Two summers ago, the Camp Fire became the deadliest wildfire in California history, killing 85 people and destroying almost 19,000 buildings. As of June, 90% of the town of Paradise — a population that previously numbered more than 26,000 — remains displaced. Pleading guilty afterward, PG&E admitted blame for the fire, paying a $4 million fine and billions of dollars in settlements. In 2016, a fire at the Ghost Ship warehouse in Oakland killed 36. PG&E was also sued in relation to this fire. In fact, since 2015, PG&E has been found at least partly responsible for more than a dozen major fires, each one in connection to unsafe equipment or inadequate safety practices.
Last year, in an attempt to prevent even more fires, PG&E shut off power to 2.5 million people in California for almost a month, and as I write this op-ed, California is facing extensive rolling blackouts.
But despite having to live under potential threats of fire and blackout at the hands of PG&E, Californians still pay the seventh-highest rate for electricity in the entire country, more than 60% higher than the national average. PG&E has been allowed to have an electrical monopoly over much of California, and in doing so, has proven exactly why private monopolies should not be allowed.
Although electricity is considered a public utility, PG&E still operates as a for-profit business. A for-profit model does not incentivize companies to act safely or keep prices low. Maintaining equipment properly, replacing aging equipment and enforcing safety standards are expensive tasks that increase a company’s operating expenses and decrease its profit.
With a for-profit model, PG&E and other for-profit utility companies are incentivized to cut costs by overlooking safety, and it is exactly the failure to abide by these safety protocols that has caused many of the disasters resting at the feet of PG&E.
Free market capitalists among us would say that these incentive structures are outweighed by competition in the marketplace. They will say companies are in fact incentivized to be safe and offer lower prices and better products because if they do not, they will lose customers to companies that do. Perhaps that is true in other situations, but not when one company has a monopoly. Most residents of Northern and Central California have no other utility to choose from and must agree to whatever terms PG&E offers.
PG&E isn’t alone. Many utility companies have legal monopolies in their regions. Because of the high cost of building and maintaining electrical grids, it is often impractical or impossible for new companies to emerge or for startups, even well-funded ones, to have any chance of competing with established utilities.
Because of this dynamic, the best way to give Californians a better and safer experience is to bring PG&E under the control of the state and operate the utility as a public service. Because it answers to the public, the state government is incentivized to maintain safety and keep prices low, else its leaders answer for their decisions in the next election. State control of PG&E provides us with an opportunity to resolve the twin challenges of California’s electricity: price and safety.
Further, when PG&E is incorporated as a public service by the state of California, it should operate with a tax-funded model. It should not charge the consumer directly but rather base its finances around taxation, as should all public services.
We do not ask the military to make a profit. We do not ask roads or schools, in most cases, to make a profit, nor do we ask unemployment benefits to do so. We have instead agreed these are necessities that provide broad societal benefits and are worthy of being supported by society as a whole. Electricity is another such service. Additionally, by using a progressive tax structure, the cost burden of a tax can be shifted off of those who can least afford it, providing relief to Californians who are struggling.
The purpose of a for-profit company is to benefit itself. The purpose of a government is to benefit the people. We should not let our most important public services be controlled by those who seek first and foremost to benefit themselves.