Thursday, November 18, 2010

The Pee Genie - How We're All at Risk

The Pacific Gas & Electric Company services customers for gas and electric utility use throughout Central and Northern California--as seen by the blue area on the map below.

The history of America's industrial/urban expansion is in large part due to the harnessing of sources of reliable energy. The Pacific Gas & Electric Company was formed from the consolidation of a number of smaller entities, which finally became known by its present name in 1905. PG&E has always been a privately held company, run for the benefit of its shareholders. In addition, it has held what amounts to a monopoly over its service area, since there are no significant competitors. Like any privately held company, it is run in such a way as to minimize costs, and maximize profits.

But utilities aren't really like ordinary products of commerce, where supply and demand can be allowed to fluctuate along with market conditions. People need water, and power, and sewer systems, and telephones every day, and they need to be able to count on their being there, on demand.

In full acknowledgement of that reality, we have set up regulatory agencies to ride shotgun over the privately held and run utility companies. Known as The California Public Utilities Commission (before 1946 known as the Railroad Commission of the State of California), it meets publicly twice a month to carry out the business of the agency, which may include the adoption of utility rate changes, rules on safety and service standards, implementation of conservation programs, investigation into unlawful or anti-competitive practices by regulated utilities, and intervention into federal proceedings which affect California ratepayers.

The general public's interest is represented by the Commission, but the regulation of utilities, like every other large commercial enterprise, is a controversial matter, and subject to all kinds of influences, predominantly by the very industry, in this case, that the Commission is created to oversee. Rate increases have traditionally been the most closely watched decisions by the Commission, though a lot of interest is also generated from proposals to build new generating facilities, especially among those sensitive about environmental problems which result from such projects.

During the late 1990's the State of California decided to allow PG&E to sell off most of its natural gas power plants. The justification was that the resulting "increase in competition" among generating entities would result in reduction in costs and rates. There were many who feared what might happen if publicly regulated utilities, under requirement of law to sell power at fixed rates, were forced by market conditions to pay higher prices than they could recoup in charges to customers. And this is precisely what occurred.

Over the decades, there had developed a wholesale market for energy trading, much like a stock exchange or board of trade, for utility "commodities", such as electricity and gas. The deregulation of power generation, coupled with the de-accession of generating facilities by PG&E, had the effect of requiring the utility to buy power from the energy generators at fluctuating prices, while being forced to sell power to consumers at a fixed cost. However, the market for electricity was dominated by the Enron Corporation, which, with help from other corporations, artificially pushed prices for electricity ever higher. This led to the California electricity crisis that began in 2000, on a transmission corridor PG&E had built. With a critical power shortage, rolling blackouts began in January 2001. As a result of this deregulation and subsequent fraudulent pricing schemes by Enron, PG&E went bankrupt in April 2001. The State of California bailed out the utility, at enormous cost to the California taxpayers. The resulting fiscal crisis was in large measure responsible for Governor Gray Davis's recall, and subsequent election of Republican Arnold Schwarzenegger.

There are a number of ironies here. De-regulation had been advocated by Republican lawmakers in Sacramento. Enron Corporation had had close ties to President Bush II (through his friendship with CEO Ken Lay), and VP Dick Cheney had been instrumental in shielding Enron Corporation from legal challenges, and in (secretly) lobbying against the Federal Government's responding to California's appeals to the Federal Trade Commission and Congress for assistance and intervention. Enron, of course, was a fraudulently run operation, which itself in due course went bankrupt, bilking employees and shareholders out of billions, and leaving the State of California and its utility generation in a holy mess.

In the years since then, new crises have emerged for Pacific Gas & Electric. Last year, the utility began installing new "Smart Meters"--automated metering devices which don't require a manual "reading" but instead transmit usage in real time directly back to a central control system. This is part of a new push to implement what it calls "dynamic rate" pricing, which will allow the company to adjust rates continuously, instead of "averaging" usage to determine rolling charges. Though it's supposed to allow people to "save" through voluntary "savings" it's almost certainly intended to facilitate higher prices through "peak" pricing. Almost immediately, many customers who'd had the new Smart Meters installed (in most cases, without their knowledge or approval), noticed their rates were increasing rapidly, sometimes by two or three hundred percent or more (!) per month. This led to a public outcry and protest, in some cases motivating customers to lock up their old meters so PG&E couldn't install the new ones! The Smart Meter controversy has taken several turns in the intervening months. What seems clear is that PG&E didn't adequately design or test these devices prior to approving them, and that their real purpose is to increase rates through "automated" price-structuring schemes.

A Smart Meter was installed at our house; it just appeared one day on the side of the garage. Usually, PG&E gives people a warning notice when they're planning to enter your property. But no such notice was ever delivered to us. They deliberately installed these meters "secretly" so that people would not have the opportunity to question or object to their installation.

Finally, on September 9, 20120, a residential gas main in San Bruno, California (just south of San Francisco), blew up, setting a whole neighborhood aflame, killing seven, injuring scores more. In the aftermath of this tragedy, it was revealed that Pacific Gas & Electric knew it had dozens of main line sites in the immediate Bay Area which were antiquated, in need of repair, and which had not been inspected for years. And the utility had had no immediate plans for upgrading or repair.

We live on a hillside in the East Bay Hills, in a notorious slide zone which undergoes continuous "creep"--year in, year out--and which necessitates the routine semi-annual, unscheduled repair of water, sewage and gas line mains in the streets and along alley rights-of-way. About five years ago, on the street below ours, a gas main leak developed, and the smell could be detected three blocks away. PG&E responded to customer reports, but was unaware of the problem until it was brought to their attention. This could easily--knock on wood--have developed into a major incident, had that leaking gas been inadvertently ignited.

As a matter of course, I tend to distrust large private corporations, because I know that in their day-to-day operations, they always come down on the side of "efficiency" and "cost-savings" rather than safety and customers' convenience. The California Public Utilities Commission usually rubber-stamps every request by PG&E, capitulating to utility rate increases, and the passage of special assessments and fees to reimburse itself for "unforeseen" developments (like the San Bruno explosion and fire). Unforeseen, my eye!

There's an inherent contradiction between the profit motive of privately run, money-making companies, and the public interest. When a utility fails to put the interests of its customers first, the consequences can be huge, and devastating.

No comments: