I remain several book reviews behind, but I decided to move this one up the queue since it narrates the story of how a regulated monopoly utility (PG&E) ultimately caused a wildfire that killed many people. Given what recently happened in Lahaina, where so many people died for what will almost certainly turn out to be completely avoidable reasons, this book is quite topical, and if you have any interest in wildfire, or badly behaving utility companies, or energy as a policy issue, I highly recommend it. Special thanks to the indomitable Gregg D, who recommended it to me.
First, the grades:
Readability: A+
Ideas: A
Conciseness: A-
Overall grade: A
The book was written by a journalist; her writing is easy to read, and she explains concepts succinctly. She gets into the long history of PG&E, which is quite checkered. For example, you may or may not remember that PG&E was the company Erin Brockovich sued for allowing hexavalent chromium to leach into the groundwater around her town. PG&E’s failures were also behind the 2010 San Bruno gas explosion that leveled a bunch of homes and killed 8 people. And of course, PG&E’s transmission lines sparked the fire that destroyed the town of Paradise and the Camp Fire a year later that killed a bunch of people.
As always, my interest in writing about this book has to do with what ideas are in it that should be of interest to conservatives generally, and California conservatives specifically. Here are some thoughts about that:
The entire use case of a “regulated monopoly utility” like PG&E is that once someone builds a set of transmission lines to your house, it doesn’t make any economic sense for a competitor to *also* build a set of transmission lines to your house, so you just end up with a bunch of local monopolies. Thus, says this school of thought, it is better for the government to just anoint a company as a monopoly, prevent any competition, and then force the anointed monopoly to accept government-imposed limits on its pricing.
In California, those limits are imposed by the California Public Utilities Commission (CPUC), which is one of those very important agencies that few people have heard of and even fewer ever think about. It is a 1000-person bureaucracy headed by 5 commissioners, all appointed by the governor. It’s yet another reason why whom you vote for in a governor’s race really matters.
Unfortunately, a tradeoff of this whole system is that someone, the CPUC in the case of California, has to decide what costs the utility itself has to pay for, and what costs it gets to pass on to customers. Any cost borne by the company comes out of profits and is therefore effectively paid for by the company’s shareholders, and any cost passed on to customers is obviously borne by the customers.
Here in CA, new capital expenditures are allowed to be passed on to customers in the form of rate hikes and special fees. Routine maintenance is not allowed to be passed on, and hence maintenance lowers profitability. Therefore, the financial incentive of any regulated utility like PG&E is to do as little maintenance as it can possibly get away with. The result: neglected maintenance was the cause of every one of the disasters described in the book; for example, the Camp Fire was caused by a transmission line hook that broke- something that shouldn’t be particularly surprising given that said hook was purchased in 1919 for 56 cents, installed, and then never inspected, repaired, or replaced in the 100 years that followed.
Thus, the viability of our current system hinges on someone holding utilities like PG&E accountable for doing the maintenance it is supposed to do. Theoretically that is the CPUC. But the CPUC chose to put all its energy into pressuring PG&E to hit renewable energy targets, even though that produced the most expensive energy prices for consumers in the nation. It ignored its obligation to monitor what PG&E was (or more precisely, wasn’t) doing on the maintenance side, all in service of its renewable energy agenda. By the way, it remains the case that CA has tremendously high energy costs; we currently rank behind only Hawaii and Alaska.
In the end, California is saddled with an overly concentrated, too-big-to-fail-but-also-too-big-to-manage energy system that has no market discipline and suffers from political cronyism in its supposed “oversight” body. That system produces some of the nation’s highest-cost energy in a state that loudly screeches about how committed it is to “equity”, all while routinely producing disasters that (a) cost billions of dollars in damage and (b) increasingly kill people. Frankly, the energy system is just a synecdoche for the government of California broadly, after a generation of virtually unbroken supermajority rule.
The other day I listened to a presentation by Noon Energy, an innovative company in my district which has some really exciting, potentially game-changing battery technology. My liberal friends will be excited about it because of its potential to solve the problem of how intermittent wind and solar are as energy sources. But we as conservatives should be excited about it because low-cost, scalable, high energy density, long-duration battery storage makes possible a policy of deregulating the energy sector, moving to microgrids and more local energy production and distribution, which in turn means more local control/accountability, and then substantially reining in unaccountable 1000-person bureaucratic power centers like the CPUC. Thinking about that should set your conservative heart aflutter.
But trying to do that will be one helluva dogfight, because 1000-person brueaucratic power centers are, well, powerful, and there’s a great chapter in the book in which governor Newsom in 2019 is faced with an opportunity to make a tough move in that direction:
“A takeover was possible, but not without a fight. Ultimately, Newsom chose the status quo.”
That’s governor Newsom in a nutshell.
In the end, if you want to fight a fight against a large institutional bureaucracy, your odds are far better if you hitch your wagon to a conservative train. That’s something to think about as you weigh your options in this upcoming election cycle.