires means your house might burn down. It goes against the prevailing culture of the ever-growing housing bubble, but financialization has to hit its limits some time.
        mauvehaus 2y ago
        Self-insuring is probably not going to fly with your mortgage lender. If nobody can get a mortgage, and everyone has to self-insure, it's going to 1) drive down housing prices (fewer cash buyers) and 2) guarantee that only people of pretty substantial means can afford to live there (even with lower prices, most people can't come up with a cash payment for a house).
        coryrc 2y ago
        If prices were sane, anybody who bought a house ten years ago currently has enough equity to pay cash.
        mindslight 2y ago
        I did acknowledge it would go against housing bubble culture. It certainly wouldn't be a financially prudent way of obtaining primary shelter, but rather for vacation homes or whatnot. We're mostly talking about rural properties in the woods, right?
        deleted 2y ago
        [deleted]
      - trinsic2 2y ago
        You mean like a brick building? like how structures were originally built? Seems like a good idea to me for house to be made of stone in high fire related areas. Obviously the cost would be astronomical.
        arrosenberg 2y ago
    - abeppu 2y ago
      > We would have a new problem of causing a ton of people to be unable to continue living in those areas without some kind of off-grid program. But people in those areas are likely to be able to benefit from solar, so maybe being "off the grid" in the sense of not having long runs of power lines surrounded by trees to your house in the country is reasonable, and perhaps also cheaper for those rural residents anyway?
    - marssaxman 2y ago
      > a ton of people to be unable to continue living in those areas That sounds like more of a solution than a problem: those places are going to burn, so it's better that people stop living there.
      - UncleEntity 2y ago
        Ironically, if they just let them naturally burn in the first place there wouldn't be even a fraction of damage caused by these modern wildfires.
        Qwertious 2y ago
        IIRC it's a funding problem - controlled burns require a ton of manpower to control, and the longer since the last burn, the harder it is to control.
  - amluto 2y ago
    This whole model is nonsensical, though. Averaging costs among customers doesn’t give anyone the right incentives: - Urban customers should have an incentive to use electricity over gas, which they would if rates were reasonable. - Urban customers should not pay per kWh even if one thinks they should subsidize rural customers. It should be some kind of tax with reasonable allocation. - Undercharging rural customers for provision of service and overcharging per kWh messes up incentives, too. If suburban or rural communities faced the actual cost of transmission to their area and distribution within it, they could make real decisions, for example: # Technologies exist to reduce the risk that a power line fault starts a fire. Search for “ground fault neutralizer” or “REFCL.” Similarly common reclosers take a very YOLO approach to deal with a faulted line, and other approaches exist. PG&E, of course, doesn’t want to use these because the ridiculous CPUC rules let them make more profit by spending more money trimming trees. # Communities could maintain their own lines and have actual locally enforced codes about vegetation. # Communities could install batteries at their end of transmission lines to help ride through public safety power shutdowns and to level out their own loads. And they could even build small wind turbines optimized for operation in high winds (which are rather strongly correlated with those shutdowns) to generate a few MW and keep those batteries charged. Heck, this could be automated: de-energize the line when the wind is high automatically, and there won’t even be a substantial inrush when re-energizing when the wind stops because the batteries can reduce load to zero. # A community could decide the cost isn’t worth it and build its own mini grid. This might spur interesting investment into things like small modular reactors :) - The ownership and regulatory structure right now sucks, amplifying all the problems above and the lack of real solutions.
  - ahmeneeroe-v2 2y ago
    I am 90% in agreement with you. I do think that you should consider how rural/suburban areas have all of the generation and transmission which the cities rely on for their power. It's not exactly fair to treat those rural residents as burdens to the urban areas when they provide the means for the urban areas to exist.
    - janalsncm 2y ago
      > they provide the means for the urban areas to exist Unless you’re referring to farmers I don’t understand this point. As of right now it is the other way around.
      - ahmeneeroe-v2 2y ago
        No. Build the generation for urban areas within those same urban areas.
    - avidiax 2y ago
      > It's not exactly fair to treat those rural residents as burdens to the urban areas when they provide the means for the urban areas to exist. There's a difference between people that are in farming/ranching and industry vs. people that are rural to afford a more lavish home in the woods or on the hills. Even still, a system that doesn't appropriately price and apportion risk will always be under pressure.
      - ahmeneeroe-v2 2y ago
        >a system that doesn't appropriately price and apportion risk will always be under pressure Very well stated, I am stealing this. Also in agreement with rural resource types vs rich rural. Again I think it is more complex than just apportioning power costs. CA effectively has a state policy of not maintaining its forest/rural land (ditto feds and their land). My parents live adjacent to national forest and have fire evacuations nearly every year. There is nothing that the rural residents in their area can do to mitigate risk, even at their own cost. So we're asking them to bear the cost of the state/fed policy decisions. This is exactly the problem you describe of inappropriate price/risk apportionment.
- rufus_foreman 2y ago
  >> Can the CA govt just impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free I don't think so. Not currently. "nor shall private property be taken for public use, without just compensation" That's federal law. Supposedly, that applies to the states through the Fourteenth Amendment. All of the sudden, once the Fourteenth Amendment is passed, the Constitution applies to state governments, not just the federal government. So if that's the case, no. You can't just "scoop up the assets for free" because you can't take private property for public use without compensation. I'm kinda a little bit suspicious that it makes sense to interpret the Fourteenth Amendment that way. Sounds like a power grab. If you want to try and turn that around, I know just the guys to do it.
  - rangestransform 2y ago
    It’s not unconstitutional to make utilities liable for fires that their power lines ignite, and it won’t be a taking without just compensation if the actual value of the company drops below zero
    - rufus_foreman 2y ago
      >> It’s not unconstitutional to make utilities liable for fires that their power lines ignite That's not the question under consideration. The question under consideration is if it constitutional for the government to "impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free". Under my understanding of the law, no you can't do that, due to the takings clause and it's incorporation under the 14th amendment. I think the law should be different, I don't agree with incorporation doctrine. But I still don't think the government should impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free. Hopefully that clears everything up for you.
- bobthepanda 2y ago
  This is generally a horrible idea. This is how public transit companies were generally acquired, but on the way to bankruptcy firms would defer maintenance to stave it off, which led to the sorry state of most mass transit systems today.
- refurb 2y ago
  Absolutely, barring the company bringing them to court for violating the "taking withouy compensation". But what people forget is that the CA state doesn't want PG&E. The state already exerts significant control over PG&E operations through the CPUC (members nominated by Gavin Newsom). CPUC approves/rejects all capital spending down to new fences for electrical substations. You can read about all the decisions in the 931 page rate decision, which is public. https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M520/K896/520896345.pdf https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M520/K... But what about executive compensation? Well, a separate CA state agency approves that as well. https://energysafety.ca.gov/what-we-do/electrical-infrastructure-safety/wildfire-mitigation-and-safety/executive-compensation/ https://energysafety.ca.gov/what-we-do/electrical-infrastruc... So at this point the CA state government basically runs PG&E. But if they purchased it, they'd be exposing themselves to all the political risk when things go bad. But right now, they get political air cover. Despite the tight level of control over how PG&E is run, the CA state government gets none of the blowback. It's the optimal setup from a political perspective.
tristanb 2y ago
I am so sick of PG&E - our energy bills are nearly $1,000/mo. It's absolutely bonkers.
- ahmeneeroe-v2 2y ago
  Look at your power bill. Half of your kWh cost is taxes to the State of California. You could literally have half the power bill tomorrow if CA would stop taxing it.
  - hypothesis 2y ago
    No can do, they are going to start taxing (hard to call that billing at that point) you based on your income. At least that was the plan last summer or so.
    - kevinburke 2y ago
      All utilities have usage based costs and large fixed costs. Historically, all utilities have charged solely on usage. The problem is when you have solar, or solar + battery, your usage goes way down. Unfortunately the grid still needs to be maintained and power plants at peak times (maybe a bit lower, but still high) still need to be paid for. With usage based bills, people with solar pay less than their fair share for the maintenance component of a utility's cost, which means that this cost is larger for the other rate payers. On top of this California has huge subsidies to early rooftop solar adopters. This structure hurts lower income people more since lower income people are more likely to rent and apartments don't have as much space for / not as interested in rooftop solar. So the CPUC started exploring different models for adding a bigger fixed charge to the bill and lowering the per-kwh cost. Of course the rooftop solar installers hated this as did the different "equity groups." Which is where you got the idea to adjust the fixed charge based on income. I don't think it's a great idea but I at least understand where the CPUC is coming from. We probably need more innovation in utility pricing models.
      - hypothesis 2y ago
abeppu 2y ago
The author mentions the cost of buying out the distribution network, and cites SF's failed attempt to do this. The author tries to figure out the price for Walnut Creek's grid based on inflation and population -- but the $2.5B figure this is based off was rejected by PG&E. The messed up thing is PG&E as a monopoly can set the price wherever they like -- and they can demand substantial continuing payments to connect to the grid so long as they retain it. > PG&E continues to demand huge payments on routine power grid connections. For example, the cost to comply with PG&E’s latest requirements for the City to use public power to connect streetlights, traffic signals and other small loads would exceed $1 billion. https://www.publicpowersf.org/en/faq https://www.publicpowersf.org/en/faq I think either we need the political will to use eminent domain to take the grid back (i.e. set the price through a legal proceeding), or we'd need to build a duplicate distribution grid and then abandon PG&E.
- kevinburke 2y ago
  Yes, the fact that PG&E rejected the offer is why I adjusted the figure for Walnut Creek's population and then increased it by 50%. The fact is muni borrowing is cheap - even if PG&E charged $1 billion we could finance that for about six cents per kilowatt hour. I don't think the CPUC will let them get away with "we won't sell at any price" - I think the regulators would force them to sell at some price.
  - abeppu 2y ago
    > I don't think the CPUC will let them get away with "we won't sell at any price" - I think the regulators would force them to sell at some price. Has the CPUC forced such a sale before? Functionally, if PG&E can just safely gauge what's likely to be out of reach for each city, they can name a price detached from reality and be confident of maintaining their stranglehold.
  - brian-armstrong 2y ago
    PG&E surely knows that if it lets one city do this, then more will follow quickly. It will be left with the least profitable regions and cities that can't afford to/don't have the credit for this transition. That would ultimately leave the remaining customers in an even less affordable position.
xrd 2y ago
These formerly "public utilities" are now often owned by PE or Berkshire Hathaway. Whenever I see the folky wisdom of Charlie Munger or Warren Buffer posted on HN, I can't help but think about their firm's work in transforming State Farm insurance, GEICO and this gem I posted earlier today on HN: "PacifiCorp Was Grossly Negligent in Oregon’s 2020 Wildfires. Now It’s Asking Lawmakers for Protection." https://news.ycombinator.com/item?id=42971311 https://news.ycombinator.com/item?id=42971311 Because of regulation, they can gouge consumers who are captive to the damage, literally and financially.
- 1970-01-01 2y ago
  >>they are also undertaking a massive project to underground utility lines in fire-prone areas. Seems like they're actively trying to fix it.
  - xrd 2y ago
    I'm glad you stated that. It certainly wasn't my takeaway of the way they handled it, however. By my reading it seems like the local officials begged them to turn off the lines when they saw what was coming. And, that the executives at the utility didn't take action and then denied that this meeting occurred seems damning to the people who lost everything.
- lotsofpulp 2y ago
  I don’t see anything in State Farm’s history that indicates Berkshire Hathaway had anything to do with the company. It has always been a mutual insurance company, owned by its policyholders.
  - xrd 2y ago
    You are right. I'm confusing State Farm with Allstate, via McKinsey (I'm reading the book "When McKinsey comes to town"). Berkshire Hathaway owns Geico and has taken a similar path, however. But, this Oregon utility has BH ownership.
- dragonwriter 2y ago
atlas_hugged 2y ago
Same thing is likely true in SoCal. The city of Azusa,CA has their own, non-Edison utility, and their rates are 1/3rd of the Edison rates in the towns around them.
- mmooss 2y ago
  Could Azusa sell power to the town around them?
drewda 2y ago
Interesting analysis. Sounds like an argument for ABAG to expand its energy related services into a full utility (at least on the electricity side): https://abag.ca.gov/our-work/energy-infrastructure https://abag.ca.gov/our-work/energy-infrastructure
Aurornis 2y ago
The author estimates that electricity prices would be reduced by up to 33% (from $0.45 blended rate to $0.30), but PG&E’s profit margins are only 11%. That’s a good hint that this hypothetical is missing some important details The article hedges against someone pointing this out by admitting that Walnut Creek is an unusually optimistic location and that PG&E is also recognizing large expenses related to ongoing infrastructure buildouts, but no solutions are offered for these caveats. The hidden problem with projects like this is that once you roll these utilities into the city’s budget it’s too tempting to start dipping into taxpayer funds for needed improvements rather than raising electricity rates. When problems arise, politicians try to kick it down the road so it becomes their successor’s problem, or they try to offload the expense onto a growing debt load because that delays the problem to the next generation. It becomes easier to keep the highly visible rate down, but taxes might go up to cover the infrastructure costs instead. So I’m skeptical. If there was an analysis that showed a drop in rates that was not 3X higher than the profit margins of the private utility I’d be more open to the idea, but as presented this feels like back of the envelope math that generates savings by ignoring all the details that didn’t make their way onto the envelope.
- colechristensen 2y ago
  >The author estimates that electricity prices would be reduced by up to 33% (from $0.45 blended rate to $0.30), but PG&E’s profit margins are only 11%. That’s a good hint that this hypothetical is missing some important details PG&E customers are paying very large amounts for the consequences of bad infrastructure causing wildfires and other legal costs which are being paid for with higher rates. Example: https://www.ewg.org/news-insights/news-release/2022/12/pge-asks-california-regulators-recover-136b-ratepayers-cost https://www.ewg.org/news-insights/news-release/2022/12/pge-a...
  - Aurornis 2y ago
    Right, but that’s my point: You can’t assume these costs disappear if the government takes over. They just get blended into the tax bill.
bitmasher9 2y ago
This is absolutely a no-brainer for municipalities. The private companies are charging a premium that they return to shareholders and give to executives. Municipalities have excellent access to credit at rates significantly lower than the premium charged by utility companies. The residents get cheaper access and more influence in how the utility is ran. The number of people that pay for-profit companies for natural gas (heat), electricity, and water in North America is absolutely bonkers. There is a specific concern about foreign corporations purchasing water rights in the American west.
- AnotherGoodName 2y ago
  Yep you literally get half price power if your city does it - https://www.cityofpaloalto.org/files/assets/public/v/5/utilities/rates-schedules-for-utilities/residential-utility-rates/e-1-effective-2024-07-01.pdf https://www.cityofpaloalto.org/files/assets/public/v/5/utili... I’m lucky enough to be in such an area. Note the city takes a bit of the above as profit too. Not that that’s a bad thing but it just goes to show how beneficial it is and how much more you’re paying by not doing it. Every city should do it asap.
  - xienze 2y ago
    Yeah it might be easy for municipal electricity to win on price when the bar is set at $0.42/kWh. Out here our evil private company is charging $0.11/kWh. I have serious doubts any municipality anywhere could deliver power for half that.
    - pwrson 2y ago
      Cleveland Public Power rates online are <$0.10/kWh in the summer and <$0.05/kWh in the winter.
    - bitmasher9 2y ago
      I’m not sure where “out here” is, but $0.11/kWh is not the national low for municipal power costs.
- 2y ago
shawndrost 2y ago
+1 to this analysis. Urban ratepayers in CA subsidize rural and fire-prone ratepayers. (Utility rates are a stealth tax. Same story as home insurance.) The fight is ultimately political and not as one-sided as you might think. The broad regulator and politician view is that the subsidies are valid, and if the cities all leave the grid, the subsidies will wind up on the state's balance sheet. Nobody wants to see rural de-electrification. Utilities have a lot of sway with politicians for corrupt and non-corrupt reasons.
jmyeet 2y ago
It never ceases to amaze me how often people will make socialist economic arguments (that are objectively correct) yet eschew the label "socialism". An enterprise, like providing a utility, has revenues and it has costs. The difference between the two can be called the "surplus labor value". What happens to that depends on the economic system. In capitalism, capital owners own that enterprise (utility) and they siphon off profits raising the costs. Put another way, capital owners own the means of production, not the residents of the city or the city itself. This is rent-seeking behavior. In a socialist organization of the economy, the residents either directly or through the city itself, would own the utility. Any profits would go back into the utility or be extra revenue for the city but there's really no incentive to increase prices on the citizens who own the utility (unlike the unquenchable thirst for increasing profits for capital owners). I have to constantly point out that capitalism isn't markets (market existed thousands of years before it and exist in every economic system). Capitalism simply supplanted feudalism by replacing kings with billionaires. That's it. We have abundant examples of how the latter is a substantially better system. Just compare EPB Internet (Chattanooga, TN and surrounds) vs Verizon, AT&T, Comcast or Spectrum. Municipal broadband, without exception, is substantially better than any national ISP. The only thing that keeps national ISPs in business is more rent-seeking behavior such as lobbying for legislation to ban municipal broadband. Given this is the Superbowl weekend, it's worth adding that the Packers are owned by Green Bay (an arrangement the NFL now bans for any other franchise). What do we see in other cities? Teams extorating massive tax breaks from cities, counties and states to build massive stadiums at taxpayer expense without the team having to give up anything. The KC Chiefs are rumbling about leaving because the city didn't pass a sales tax increase to pay for upgrades to Arrowhead Stadium. I don't know why anyone is surprised by any of this anymore.
- mmooss 2y ago
  Do you think public ownership would have yielded the development of modern IT, for example?
  - jmyeet 2y ago
    The Internet was quite literally a government invention. Google was invented at Stanford. Linux was created by a volunteer who organized on Usenet.
jcarrano 2y ago
If PG&E could be undercut by 25%, then why are there no private companies doing it? Either it is not as profitable as the author claims, or PG&E's monopoly is due to state regulations (I don't know enough about the specifics) and it would be quite contradictory to demand the state solve the problems it created. Overall it reads like any other socialist argument for nationalizing (in this case "municipalizing") companies, which does not work both on theoretical grounds and based on historical experience. The claim "Walnut Creek could borrow from its utility in recessions, and loan money during booms" is laughable. We know how that ends: the city would finance its deficits with utility money until the company is bankrupt.
- aquaticsunset 2y ago
  Municipal utilities exist everywhere. I'm not sure why you're being all hypothetical about it. They work well and for many reasons discussed here, sound like a good fit for Walnut Creek.
payne92 2y ago
> It costs a lot of money to deliver power to rural customers Utilities (generally) have a universal service obligation. If someone can cherry-pick just the denser areas with lower distribution costs, of course they could "undercut" the utility with the requirement to serve everyone. (I'm not saying that PG&E couldn't be better managed. I'm saying that there's a much, much deeper policy issue at stake here.)
- llamaimperative 2y ago
  Land Value Tax solves this
  - aqueueaqueue 2y ago
    How so?
    - llamaimperative 2y ago
      It incentivizes greater development of already-developed land (meaning less infrastructure serving more people) rather than acquisition and low-yield development of new (more rural) land.
      - deleted 2y ago
        [deleted]
- aqueueaqueue 2y ago
  They made the point that this is the plan. Encourage people to live in cities.
  - UncleEntity 2y ago
    The more people that leave the rural areas for the cities makes it less profitable to serve the existing rural folks. I grew up in the Bay Area, lived in 'rural' Humboldt and Placer counties, and can say I would never move back to the bay no matter how much the technocrats would desire it. Pretty happy with my ~30k town nowhere near California TBH...
flyinghamster 2y ago
There are a number of northern Illinois cities that have their own utility grids. Off the top of my head I can think of Naperville, Princeton, Rochelle, and Peru, with the last three having their own power plants. Rochelle's municipal utility system also provides water and sewer, and fiber-optic internet. https://www.rmu.net/ https://www.rmu.net/
Zaheer 2y ago
Santa Clara's utility rates are also cheaper because there's a bunch of data centers that are the bulk of consumption and subsidize rates for residents. That said, I'm all for getting rid of PG&E
knappe 2y ago
Boulder CO tried to do this, but failed. After a 10 year fight, Xcel's lobbying won out and the $29 million that was spent to start the process had been exhausted. We need more cities trying to do this to show how it can be done and done well. https://www.cpr.org/2020/11/20/boulder-ends-decade-long-pursuit-of-city-owned-power-utility/ https://www.cpr.org/2020/11/20/boulder-ends-decade-long-purs...
- grandempire 2y ago
  It's one thing if a city already has one. But what advantage does the city bring to creating and operating power facilities? That requires many specialists with years of experience, in addition to great leadership. Without that, I assume the government is just a wallet to be taken advantage of. It's similar to public transportation. Most cities don't design a system, they order it from a catalog - and they pay private consultants (similar to Oracle consultants) to tell them what to do. There is so much corruption and privatization there, but unlike power there is no business case that would make it attractive outside of public funding.
kelseyfrog 2y ago
Of course it's cost effective for cities to start their own utilities, the economies of scale work in favor of urban and suburban electrification and maintenance. What isn't effective is electrification and maintenance of low density regions although power monopolies like PG&E are required to provide service. The urban and suburban customers are effectively subsidizing the cost of transmission and maintenance for rural customers. PG&E doesn't want their most profitable customer base[cities] to have public utilities because if enough do, their company becomes unprofitable and implodes. This is exactly the reason we should do it.
- UncleEntity 2y ago
  Sure, PG&E implodes but then who manages Diablo Canyon and who delivers electricity to the unprofitable rural areas? I left California last century but seem to recall the PUC(?) has a pretty tight reign on what PG&E does and doesn't do.
  - kelseyfrog 2y ago
    Unfortunately rural inhabitants have been free riding on a grostesquely distorted market for decades. It may be hard for them to swallow the idea that they will have to pay market rates for transmission and maintenance, but they should also be the first to agree that despite this, it's ultimately a more fair order han getting what essentially amounts to a handout today.
  - kevinburke 2y ago
    The flip side of this is that more and more homes are being built in fire zones in large part because we subsidize development in fire zones. It's a bad problem because of bad incentives. We should incentivize urban living
  - JCharante 2y ago
    > Sure, PG&E implodes but then who manages Diablo Canyon and who delivers electricity to the unprofitable rural areas? Hopefully no one manages them and that forces residents to move out and stop being a drain on society.
rmason 2y ago
I used to live in a small town in Michigan which had city provided power using a dam. It was inexpensive and highly reliable. But every couple of years the big power company in the state would try and get the city to sell them the utility. After I moved a city council for whatever reason ended up selling. As a result the cost of electricity immediately doubled and power outages occurred regularly due to reduced maintenance. I don't know what they spent the money on that they received but it was a very poor decision that I have to believe they regret.
- tmnvix 2y ago
  Perhaps I'm too cynical, but somehow I doubt that those with decision making power that were in favour of selling at the time regret much. Our modern political economy is almost entirely focused on ensuring that everything that can be sold to private entities (read, the market) is. In this ideology the sale would be viewed as a success regardless of any practical downsides.
  - Ekaros 2y ago
    I think this is just the end-stage failures of social democracies. Fund the things now, even if it means selling anything that can generate slight profits in long term. Or provide basic services at reasonable rates. Eventually everything is sold and out sourced, money has been wasted on buying votes and the debt is maxed out. Then the system will fail...
    - treyd 2y ago
      It's the end state of neoliberal policies. That's the ideological tendency that actually has the obsession with markets and strangling government capacity to do anything other than be a spigot for tax dollars. Scandinavian social democracies aren't perfect but they don't suffer from these entirely predictable problems to nearly the same degree.
      - jopsen 2y ago
        Sure, they do we're just not as far along the curve! That said, who is to say the trend isn't reversible some day. Also let's not forget the selling to private operators does provide benefits, not always, it's not the magic fix we pretend it is.
rightbyte 2y ago
Social democracy in fashion again?
- mmooss 2y ago
  It's interesting that in some HN discussions, all the arguments for (in this case) public ownership are valid and the advantages of private ownership seem to be completely forgotten. And in other discussions, it is vice-versa. I think that reflects the broader public. If you can get people in one or the other mode, they will forget what they knew 24 hours ago. Personally, I think private ownership and public ownership are two tools in the toolchest, good for different tasks. In many cases, privatization is a capitalist who notices a large, reliable cash flow, such as public utility revenue, and wants a cut of it. Public ownership can suffer from a lack of innovation - perhaps that matters less for mature technologies.
legitster 2y ago
I'm as capitalist as they come, but I think privatizing natural monopolies makes no sense. In our area, they handed over all school bus services to a private firm. The number of drivers, buses, and routes do not change. How was it supposed to save costs without degrading the service? The answer is, it did not. But administrations were diluted that they could take it off their liabilities.
gojomo 2y ago
PG&E's absurdly high rates are how they finance the careers of Governor Newsom & his wife, and "donations" to a giant array of other pet project "charities" for politicians & their favored cronies/causes. https://www.washingtonpost.com/business/2019/11/11/pge-helped-fund-careers-calif-governor-his-wife-now-he-accuses-utility-corporate-greed/ https://www.washingtonpost.com/business/2019/11/11/pge-helpe... https://www.sacbee.com/article251851903.html https://www.sacbee.com/article251851903.html Why would any of California's uniparty establishment want to refund all that money to random utility customers – who might not even be reliable party footsoldiers? PG&E's lowest overnight rates are 30¢/kwh, surging during peak hours to rates ranging from 39¢/kwh to 72¢/kwh. In neighboring Nevada, the utility serving its major metros NV Energy has rates of 11¢/kwh for residential users & 7-9¢/kwh for small businesses.
- Aurornis 2y ago
  > But over the past two decades, Newsom (D) and his wife have accepted more than $700,000 from the Pacific Gas & Electric $700,000 over 20 years is $35,000 per year (not to mention Newsom wasn’t governor for most of that time) PG&E revenues are $25,000,000,000 per year. Regardless of what you think about the arrangement, it’s not why rates are high. > In neighboring Nevada, the utility serving its major metros NV Energy has rates of 11¢/kwh for residential users & 7-9¢/kwh for small businesses Comparing electricity costs across difference states rarely indicates much. Geographies, energy sources, and regulations are very different from state to state.
  - culopatin 2y ago
    I don’t think they imply the payouts are so big they need to raise the rate, but that they have the support of the people in political power to maintain the monopoly and keep charging whatever they want.
  - gojomo 2y ago
    Of course it's not the 1:1 expense passthrough of PG&E's multidecade sponsorship of just Newsom's family that alone causes higher rates. It's the tens of millions in political contributions to not just Newsom at every stage if his career but also his allies & ilk. Plus tens of millions more in donations to favored "charitable" projects of family & cronies of politicians like Newsom & his allies. Plus harder-to-tally overpriced jobs & contracts steered to the "right" (regime-aligned) consultants, firms, & unions. (Did you notice how the glowing character reference in the Wapo article, about how immune to influence Newsom is, comes from a former Newsom advisor – & member of his wife's nonprofit board – who currently has PG&E as a paying client of his PR firm?) All the cash & favors are then topped off with a showy cheerfulness to "accept the responsibility" of extra costs from those state-idiosyncratic "regulations" you mention. But of course that's the quid pro quo of their monopoly remaining unchallenged, & all costs more-than-passed-on to ratepayers – so the ruling machine including Newsom can keep getting their beaks wet in all PG&E's spending & donation fountains. To look at only the formal campaign contributions against revenues, & accept as excuse a cover-story for extra corrupt expenditures ("regulations are very different"), & then conclude "no problem" is exactly why milking ratepayers this way, spreading the loot widely, is such a enduringly great racket.
bloomingkales 2y ago
If Star Citizen can get nearly a billion dollars, I think we can all (right here on HN) evangelize a kickstarter for this. We just need the people that know this in and out to lead. We should be doing more really in our current world. I confess I too spend too much time trying to build little apps just for money. This just for money thing has got me reflecting a lot lately.
blackeyeblitzar 2y ago
I can believe this is possible from a cost perspective, but I cannot believe that local governments can have leadership quality that is sufficient to do this well most of the time.
ChicagoDave 2y ago
Geneva/IL has its own utilities. Water and electricity. Gas is still ComEd.
clcaev 2y ago
There are electric cooperatives everywhere. See https://www.electric.coop/our-organization/nreca-member-directory https://www.electric.coop/our-organization/nreca-member-dire...
fsckboy 2y ago
in situations where you want or need to look into "uninterruptible power backup" at even a reasonably small scale (e.g. a large apartment building or a hospital), given the cost and durability of a diesel generator, once you've bought and installed one, turns out you might as well run it. Varying economic and regulatory conditions can make it more or less viable, but it's in the range of feasible.
roody15 2y ago
I am a city council member in small city (9,000) which owns and operates a municipal electric power plant. We have 4 large diesel generators, two large wind turbines and a few fields of solar panels. It is nice having power on 24/7, if there is an outage we simply fire up a diesel generator and power is restored in just a few minutes. We do have to buy power on the grid but also have times where we sell power back (summer, when people use AC prices go up and our solar panels typically generate excesss and profit) The price of power is almost identical to those outside of the city. Honestly keeping as many derives local really has been a win/ win for our community.
lokar 2y ago
PG&E should have been liquidated in bankruptcy and the physical assets taken by the state, with regional public utilities created from them.
- kevinburke 2y ago
  Bankruptcy would not help because you’d still have some entity managing the entire coverage area. The gain comes from creating a market for lemons.
  - lokar 2y ago
    No, give each county (or neighboring group of them) the opportunity to form a local utility and take over the mgmt. local municipal utilities have a really good track record.
owenthejumper 2y ago
East coast is struggling the same. Not as crazy yet but Coned in NY is now over 31c
- throwaway984393 2y ago
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bunabhucan 2y ago
There was a thread recently on a subreddit talking about hn threads that get outside the hn circle of competence (nuclear weapons in that case) and this thread is giving me the same vibe. I work in utilities and have worked in multiple countries/continents and all over the US (and lived and worked in CA) for munis, coops, national carriers, giant IOUs etc. If you see something you disagree with here please treat it as "I implemented notepad.exe in elisp" level of not even wrong.
- kevinburke 2y ago
  Thank you, I got the same impression, I have relatives and friends who work in government roles for local and statewide energy operators and ran this post by them, hopefully I did not butcher the details too much.
indus 2y ago
and cities can build roads and highways too?
calvinmorrison 2y ago
Philadelphia has repeatedly killed people due to aging infrastructure. They have wooden pipes 100 years old. Half my block caved in due to a sewer collapse. They estimate all the current backlog of pipes will be done in 100 years. Yes you can start it, but should we bow to political pressure to put off maintaining infrastructure? No. There's a real cost to maintain this stuff. But a political force doesn't want to raise prices so it gets depayed.
- kevinburke 2y ago
  This has not been the case with the three operators in the Bay Area - Santa Clara, Palo Alto, and Alameda.
blkhp19 2y ago
*cost-effectively — confusing title without the proper adverb hyphenation
deleted 2y ago
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yonran 2y ago
It seems that the bulk of the savings for making an urban municipal utility come from not having to pay for upgrades in fire-prone regions. And the end game is that cities will have their own utilities with lower rates, whereas rural people will be adverse selected to be stuck with PG&E and pay thousands of dollars per month on energy. Wouldn’t it be easier for PG&E themselves to implement this desired rate schedule where urban rates are cheap and rural rates are expensive? It seems odd that the PUC would not allow PG&E to charge extraordinary rates for rural areas today, but they do allow cities to buy up the good parts of PG&E which will inevitably lead to the same outcome in the future.
gunian 2y ago
i miss feudalism the olden times of fiefdoms were so much better than one world humans
thelastgallon 2y ago
Austin Energy pays the city 115 million every year. Austin Energy earns no profits and pays no federal income taxes. All revenues benefit the customers of Austin Energy and the residents of the City of Austin. The primary financial benefit to the City of Austin is Austin Energy’s transfer to the General Fund, which is set by policy and allocated by elected City Council members to municipal purposes such as fire and parks. https://austinenergy.com/about/company-profile/numbers https://austinenergy.com/about/company-profile/numbers
- ProllyInfamous 2y ago
  The only city utility I've experienced better than Austin Energy is Chattanooga's Electric Power Board (which offers up to 20gb/s fiber to every single electricity customer in their jurisdiction, except some apartment complexes). Inexpensive, reliable, and heavily litigated (just how I like my local utility).
hahamrfunnyguy 2y ago
We have a publicly owned electricity utility. Electricity is cheap and it's and it's a selling point for homes within their service area. The other utility is bad, especially when it comes to billing. People hate it and there has been a big effort from activists to turn it over to public hands. The local politicians are on board for the most part, but the company is of course fighting tooth and nail.
rsynnott 2y ago
Sure, providing power to a city is cheaper per-head than providing it to a large area which includes a lot of rural customers, news at 11. But they probably should not be _allowed_ to do so, because it would make providing power in rural areas at all uneconomic. If you had an electricity market where everyone paid actual cost to deliver power to them, you’re really talking about just having cities.
teknopaul 2y ago
Profit creaming, not good for county even if it seems good in the city. Everytime there is a natural disaster in the US the press report xxxx houses without power. US leccy firms pride the bear minimum service, always. Profit comes first. Delivery second priority at best. This doesn't ofter happen in Europe because they dont profit cream and builds reliable redundant grid for almost everone. The grid even extends beyond countries boundaries, with neighbouring countries supporting each other. Some folk out in the sticks, who you might think don't matter, provide useful services to the city folk. Eg farmers. I.e. Cost the grid not the city. You probably are being ripped off in the US, but that's a different story to the one being told imho. Careful what you wish for.
- gottorf 2y ago
  The average American utility company nets around 10% return on equity, IIRC. 30-year Treasury bonds can be had today around 4.6%, with none of the risk or headaches of operating a business. Hardly a bastion of profitability. I agree residential electric infrastructure in the US is not nearly as good as it could be. Buried power lines in suburban environments alone could probably cut outage numbers at least by half; but as one of the first countries in the world to electrify, doing that is a lot more expensive than in developing countries. Sometimes there is such a thing as a first-mover disadvantage!
imchillyb 2y ago
Electric, Water, Sewer are modern necessities. Our governments should provide these services to Citizens at no cost to them. We already pay for the maintenance costs and infrastructure is already built out. Charge the companies for the services, and give them to the populace. But, but, but, that's socialism! Taxes are socialism. Take from the many, use that spending power to benefit the people.
temptemptemp111 2y ago
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throwaway984393 2y ago
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r0m4n0 2y ago
Not only am I getting a 14c rate with smud but smud is ask really active in the community. They donate $1000s to my neighborhood association and local maker space. Also a friend is mine wanted 3 phase power ad was researching what it would take. Smud was very helpful and had a simple process while PGE wanted proof of business usage amongst other stuff (heard this all second hand though)
tamaharbor 2y ago
Good luck getting that 4% financing.
a3w 2y ago
What is PG&E should perhaps be on top of the page?

420 points by kevinburke 2y ago

deleted 2y ago

[deleted]

Can the CA govt just impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free?

kevinburke 2y ago
PG&E already went bankrupt recently, and taking over the whole state wouldn't really help very much. The problem is largely liability rules that make it very expensive to provide power to wildfire zones and rural areas. PG&E and the state have decided to pay for that by charging people who live in cities very high rates for electricity. It's perverse that people who live in safe, urban areas are subsidizing people who live in wildfire zones. The savings come largely from not doing that anymore.
- CobaltFire 2y ago
  I bang this drum all the time, but you are the first other person I've seen state it online. If we stop subsidizing the foothills by creating urban utility districts it would solve the PG&E problem. We would have a new problem of causing a ton of people to be unable to continue living in those areas without some kind of off-grid program. Long term I think this is the only sane way forward though.
  - thatguy0900 2y ago
    Long term I don't see how it's possible to continue to let people live in areas so fire prone that insurance cannot be done, it seems to me. Unless you want to live in a concrete castle or something
    - mindslight 2y ago
      Construction itself isn't that expensive. It's certainly possible to self insure and accept that living in an area prone to fires means your house might burn down. It goes against the prevailing culture of the ever-growing housing bubble, but financialization has to hit its limits some time.
      - mauvehaus 2y ago
        Self-insuring is probably not going to fly with your mortgage lender. If nobody can get a mortgage, and everyone has to self-insure, it's going to 1) drive down housing prices (fewer cash buyers) and 2) guarantee that only people of pretty substantial means can afford to live there (even with lower prices, most people can't come up with a cash payment for a house).
        coryrc 2y ago
        If prices were sane, anybody who bought a house ten years ago currently has enough equity to pay cash.
        mindslight 2y ago
        I did acknowledge it would go against housing bubble culture. It certainly wouldn't be a financially prudent way of obtaining primary shelter, but rather for vacation homes or whatnot. We're mostly talking about rural properties in the woods, right?
      - deleted 2y ago
        [deleted]
    - trinsic2 2y ago
      You mean like a brick building? like how structures were originally built? Seems like a good idea to me for house to be made of stone in high fire related areas. Obviously the cost would be astronomical.
      - arrosenberg 2y ago
  - abeppu 2y ago
    > We would have a new problem of causing a ton of people to be unable to continue living in those areas without some kind of off-grid program. But people in those areas are likely to be able to benefit from solar, so maybe being "off the grid" in the sense of not having long runs of power lines surrounded by trees to your house in the country is reasonable, and perhaps also cheaper for those rural residents anyway?
  - marssaxman 2y ago
    > a ton of people to be unable to continue living in those areas That sounds like more of a solution than a problem: those places are going to burn, so it's better that people stop living there.
    - UncleEntity 2y ago
      Ironically, if they just let them naturally burn in the first place there wouldn't be even a fraction of damage caused by these modern wildfires.
      - Qwertious 2y ago
        IIRC it's a funding problem - controlled burns require a ton of manpower to control, and the longer since the last burn, the harder it is to control.
- amluto 2y ago
  This whole model is nonsensical, though. Averaging costs among customers doesn’t give anyone the right incentives: - Urban customers should have an incentive to use electricity over gas, which they would if rates were reasonable. - Urban customers should not pay per kWh even if one thinks they should subsidize rural customers. It should be some kind of tax with reasonable allocation. - Undercharging rural customers for provision of service and overcharging per kWh messes up incentives, too. If suburban or rural communities faced the actual cost of transmission to their area and distribution within it, they could make real decisions, for example: # Technologies exist to reduce the risk that a power line fault starts a fire. Search for “ground fault neutralizer” or “REFCL.” Similarly common reclosers take a very YOLO approach to deal with a faulted line, and other approaches exist. PG&E, of course, doesn’t want to use these because the ridiculous CPUC rules let them make more profit by spending more money trimming trees. # Communities could maintain their own lines and have actual locally enforced codes about vegetation. # Communities could install batteries at their end of transmission lines to help ride through public safety power shutdowns and to level out their own loads. And they could even build small wind turbines optimized for operation in high winds (which are rather strongly correlated with those shutdowns) to generate a few MW and keep those batteries charged. Heck, this could be automated: de-energize the line when the wind is high automatically, and there won’t even be a substantial inrush when re-energizing when the wind stops because the batteries can reduce load to zero. # A community could decide the cost isn’t worth it and build its own mini grid. This might spur interesting investment into things like small modular reactors :) - The ownership and regulatory structure right now sucks, amplifying all the problems above and the lack of real solutions.
- ahmeneeroe-v2 2y ago
  I am 90% in agreement with you. I do think that you should consider how rural/suburban areas have all of the generation and transmission which the cities rely on for their power. It's not exactly fair to treat those rural residents as burdens to the urban areas when they provide the means for the urban areas to exist.
  - janalsncm 2y ago
    > they provide the means for the urban areas to exist Unless you’re referring to farmers I don’t understand this point. As of right now it is the other way around.
    - ahmeneeroe-v2 2y ago
      No. Build the generation for urban areas within those same urban areas.
  - avidiax 2y ago
    > It's not exactly fair to treat those rural residents as burdens to the urban areas when they provide the means for the urban areas to exist. There's a difference between people that are in farming/ranching and industry vs. people that are rural to afford a more lavish home in the woods or on the hills. Even still, a system that doesn't appropriately price and apportion risk will always be under pressure.
    - ahmeneeroe-v2 2y ago
      >a system that doesn't appropriately price and apportion risk will always be under pressure Very well stated, I am stealing this. Also in agreement with rural resource types vs rich rural. Again I think it is more complex than just apportioning power costs. CA effectively has a state policy of not maintaining its forest/rural land (ditto feds and their land). My parents live adjacent to national forest and have fire evacuations nearly every year. There is nothing that the rural residents in their area can do to mitigate risk, even at their own cost. So we're asking them to bear the cost of the state/fed policy decisions. This is exactly the problem you describe of inappropriate price/risk apportionment.
rufus_foreman 2y ago
>> Can the CA govt just impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free I don't think so. Not currently. "nor shall private property be taken for public use, without just compensation" That's federal law. Supposedly, that applies to the states through the Fourteenth Amendment. All of the sudden, once the Fourteenth Amendment is passed, the Constitution applies to state governments, not just the federal government. So if that's the case, no. You can't just "scoop up the assets for free" because you can't take private property for public use without compensation. I'm kinda a little bit suspicious that it makes sense to interpret the Fourteenth Amendment that way. Sounds like a power grab. If you want to try and turn that around, I know just the guys to do it.
- rangestransform 2y ago
  It’s not unconstitutional to make utilities liable for fires that their power lines ignite, and it won’t be a taking without just compensation if the actual value of the company drops below zero
  - rufus_foreman 2y ago
    >> It’s not unconstitutional to make utilities liable for fires that their power lines ignite That's not the question under consideration. The question under consideration is if it constitutional for the government to "impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free". Under my understanding of the law, no you can't do that, due to the takings clause and it's incorporation under the 14th amendment. I think the law should be different, I don't agree with incorporation doctrine. But I still don't think the government should impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free. Hopefully that clears everything up for you.
bobthepanda 2y ago
This is generally a horrible idea. This is how public transit companies were generally acquired, but on the way to bankruptcy firms would defer maintenance to stave it off, which led to the sorry state of most mass transit systems today.
refurb 2y ago
Absolutely, barring the company bringing them to court for violating the "taking withouy compensation". But what people forget is that the CA state doesn't want PG&E. The state already exerts significant control over PG&E operations through the CPUC (members nominated by Gavin Newsom). CPUC approves/rejects all capital spending down to new fences for electrical substations. You can read about all the decisions in the 931 page rate decision, which is public. https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M520/K896/520896345.pdf https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M520/K... But what about executive compensation? Well, a separate CA state agency approves that as well. https://energysafety.ca.gov/what-we-do/electrical-infrastructure-safety/wildfire-mitigation-and-safety/executive-compensation/ https://energysafety.ca.gov/what-we-do/electrical-infrastruc... So at this point the CA state government basically runs PG&E. But if they purchased it, they'd be exposing themselves to all the political risk when things go bad. But right now, they get political air cover. Despite the tight level of control over how PG&E is run, the CA state government gets none of the blowback. It's the optimal setup from a political perspective.

tristanb 2y ago

I am so sick of PG&E - our energy bills are nearly $1,000/mo. It's absolutely bonkers.

ahmeneeroe-v2 2y ago
Look at your power bill. Half of your kWh cost is taxes to the State of California. You could literally have half the power bill tomorrow if CA would stop taxing it.
- hypothesis 2y ago
  No can do, they are going to start taxing (hard to call that billing at that point) you based on your income. At least that was the plan last summer or so.
  - kevinburke 2y ago
    All utilities have usage based costs and large fixed costs. Historically, all utilities have charged solely on usage. The problem is when you have solar, or solar + battery, your usage goes way down. Unfortunately the grid still needs to be maintained and power plants at peak times (maybe a bit lower, but still high) still need to be paid for. With usage based bills, people with solar pay less than their fair share for the maintenance component of a utility's cost, which means that this cost is larger for the other rate payers. On top of this California has huge subsidies to early rooftop solar adopters. This structure hurts lower income people more since lower income people are more likely to rent and apartments don't have as much space for / not as interested in rooftop solar. So the CPUC started exploring different models for adding a bigger fixed charge to the bill and lowering the per-kwh cost. Of course the rooftop solar installers hated this as did the different "equity groups." Which is where you got the idea to adjust the fixed charge based on income. I don't think it's a great idea but I at least understand where the CPUC is coming from. We probably need more innovation in utility pricing models.
    - hypothesis 2y ago

abeppu 2y ago

The author mentions the cost of buying out the distribution network, and cites SF's failed attempt to do this. The author tries to figure out the price for Walnut Creek's grid based on inflation and population -- but the $2.5B figure this is based off was rejected by PG&E. The messed up thing is PG&E as a monopoly can set the price wherever they like -- and they can demand substantial continuing payments to connect to the grid so long as they retain it. > PG&E continues to demand huge payments on routine power grid connections. For example, the cost to comply with PG&E’s latest requirements for the City to use public power to connect streetlights, traffic signals and other small loads would exceed $1 billion. https://www.publicpowersf.org/en/faq https://www.publicpowersf.org/en/faq I think either we need the political will to use eminent domain to take the grid back (i.e. set the price through a legal proceeding), or we'd need to build a duplicate distribution grid and then abandon PG&E.

kevinburke 2y ago
Yes, the fact that PG&E rejected the offer is why I adjusted the figure for Walnut Creek's population and then increased it by 50%. The fact is muni borrowing is cheap - even if PG&E charged $1 billion we could finance that for about six cents per kilowatt hour. I don't think the CPUC will let them get away with "we won't sell at any price" - I think the regulators would force them to sell at some price.
- abeppu 2y ago
  > I don't think the CPUC will let them get away with "we won't sell at any price" - I think the regulators would force them to sell at some price. Has the CPUC forced such a sale before? Functionally, if PG&E can just safely gauge what's likely to be out of reach for each city, they can name a price detached from reality and be confident of maintaining their stranglehold.
- brian-armstrong 2y ago
  PG&E surely knows that if it lets one city do this, then more will follow quickly. It will be left with the least profitable regions and cities that can't afford to/don't have the credit for this transition. That would ultimately leave the remaining customers in an even less affordable position.

xrd 2y ago

These formerly "public utilities" are now often owned by PE or Berkshire Hathaway. Whenever I see the folky wisdom of Charlie Munger or Warren Buffer posted on HN, I can't help but think about their firm's work in transforming State Farm insurance, GEICO and this gem I posted earlier today on HN: "PacifiCorp Was Grossly Negligent in Oregon’s 2020 Wildfires. Now It’s Asking Lawmakers for Protection." https://news.ycombinator.com/item?id=42971311 https://news.ycombinator.com/item?id=42971311 Because of regulation, they can gouge consumers who are captive to the damage, literally and financially.

1970-01-01 2y ago
>>they are also undertaking a massive project to underground utility lines in fire-prone areas. Seems like they're actively trying to fix it.
- xrd 2y ago
  I'm glad you stated that. It certainly wasn't my takeaway of the way they handled it, however. By my reading it seems like the local officials begged them to turn off the lines when they saw what was coming. And, that the executives at the utility didn't take action and then denied that this meeting occurred seems damning to the people who lost everything.
lotsofpulp 2y ago
I don’t see anything in State Farm’s history that indicates Berkshire Hathaway had anything to do with the company. It has always been a mutual insurance company, owned by its policyholders.
- xrd 2y ago
  You are right. I'm confusing State Farm with Allstate, via McKinsey (I'm reading the book "When McKinsey comes to town"). Berkshire Hathaway owns Geico and has taken a similar path, however. But, this Oregon utility has BH ownership.
dragonwriter 2y ago

atlas_hugged 2y ago

Same thing is likely true in SoCal. The city of Azusa,CA has their own, non-Edison utility, and their rates are 1/3rd of the Edison rates in the towns around them.

mmooss 2y ago
Could Azusa sell power to the town around them?

drewda 2y ago

Interesting analysis. Sounds like an argument for ABAG to expand its energy related services into a full utility (at least on the electricity side): https://abag.ca.gov/our-work/energy-infrastructure https://abag.ca.gov/our-work/energy-infrastructure

Aurornis 2y ago

The author estimates that electricity prices would be reduced by up to 33% (from $0.45 blended rate to $0.30), but PG&E’s profit margins are only 11%. That’s a good hint that this hypothetical is missing some important details The article hedges against someone pointing this out by admitting that Walnut Creek is an unusually optimistic location and that PG&E is also recognizing large expenses related to ongoing infrastructure buildouts, but no solutions are offered for these caveats. The hidden problem with projects like this is that once you roll these utilities into the city’s budget it’s too tempting to start dipping into taxpayer funds for needed improvements rather than raising electricity rates. When problems arise, politicians try to kick it down the road so it becomes their successor’s problem, or they try to offload the expense onto a growing debt load because that delays the problem to the next generation. It becomes easier to keep the highly visible rate down, but taxes might go up to cover the infrastructure costs instead. So I’m skeptical. If there was an analysis that showed a drop in rates that was not 3X higher than the profit margins of the private utility I’d be more open to the idea, but as presented this feels like back of the envelope math that generates savings by ignoring all the details that didn’t make their way onto the envelope.

colechristensen 2y ago
>The author estimates that electricity prices would be reduced by up to 33% (from $0.45 blended rate to $0.30), but PG&E’s profit margins are only 11%. That’s a good hint that this hypothetical is missing some important details PG&E customers are paying very large amounts for the consequences of bad infrastructure causing wildfires and other legal costs which are being paid for with higher rates. Example: https://www.ewg.org/news-insights/news-release/2022/12/pge-asks-california-regulators-recover-136b-ratepayers-cost https://www.ewg.org/news-insights/news-release/2022/12/pge-a...
- Aurornis 2y ago
  Right, but that’s my point: You can’t assume these costs disappear if the government takes over. They just get blended into the tax bill.

bitmasher9 2y ago

This is absolutely a no-brainer for municipalities. The private companies are charging a premium that they return to shareholders and give to executives. Municipalities have excellent access to credit at rates significantly lower than the premium charged by utility companies. The residents get cheaper access and more influence in how the utility is ran. The number of people that pay for-profit companies for natural gas (heat), electricity, and water in North America is absolutely bonkers. There is a specific concern about foreign corporations purchasing water rights in the American west.

AnotherGoodName 2y ago
Yep you literally get half price power if your city does it - https://www.cityofpaloalto.org/files/assets/public/v/5/utilities/rates-schedules-for-utilities/residential-utility-rates/e-1-effective-2024-07-01.pdf https://www.cityofpaloalto.org/files/assets/public/v/5/utili... I’m lucky enough to be in such an area. Note the city takes a bit of the above as profit too. Not that that’s a bad thing but it just goes to show how beneficial it is and how much more you’re paying by not doing it. Every city should do it asap.
- xienze 2y ago
  Yeah it might be easy for municipal electricity to win on price when the bar is set at $0.42/kWh. Out here our evil private company is charging $0.11/kWh. I have serious doubts any municipality anywhere could deliver power for half that.
  - pwrson 2y ago
    Cleveland Public Power rates online are <$0.10/kWh in the summer and <$0.05/kWh in the winter.
  - bitmasher9 2y ago
    I’m not sure where “out here” is, but $0.11/kWh is not the national low for municipal power costs.
2y ago

shawndrost 2y ago

+1 to this analysis. Urban ratepayers in CA subsidize rural and fire-prone ratepayers. (Utility rates are a stealth tax. Same story as home insurance.) The fight is ultimately political and not as one-sided as you might think. The broad regulator and politician view is that the subsidies are valid, and if the cities all leave the grid, the subsidies will wind up on the state's balance sheet. Nobody wants to see rural de-electrification. Utilities have a lot of sway with politicians for corrupt and non-corrupt reasons.

jmyeet 2y ago

It never ceases to amaze me how often people will make socialist economic arguments (that are objectively correct) yet eschew the label "socialism". An enterprise, like providing a utility, has revenues and it has costs. The difference between the two can be called the "surplus labor value". What happens to that depends on the economic system. In capitalism, capital owners own that enterprise (utility) and they siphon off profits raising the costs. Put another way, capital owners own the means of production, not the residents of the city or the city itself. This is rent-seeking behavior. In a socialist organization of the economy, the residents either directly or through the city itself, would own the utility. Any profits would go back into the utility or be extra revenue for the city but there's really no incentive to increase prices on the citizens who own the utility (unlike the unquenchable thirst for increasing profits for capital owners). I have to constantly point out that capitalism isn't markets (market existed thousands of years before it and exist in every economic system). Capitalism simply supplanted feudalism by replacing kings with billionaires. That's it. We have abundant examples of how the latter is a substantially better system. Just compare EPB Internet (Chattanooga, TN and surrounds) vs Verizon, AT&T, Comcast or Spectrum. Municipal broadband, without exception, is substantially better than any national ISP. The only thing that keeps national ISPs in business is more rent-seeking behavior such as lobbying for legislation to ban municipal broadband. Given this is the Superbowl weekend, it's worth adding that the Packers are owned by Green Bay (an arrangement the NFL now bans for any other franchise). What do we see in other cities? Teams extorating massive tax breaks from cities, counties and states to build massive stadiums at taxpayer expense without the team having to give up anything. The KC Chiefs are rumbling about leaving because the city didn't pass a sales tax increase to pay for upgrades to Arrowhead Stadium. I don't know why anyone is surprised by any of this anymore.

mmooss 2y ago
Do you think public ownership would have yielded the development of modern IT, for example?
- jmyeet 2y ago
  The Internet was quite literally a government invention. Google was invented at Stanford. Linux was created by a volunteer who organized on Usenet.

jcarrano 2y ago

If PG&E could be undercut by 25%, then why are there no private companies doing it? Either it is not as profitable as the author claims, or PG&E's monopoly is due to state regulations (I don't know enough about the specifics) and it would be quite contradictory to demand the state solve the problems it created. Overall it reads like any other socialist argument for nationalizing (in this case "municipalizing") companies, which does not work both on theoretical grounds and based on historical experience. The claim "Walnut Creek could borrow from its utility in recessions, and loan money during booms" is laughable. We know how that ends: the city would finance its deficits with utility money until the company is bankrupt.

aquaticsunset 2y ago
Municipal utilities exist everywhere. I'm not sure why you're being all hypothetical about it. They work well and for many reasons discussed here, sound like a good fit for Walnut Creek.

payne92 2y ago

> It costs a lot of money to deliver power to rural customers Utilities (generally) have a universal service obligation. If someone can cherry-pick just the denser areas with lower distribution costs, of course they could "undercut" the utility with the requirement to serve everyone. (I'm not saying that PG&E couldn't be better managed. I'm saying that there's a much, much deeper policy issue at stake here.)

llamaimperative 2y ago
Land Value Tax solves this
- aqueueaqueue 2y ago
  How so?
  - llamaimperative 2y ago
    It incentivizes greater development of already-developed land (meaning less infrastructure serving more people) rather than acquisition and low-yield development of new (more rural) land.
    - deleted 2y ago
      [deleted]
aqueueaqueue 2y ago
They made the point that this is the plan. Encourage people to live in cities.
- UncleEntity 2y ago
  The more people that leave the rural areas for the cities makes it less profitable to serve the existing rural folks. I grew up in the Bay Area, lived in 'rural' Humboldt and Placer counties, and can say I would never move back to the bay no matter how much the technocrats would desire it. Pretty happy with my ~30k town nowhere near California TBH...

flyinghamster 2y ago

There are a number of northern Illinois cities that have their own utility grids. Off the top of my head I can think of Naperville, Princeton, Rochelle, and Peru, with the last three having their own power plants. Rochelle's municipal utility system also provides water and sewer, and fiber-optic internet. https://www.rmu.net/ https://www.rmu.net/

Zaheer 2y ago

Santa Clara's utility rates are also cheaper because there's a bunch of data centers that are the bulk of consumption and subsidize rates for residents. That said, I'm all for getting rid of PG&E

knappe 2y ago

Boulder CO tried to do this, but failed. After a 10 year fight, Xcel's lobbying won out and the $29 million that was spent to start the process had been exhausted. We need more cities trying to do this to show how it can be done and done well. https://www.cpr.org/2020/11/20/boulder-ends-decade-long-pursuit-of-city-owned-power-utility/ https://www.cpr.org/2020/11/20/boulder-ends-decade-long-purs...

grandempire 2y ago
It's one thing if a city already has one. But what advantage does the city bring to creating and operating power facilities? That requires many specialists with years of experience, in addition to great leadership. Without that, I assume the government is just a wallet to be taken advantage of. It's similar to public transportation. Most cities don't design a system, they order it from a catalog - and they pay private consultants (similar to Oracle consultants) to tell them what to do. There is so much corruption and privatization there, but unlike power there is no business case that would make it attractive outside of public funding.

kelseyfrog 2y ago

Of course it's cost effective for cities to start their own utilities, the economies of scale work in favor of urban and suburban electrification and maintenance. What isn't effective is electrification and maintenance of low density regions although power monopolies like PG&E are required to provide service. The urban and suburban customers are effectively subsidizing the cost of transmission and maintenance for rural customers. PG&E doesn't want their most profitable customer base[cities] to have public utilities because if enough do, their company becomes unprofitable and implodes. This is exactly the reason we should do it.

UncleEntity 2y ago
Sure, PG&E implodes but then who manages Diablo Canyon and who delivers electricity to the unprofitable rural areas? I left California last century but seem to recall the PUC(?) has a pretty tight reign on what PG&E does and doesn't do.
- kelseyfrog 2y ago
  Unfortunately rural inhabitants have been free riding on a grostesquely distorted market for decades. It may be hard for them to swallow the idea that they will have to pay market rates for transmission and maintenance, but they should also be the first to agree that despite this, it's ultimately a more fair order han getting what essentially amounts to a handout today.
- kevinburke 2y ago
  The flip side of this is that more and more homes are being built in fire zones in large part because we subsidize development in fire zones. It's a bad problem because of bad incentives. We should incentivize urban living
- JCharante 2y ago
  > Sure, PG&E implodes but then who manages Diablo Canyon and who delivers electricity to the unprofitable rural areas? Hopefully no one manages them and that forces residents to move out and stop being a drain on society.

rmason 2y ago

I used to live in a small town in Michigan which had city provided power using a dam. It was inexpensive and highly reliable. But every couple of years the big power company in the state would try and get the city to sell them the utility. After I moved a city council for whatever reason ended up selling. As a result the cost of electricity immediately doubled and power outages occurred regularly due to reduced maintenance. I don't know what they spent the money on that they received but it was a very poor decision that I have to believe they regret.

tmnvix 2y ago
Perhaps I'm too cynical, but somehow I doubt that those with decision making power that were in favour of selling at the time regret much. Our modern political economy is almost entirely focused on ensuring that everything that can be sold to private entities (read, the market) is. In this ideology the sale would be viewed as a success regardless of any practical downsides.
- Ekaros 2y ago
  I think this is just the end-stage failures of social democracies. Fund the things now, even if it means selling anything that can generate slight profits in long term. Or provide basic services at reasonable rates. Eventually everything is sold and out sourced, money has been wasted on buying votes and the debt is maxed out. Then the system will fail...
  - treyd 2y ago
    It's the end state of neoliberal policies. That's the ideological tendency that actually has the obsession with markets and strangling government capacity to do anything other than be a spigot for tax dollars. Scandinavian social democracies aren't perfect but they don't suffer from these entirely predictable problems to nearly the same degree.
    - jopsen 2y ago
      Sure, they do we're just not as far along the curve! That said, who is to say the trend isn't reversible some day. Also let's not forget the selling to private operators does provide benefits, not always, it's not the magic fix we pretend it is.

rightbyte 2y ago

Social democracy in fashion again?

mmooss 2y ago
It's interesting that in some HN discussions, all the arguments for (in this case) public ownership are valid and the advantages of private ownership seem to be completely forgotten. And in other discussions, it is vice-versa. I think that reflects the broader public. If you can get people in one or the other mode, they will forget what they knew 24 hours ago. Personally, I think private ownership and public ownership are two tools in the toolchest, good for different tasks. In many cases, privatization is a capitalist who notices a large, reliable cash flow, such as public utility revenue, and wants a cut of it. Public ownership can suffer from a lack of innovation - perhaps that matters less for mature technologies.

legitster 2y ago

I'm as capitalist as they come, but I think privatizing natural monopolies makes no sense. In our area, they handed over all school bus services to a private firm. The number of drivers, buses, and routes do not change. How was it supposed to save costs without degrading the service? The answer is, it did not. But administrations were diluted that they could take it off their liabilities.

gojomo 2y ago

PG&E's absurdly high rates are how they finance the careers of Governor Newsom & his wife, and "donations" to a giant array of other pet project "charities" for politicians & their favored cronies/causes. https://www.washingtonpost.com/business/2019/11/11/pge-helped-fund-careers-calif-governor-his-wife-now-he-accuses-utility-corporate-greed/ https://www.washingtonpost.com/business/2019/11/11/pge-helpe... https://www.sacbee.com/article251851903.html https://www.sacbee.com/article251851903.html Why would any of California's uniparty establishment want to refund all that money to random utility customers – who might not even be reliable party footsoldiers? PG&E's lowest overnight rates are 30¢/kwh, surging during peak hours to rates ranging from 39¢/kwh to 72¢/kwh. In neighboring Nevada, the utility serving its major metros NV Energy has rates of 11¢/kwh for residential users & 7-9¢/kwh for small businesses.

Aurornis 2y ago
> But over the past two decades, Newsom (D) and his wife have accepted more than $700,000 from the Pacific Gas & Electric $700,000 over 20 years is $35,000 per year (not to mention Newsom wasn’t governor for most of that time) PG&E revenues are $25,000,000,000 per year. Regardless of what you think about the arrangement, it’s not why rates are high. > In neighboring Nevada, the utility serving its major metros NV Energy has rates of 11¢/kwh for residential users & 7-9¢/kwh for small businesses Comparing electricity costs across difference states rarely indicates much. Geographies, energy sources, and regulations are very different from state to state.
- culopatin 2y ago
  I don’t think they imply the payouts are so big they need to raise the rate, but that they have the support of the people in political power to maintain the monopoly and keep charging whatever they want.
- gojomo 2y ago
  Of course it's not the 1:1 expense passthrough of PG&E's multidecade sponsorship of just Newsom's family that alone causes higher rates. It's the tens of millions in political contributions to not just Newsom at every stage if his career but also his allies & ilk. Plus tens of millions more in donations to favored "charitable" projects of family & cronies of politicians like Newsom & his allies. Plus harder-to-tally overpriced jobs & contracts steered to the "right" (regime-aligned) consultants, firms, & unions. (Did you notice how the glowing character reference in the Wapo article, about how immune to influence Newsom is, comes from a former Newsom advisor – & member of his wife's nonprofit board – who currently has PG&E as a paying client of his PR firm?) All the cash & favors are then topped off with a showy cheerfulness to "accept the responsibility" of extra costs from those state-idiosyncratic "regulations" you mention. But of course that's the quid pro quo of their monopoly remaining unchallenged, & all costs more-than-passed-on to ratepayers – so the ruling machine including Newsom can keep getting their beaks wet in all PG&E's spending & donation fountains. To look at only the formal campaign contributions against revenues, & accept as excuse a cover-story for extra corrupt expenditures ("regulations are very different"), & then conclude "no problem" is exactly why milking ratepayers this way, spreading the loot widely, is such a enduringly great racket.

bloomingkales 2y ago

If Star Citizen can get nearly a billion dollars, I think we can all (right here on HN) evangelize a kickstarter for this. We just need the people that know this in and out to lead. We should be doing more really in our current world. I confess I too spend too much time trying to build little apps just for money. This just for money thing has got me reflecting a lot lately.

blackeyeblitzar 2y ago

I can believe this is possible from a cost perspective, but I cannot believe that local governments can have leadership quality that is sufficient to do this well most of the time.

ChicagoDave 2y ago

Geneva/IL has its own utilities. Water and electricity. Gas is still ComEd.

clcaev 2y ago

There are electric cooperatives everywhere. See https://www.electric.coop/our-organization/nreca-member-directory https://www.electric.coop/our-organization/nreca-member-dire...

fsckboy 2y ago

in situations where you want or need to look into "uninterruptible power backup" at even a reasonably small scale (e.g. a large apartment building or a hospital), given the cost and durability of a diesel generator, once you've bought and installed one, turns out you might as well run it. Varying economic and regulatory conditions can make it more or less viable, but it's in the range of feasible.

roody15 2y ago

I am a city council member in small city (9,000) which owns and operates a municipal electric power plant. We have 4 large diesel generators, two large wind turbines and a few fields of solar panels. It is nice having power on 24/7, if there is an outage we simply fire up a diesel generator and power is restored in just a few minutes. We do have to buy power on the grid but also have times where we sell power back (summer, when people use AC prices go up and our solar panels typically generate excesss and profit) The price of power is almost identical to those outside of the city. Honestly keeping as many derives local really has been a win/ win for our community.

lokar 2y ago

PG&E should have been liquidated in bankruptcy and the physical assets taken by the state, with regional public utilities created from them.

kevinburke 2y ago
Bankruptcy would not help because you’d still have some entity managing the entire coverage area. The gain comes from creating a market for lemons.
- lokar 2y ago
  No, give each county (or neighboring group of them) the opportunity to form a local utility and take over the mgmt. local municipal utilities have a really good track record.

owenthejumper 2y ago

East coast is struggling the same. Not as crazy yet but Coned in NY is now over 31c

throwaway984393 2y ago
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bunabhucan 2y ago

There was a thread recently on a subreddit talking about hn threads that get outside the hn circle of competence (nuclear weapons in that case) and this thread is giving me the same vibe. I work in utilities and have worked in multiple countries/continents and all over the US (and lived and worked in CA) for munis, coops, national carriers, giant IOUs etc. If you see something you disagree with here please treat it as "I implemented notepad.exe in elisp" level of not even wrong.

kevinburke 2y ago
Thank you, I got the same impression, I have relatives and friends who work in government roles for local and statewide energy operators and ran this post by them, hopefully I did not butcher the details too much.

indus 2y ago

and cities can build roads and highways too?

calvinmorrison 2y ago

Philadelphia has repeatedly killed people due to aging infrastructure. They have wooden pipes 100 years old. Half my block caved in due to a sewer collapse. They estimate all the current backlog of pipes will be done in 100 years. Yes you can start it, but should we bow to political pressure to put off maintaining infrastructure? No. There's a real cost to maintain this stuff. But a political force doesn't want to raise prices so it gets depayed.

kevinburke 2y ago
This has not been the case with the three operators in the Bay Area - Santa Clara, Palo Alto, and Alameda.

blkhp19 2y ago

*cost-effectively — confusing title without the proper adverb hyphenation

deleted 2y ago

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yonran 2y ago

It seems that the bulk of the savings for making an urban municipal utility come from not having to pay for upgrades in fire-prone regions. And the end game is that cities will have their own utilities with lower rates, whereas rural people will be adverse selected to be stuck with PG&E and pay thousands of dollars per month on energy. Wouldn’t it be easier for PG&E themselves to implement this desired rate schedule where urban rates are cheap and rural rates are expensive? It seems odd that the PUC would not allow PG&E to charge extraordinary rates for rural areas today, but they do allow cities to buy up the good parts of PG&E which will inevitably lead to the same outcome in the future.

gunian 2y ago

i miss feudalism the olden times of fiefdoms were so much better than one world humans

thelastgallon 2y ago

Austin Energy pays the city 115 million every year. Austin Energy earns no profits and pays no federal income taxes. All revenues benefit the customers of Austin Energy and the residents of the City of Austin. The primary financial benefit to the City of Austin is Austin Energy’s transfer to the General Fund, which is set by policy and allocated by elected City Council members to municipal purposes such as fire and parks. https://austinenergy.com/about/company-profile/numbers https://austinenergy.com/about/company-profile/numbers

ProllyInfamous 2y ago
The only city utility I've experienced better than Austin Energy is Chattanooga's Electric Power Board (which offers up to 20gb/s fiber to every single electricity customer in their jurisdiction, except some apartment complexes). Inexpensive, reliable, and heavily litigated (just how I like my local utility).

hahamrfunnyguy 2y ago

We have a publicly owned electricity utility. Electricity is cheap and it's and it's a selling point for homes within their service area. The other utility is bad, especially when it comes to billing. People hate it and there has been a big effort from activists to turn it over to public hands. The local politicians are on board for the most part, but the company is of course fighting tooth and nail.

rsynnott 2y ago

Sure, providing power to a city is cheaper per-head than providing it to a large area which includes a lot of rural customers, news at 11. But they probably should not be _allowed_ to do so, because it would make providing power in rural areas at all uneconomic. If you had an electricity market where everyone paid actual cost to deliver power to them, you’re really talking about just having cities.

teknopaul 2y ago

Profit creaming, not good for county even if it seems good in the city. Everytime there is a natural disaster in the US the press report xxxx houses without power. US leccy firms pride the bear minimum service, always. Profit comes first. Delivery second priority at best. This doesn't ofter happen in Europe because they dont profit cream and builds reliable redundant grid for almost everone. The grid even extends beyond countries boundaries, with neighbouring countries supporting each other. Some folk out in the sticks, who you might think don't matter, provide useful services to the city folk. Eg farmers. I.e. Cost the grid not the city. You probably are being ripped off in the US, but that's a different story to the one being told imho. Careful what you wish for.

gottorf 2y ago
The average American utility company nets around 10% return on equity, IIRC. 30-year Treasury bonds can be had today around 4.6%, with none of the risk or headaches of operating a business. Hardly a bastion of profitability. I agree residential electric infrastructure in the US is not nearly as good as it could be. Buried power lines in suburban environments alone could probably cut outage numbers at least by half; but as one of the first countries in the world to electrify, doing that is a lot more expensive than in developing countries. Sometimes there is such a thing as a first-mover disadvantage!

imchillyb 2y ago

Electric, Water, Sewer are modern necessities. Our governments should provide these services to Citizens at no cost to them. We already pay for the maintenance costs and infrastructure is already built out. Charge the companies for the services, and give them to the populace. But, but, but, that's socialism! Taxes are socialism. Take from the many, use that spending power to benefit the people.

temptemptemp111 2y ago

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throwaway984393 2y ago

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r0m4n0 2y ago

Not only am I getting a 14c rate with smud but smud is ask really active in the community. They donate $1000s to my neighborhood association and local maker space. Also a friend is mine wanted 3 phase power ad was researching what it would take. Smud was very helpful and had a simple process while PGE wanted proof of business usage amongst other stuff (heard this all second hand though)

tamaharbor 2y ago

Good luck getting that 4% financing.

a3w 2y ago

What is PG&E should perhaps be on top of the page?