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> 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%. This is addressed right at the beginning of

> 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%. This is addressed right at the beginning of the article. The argument is not that PG&E is skimming off huge profits, rather that it is structurally inefficient: > Distribution: How much to get the power from your local substation to your house over local power lines. In PG&E's rate chart, they charge 20 cents per kilowatt hour for this. That just does not match up with how much it actually costs them to transmit power over local lines and keep the lines maintained. > Everything else: Operations, maintenance, profit. This is where PG&E is actually seeing large expenses, because their coverage area is massive, it costs a lot of money to deliver power to rural customers, and they are also undertaking a massive project to underground utility lines in fire-prone areas. The backstory here is that PG&E underfunded maintenance for decades while paying out substantial dividends to shareholders, and now that fires are killing lots of people, they have to go back and properly maintain their network. Now, you can make the case that CA as a whole might not be better off if cities leave PG&E and the state has to subsidize rural power delivery even further, but I think the article is correct on the question that it tackles.

kevinburke 2y ago
I'm the author here. The cost savings come from not having people who live in cities pay for undergrounding lines and maintaining power lines in rural areas. Maintaining the city networks is much cheaper. This is why Santa Clara, Palo Alto and Alameda's power companies can deliver power for half of what PG&E can. You can just copy their cost structure.
- nocoiner 2y ago
  Cool. Now you’ve just undone 70 years of rural electrification in the United States. Optimizing for factors other than universal service is completely valid, but I’m guessing each of those municipal power systems pre-dated rural electrification and thereby get to somewhat free ride on the system more than anyone would reasonably allow Walnut Creek to do in the year 2025.
  - msandford 2y ago
    It's probably more efficient for society to subsidize micro grids using solar and wind and batteries for rural electrification than to bury all the power lines that it'll take. A $100 million project to bury the lines to 1000 houses is $100k per house which just ain't worth it. Not saying this is a real number but it could easily be if it's costing $0.20/kWh to do distribution.
  - kevinburke 2y ago
    Not just rural areas but places like Orinda and the Berkeley Hills where I will pay to underground lines at massive expense. There is also a huge moral hazard problem where we make it cheaper than it should be to live in fire zones by subsidizing electricity and insurance. So people build a lot of houses in fire territory that burn down. In the meantime we make it more expensive to live in the safe places. We should stop doing that
    - nicbou 2y ago
      This is very close to the arguments Strong Towns make in favour of denser neighbourhoods. https://www.youtube.com/watch?v=7Nw6qyyrTeI https://www.youtube.com/watch?v=7Nw6qyyrTeI
    - rsynnott 2y ago
      The trouble is, if you end the subsidisation overnight, you have a big, big problem.
  - toomuchtodo 2y ago
    Rural electrification was needed at the time. In many cases, it no longer is (distributed generation, microgrids, etc vs large, distant generators having to transport power to residential load centers). This is very similar to how Africa will leapfrog the legacy model with cheap solar and batteries. In Australia, they have a model of colocating stationary battery storage in neighborhoods to balance buffer solar production locally for time shifting purposes (vs shipping that power far only to bring it back in the evening).
- bunabhucan 2y ago
  You said in the article "PG&E rejected this offer for being too low" but then proceed to use that as the baseline cost that drives the rest of the estimates, that doesn't make sense. If I offer someone minimum wage to do my job and they refuse, I don't start a spreadsheet to calculate my savings. Boulder CO tried municipalization with Xcel and the gap between the city offer and Xcel position was very large. How do your figures look if you double the price and/or add in a decade tail of having to pay 25% of billing to PG&E? The small munis you mention are in the same position as PG&E with respect to owning decades old poles and conductors with decades of life remaining. The incumbent has all the cards in this negotiation. An existing muni can do it cheaper for the obvious reasons you stated - legacy network, all the customers are close together. Buying the most profitable bits of the PG&E network at a price they would agree to would not be profitable.
  - kevinburke 2y ago
    This is why I adjusted SF’s offer for population and then multiplied it by 50%, then used 400 million as the base for financing. Financing at 4% interest is not the expensive part though. Even if the price was $1 billion it would be 6 cents per kWh. I agree it would be bad if they had to fight in court for a decade! But you have to start somewhere and as I mentioned you might get a good outcome just from threatening to do it. My hope is the CPUC would force them to accept some offer.
    - bunabhucan 2y ago
      In Boulders case the goal wasn't to strand rural customers with resiliency costs but to reduce emissions. Xcel moved in that direction enough that Boulder didn't need to municipalize. Owning poles and jiggling electrons would have allowed the city to do things like let homeowners access the 4% muni borrowing rate for solar loans that stay with the property via a tax lien. With the existing structure of public regulator and local monopolies, Xcel can't easily do anything "special" for Boulder without forcing poor rural places to share the costs.
- rsynnott 2y ago
  The problem is, if cities don’t pay for that, who will? Just abandoning electricity for rural areas isn’t _really_ an option, but it would likely be uneconomic without the effective subsidy from urban areas.
  - maxerickson 2y ago
    The area I live in has utilities that service the small town population centers and a utility that services most of the outlying rural area. The rural operator is expensive, but not unaffordable. Density including the towns is about 3.2 people per square km.
    - rsynnott 2y ago
      Who paid for the infra, and how old is it? If it was inherited from a prior larger utility, this is the sort of thing you can get away with, for a while, until it needs serious maintenance. But ultimately spreading the true lifetime cost of electrical infrastructure over that sort of population density without subsidy is going to lead to absurdly high prices.
      - maxerickson 2y ago
        It formed from smaller utilities ~1950. We have harsh winters and some small thunderstorms, but that's about it for weather. Looks like people end up paying close to $0.30 per kwh. There's probably some cross subsidies coming from the state, I don't know.
        rsynnott 2y ago
        Yeah, I’d be _amazed_ if that isn’t subsidised in some way, whether via direct subsidy or risk equalisation fees from bigger utilities.
  - screye 2y ago
    Story of America. There's a reason only this continent has excessive sprawl. Ideally, rural areas pay up. Good forcing functions for change. Maybe people move closer together (similar to European villages) or they become energy-independent (solar panels). If that's politically untenable, then I'd like to see the cost reflected as a city2rural subsidy. Cities get enough hate in the US. I'd like explicit recognition of their generosity.

kevinburke 2y ago

I'm the author here. The cost savings come from not having people who live in cities pay for undergrounding lines and maintaining power lines in rural areas. Maintaining the city networks is much cheaper. This is why Santa Clara, Palo Alto and Alameda's power companies can deliver power for half of what PG&E can. You can just copy their cost structure.

nocoiner 2y ago
Cool. Now you’ve just undone 70 years of rural electrification in the United States. Optimizing for factors other than universal service is completely valid, but I’m guessing each of those municipal power systems pre-dated rural electrification and thereby get to somewhat free ride on the system more than anyone would reasonably allow Walnut Creek to do in the year 2025.
- msandford 2y ago
  It's probably more efficient for society to subsidize micro grids using solar and wind and batteries for rural electrification than to bury all the power lines that it'll take. A $100 million project to bury the lines to 1000 houses is $100k per house which just ain't worth it. Not saying this is a real number but it could easily be if it's costing $0.20/kWh to do distribution.
- kevinburke 2y ago
  Not just rural areas but places like Orinda and the Berkeley Hills where I will pay to underground lines at massive expense. There is also a huge moral hazard problem where we make it cheaper than it should be to live in fire zones by subsidizing electricity and insurance. So people build a lot of houses in fire territory that burn down. In the meantime we make it more expensive to live in the safe places. We should stop doing that
  - nicbou 2y ago
    This is very close to the arguments Strong Towns make in favour of denser neighbourhoods. https://www.youtube.com/watch?v=7Nw6qyyrTeI https://www.youtube.com/watch?v=7Nw6qyyrTeI
  - rsynnott 2y ago
    The trouble is, if you end the subsidisation overnight, you have a big, big problem.
- toomuchtodo 2y ago
  Rural electrification was needed at the time. In many cases, it no longer is (distributed generation, microgrids, etc vs large, distant generators having to transport power to residential load centers). This is very similar to how Africa will leapfrog the legacy model with cheap solar and batteries. In Australia, they have a model of colocating stationary battery storage in neighborhoods to balance buffer solar production locally for time shifting purposes (vs shipping that power far only to bring it back in the evening).
bunabhucan 2y ago
You said in the article "PG&E rejected this offer for being too low" but then proceed to use that as the baseline cost that drives the rest of the estimates, that doesn't make sense. If I offer someone minimum wage to do my job and they refuse, I don't start a spreadsheet to calculate my savings. Boulder CO tried municipalization with Xcel and the gap between the city offer and Xcel position was very large. How do your figures look if you double the price and/or add in a decade tail of having to pay 25% of billing to PG&E? The small munis you mention are in the same position as PG&E with respect to owning decades old poles and conductors with decades of life remaining. The incumbent has all the cards in this negotiation. An existing muni can do it cheaper for the obvious reasons you stated - legacy network, all the customers are close together. Buying the most profitable bits of the PG&E network at a price they would agree to would not be profitable.
- kevinburke 2y ago
  This is why I adjusted SF’s offer for population and then multiplied it by 50%, then used 400 million as the base for financing. Financing at 4% interest is not the expensive part though. Even if the price was $1 billion it would be 6 cents per kWh. I agree it would be bad if they had to fight in court for a decade! But you have to start somewhere and as I mentioned you might get a good outcome just from threatening to do it. My hope is the CPUC would force them to accept some offer.
  - bunabhucan 2y ago
    In Boulders case the goal wasn't to strand rural customers with resiliency costs but to reduce emissions. Xcel moved in that direction enough that Boulder didn't need to municipalize. Owning poles and jiggling electrons would have allowed the city to do things like let homeowners access the 4% muni borrowing rate for solar loans that stay with the property via a tax lien. With the existing structure of public regulator and local monopolies, Xcel can't easily do anything "special" for Boulder without forcing poor rural places to share the costs.
rsynnott 2y ago
The problem is, if cities don’t pay for that, who will? Just abandoning electricity for rural areas isn’t _really_ an option, but it would likely be uneconomic without the effective subsidy from urban areas.
- maxerickson 2y ago
  The area I live in has utilities that service the small town population centers and a utility that services most of the outlying rural area. The rural operator is expensive, but not unaffordable. Density including the towns is about 3.2 people per square km.
  - rsynnott 2y ago
    Who paid for the infra, and how old is it? If it was inherited from a prior larger utility, this is the sort of thing you can get away with, for a while, until it needs serious maintenance. But ultimately spreading the true lifetime cost of electrical infrastructure over that sort of population density without subsidy is going to lead to absurdly high prices.
    - maxerickson 2y ago
      It formed from smaller utilities ~1950. We have harsh winters and some small thunderstorms, but that's about it for weather. Looks like people end up paying close to $0.30 per kwh. There's probably some cross subsidies coming from the state, I don't know.
      - rsynnott 2y ago
        Yeah, I’d be _amazed_ if that isn’t subsidised in some way, whether via direct subsidy or risk equalisation fees from bigger utilities.
- screye 2y ago
  Story of America. There's a reason only this continent has excessive sprawl. Ideally, rural areas pay up. Good forcing functions for change. Maybe people move closer together (similar to European villages) or they become energy-independent (solar panels). If that's politically untenable, then I'd like to see the cost reflected as a city2rural subsidy. Cities get enough hate in the US. I'd like explicit recognition of their generosity.