Would Non-Profit Utilities Cure What Ails California Electricity?

That is the title of Severin Borenstein's typically insightful and fair-minded overview of the issues on the Berkeley-Haas Energy Institute blog. He summarizes various more or less convincing arguments for preferring a publicly or cooperatively owned non-profit utility to a regulated private monopoly such as PG&E. His bottom line is well-hedged: "What’s clear to me is that converting PG&E to a public or cooperatively-owned utility would not be the silver bullet that creates a more efficient, reliable and safety-oriented electricity provider for Northern California. It would at best be just the beginning of a long road to re-invent the utility."

One important point he makes, which I had not thought much about, is that there is a serious risk of rich, urban service areas peeling off parts of PG&E to form local public providers, shifting the bulk of the fire risk onto more rural, poorer areas:

It’s not a coincidence that the first area to advocate for making their part of PG&E territory into a public entity has been the city of San Francisco, an urban area in which the power lines pose very little wildfire risk. It is possible that PG&E is too big, and the best solution is to break it up, but it is certain that carving off the low-fire-risk areas will leave the more wooded and rural — and, on average, poorer — parts of its service territory where the fire risk is highest. No one is going to want to be the public (or investor-owned) power provider for those areas unless someone else covers the wildfire liability. Without a holistic plan to provide power in all of PG&E’s service territory, cherry picking what are now the low-cost areas will just create massive wealth transfers and exacerbate inequality.

He also points out that the dividing line between public and private is not so clear when an investor-owned firm is publicly regulated. In his view, justified skepticism about the quality of regulatory oversight under the California Public Utilities Commission (CPUC) ought to raise similar questions about the ability of a purely governmental entity to run the whole system safely and effectively:

In fact, many advocates for public or customer ownership are also the most outspoken critics of the CPUC. If they think that the CPUC, a state agency, is such a failure, why are they so confident that a government agency (or a non-profit coop) running the utility will be a success?

I take his point, snarky as it is, but there is a potentially important factor differentiating government-regulated from government-owned: the potential for "capture" of the regulators by the regulated. "Capture" is one word that one cannot find in Borenstein's post. I don't know enough about the CPUC to know whether its apparent failures in regulating PG&E are a function of incompetence, under-resourcing, bad luck, regulatory capture by the regulated entities, or some combination. But transferring ownership from rich investors with powerful interests potentially at odds with the interests of the public could improve things. On the other hand, capture of a state-owned enterprise by powerful stakeholders who are similarly conflicted cannot be ruled out...