Typically in markets like CA and TX you will have a rate case go to the public utility commission. I'm more familiar with Texas' approach (it was a data source for my dissertation); the idea is to let the companies charge enough to cover reasonable costs.
No, it won't, because PG&E doesn't have the money to do this, and the company is already majority-owned by the PG&E Fire Victim Trust after emerging from bankruptcy.
There are no rich shareholders to foist the costs on. No investors are going to pay tens of billions of dollars, more profit than PG&E generated over several decades, to pay for 10% of the electric wires to be buried. If there were any investors on the hook for this, they would simply declare bankruptcy and walk away.
The only option here is that the costs are paid by ratepayers, or taxpayers. There is no other option available.
I see, thanks for explaining. That would have made for a nice addition to the article. :)
IMHO an infrastructure of this size & importance might just as well be state owned, but I guess rate hikes will also do. As long as there is some mechanism to help (yes, probably with tax money) those who might not be able to afford them...
in that case why have owners at all? it should basically be nationalized then. otherwise taxpayer paying the cost without really reaping profits (if there are/will be any)
Because government-run electric utilities are a mixed bag too. "Public" utility monopolies like PG&E are an attempt to get some of the benefits of a market system from what is fundamentally a government service. The utility can raise money from investors, who expect a modest but stable return. In theory, the profit motive gives the utility an incentive to keep costs in check.
It's far from perfect, but actually-public utilities are responsible for a lot of disasters too. It's not obvious that nationalizing PG&E would be good for anyone.
Except they have regulated profit margins - it's cost-plus. So they have an incentive to make everything as expensive as possible to maximize their take. And the CPUC rubber stamps everything the utilities ask for.
CA has some of the most expensive electricity in the nation. So it doesn't seem like the idea worked out.
I can’t find it now but a while back someone posted the meeting minutes from the CA PUC review of PG&E’s budget. It had stuff like “request to replace chain link fence for $175k - denied” and it was a 1,000+ page document.
PG&E has to get approval for their spend from the PUC and for any rate hikes.
In practice I have no clue how it works out though.