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Comment by floren | Hacker News Reader

Here's the main reason:

> The utility-backed concept suggests poorer Californians are paying higher utility rates to pay for lost profits that utilities endure in order to pay solar owner for delivering clean energy to the grid.

If every Californian reduced their electricity usage by half, PG&E would just double the rate and probably come up with a couple additional fees to tack on as well.

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That isn't the main reason...

The main reason is that a power company defends its existence by generating and delivering as much power as possible.

If everyone had on-site generation and batteries, PG&E would barely be required, and if they were to bill too much, users would just disconnect from the grid entirely (some battery systems can already work without a grid).

To defend their existence, they need to do everything possible to stop homeowners not needing their service. And discouraging rooftop solar is part of that.

Is there any industry in California? Some office buildings? Maybe some datacenters?

I suspect that a power company could concentrate on them and still turn a profit, if 90% of detached houses stop buying electricity from it and disconnect. (But the latter requires a lot of batteries installed.)

Yes there is a lot of industry in California. It typically leads the nation in its manufacturing output. A basic Google search would reveal the depth of the state's manufacturing capabilities. This includes includes aerospace, automotive, chemical and quite a few other products.

Indeed! That was the point, driven home by a tiny morsel of irony. No chance that selling electric power to large consumers in California could disappear any time soon.

I bet the electrical grid operator's margins are much thinner in residential neighborhoods, sometimes maybe even negative.

California should've nationalized PG&E, but this is what they decided instead: continuing to rake ratepayers over the coals.

What would that solve? It would have never the less been subsidized by taxes. (see: LIPA)

Some government owned utility companies are extremely profitable and provide billion of dollars in profit to taxpayers.

A good example is Quebec, they nationalized all the electric corporations in the 1960s and it became a government monopoly.

http://www.hydroquebec.com/history-electricity-in-quebec/tim...

Uh, well, if you get virtually free inputs, after initial construction, from a Lagrande watershed, it's not hard to make profits.

So if PG&E had massive three gorges and itaipu dams they too could offer cut rate electricity just Like Paraguay too has cheap electricity.

How do we get the ball rolling on nationalizing PG&E now?

You turn it into a co-op. California can afford to based on what its residents are already burning in fiat on allowing PG&E to exist, and it's the world's fourth largest economy. Far smaller economies of entire countries have nationalized electrical grids (France is in the process of nationalizing EDF, for example, at a cost of $9.7B; to do so in California would be closer to $2.5B). Your expenses are then governed by stakeholders within the state of California instead of shareholders sucking profits out of a dysfunctional public utility. Taxpayers already subsidize PG&E, so that's not an excuse against nationalizing, they've already Crossed The Rubicon with regards to ongoing state support; any profits shareholders have/would receive are potential re-investments back into the infrastructure. Why are taxpayers subsidizing PG&E shareholders? Subsidize the infrastructure directly!

https://www.nytimes.com/2020/02/07/business/pge-bankruptcy-n...

https://www.eastbaydsa.org/campaigns/pge/

https://www.thenation.com/article/archive/wildfires-californ...

https://calmatters.org/politics/2020/02/what-happens-if-cali...

https://threadreaderapp.com/thread/1182562176667512833.html

https://www.mercurynews.com/2022/04/28/pge-revenue-profit-ri...

Realistically pg&e being a publically traded company (like Twitter was) - California can use money from the budget and send a take over offer over 40 billion. The current market cap is around is 39 billion. They would need to bid a premium to get it approved by the current share holders. Boom it’s done and they can nationalize it.

You look at other states or other countries where the regulations have been configured to work, and model on that.

The most important part is the network infrastructure (power lines, transformers, substations) is a natural monopoly so it needs to be owned by the state. Regulation and incentives keep failing when corporate ownership of the network infrastructure is tried. In New Zealand the national grid https://wikipedia.org/wiki/Transpower_New_Zealand is a “state owned enterprise”, while local low voltage networks and power metering is owned by each local government.

The idea is to use corporate (profit motivated) ownership for generators and retail metered billing to end consumers, but design the market to be competitive for multiple generation companies (don’t allow one generator to have a monopoly in any area) and for consumer choice of who bills them.

https://wikipedia.org/wiki/New_Zealand_electricity_market has a good high-level overview of how everything is configured, and also refers to some of the failures of the regulations. It refers to a disputed study that consumers are overpaying by ~33%, so in theory bills could be reduced with nationalisation. . . although I personally would expect a government department to be more than 33% inefficient, so I don’t think electricity consumers win either way.

How exactly would a state nationalize a company?

Look at your local police or fire department. Imagine if they were private companies. You need to buy the necessary equipment, pay the salaries of the staff, fire the board of directors, and cut out the shareholders.

Fire departments and police departments began as private companies; see the history of NYC. They were nationalized to limit the massive corruption associated with private fire departments (i.e., fire departments deliberately setting fire to rivals' customers).

But to the point: a U.S. state can't nationalize a private company. It simply lacks that power. The closest it can get is buying a private company, or creating a public agency or public-private partnership, all of which California has done before.

> But to the point: a U.S. state can't nationalize a private company. It simply lacks that power. The closest it can get is buying a private company, or creating a public agency or public-private partnership, all of which California has done before.

Or build its own competition. Quite a few califonia cities run their own utilities; Palo Alto started and ran its own phone company (sold to Pac Bell in the late 50s) and cable system (foolishly and destructively sold to crapcast in the '00s) but runs its own water, electricity, and gas system. Several counties run their own utility systems, often in cooperation.

However the high speed rail project suggests that this is not the time for California to enter into such projects. A century ago progressivism flourished, building water, road, and other crucial infrastructure that we still depend on. But the "revolution" of the late 70s and 80s cut away all the maintenance and support for further such projects in the name of ideology.

> But to the point: a U.S. state can't nationalize a private company. It simply lacks that power.

Eminent domain is in both the US constitution and the California state constitution. You usually have to provide compensation of course, but they made a list of exceptions that includes utilities: https://law.justia.com/constitution/california/article-i/sec...

That is for seizing land, not seizing and nationalizing a private business.

The fire conventional wisdom thing is just that: conventional wisdom. Debunked in this week's Tom Scott video.

What is the actual method that a state government such as California (or Arkansas for that matter - I'm sure they would love to own Walmart) can use to seize control of a private company, fire the board of directors, cut out shareholders and then take ownership etc.?

The closest I can find is eminent domain which they can use to obtain privately owned land, but nothing that gives them the power to do what you're describing. Can you point me in the right direction?

If PG&E requires taxpayer subsidies, withhold them and buy the assets out of bankruptcy (negating the need to negotiate with a board, shareholders, or the C-level). Show up to bankruptcy court prepared to wire the funds to the trustee. You want to avoid paying top dollar to people who have a proven track record of mismanaging the enterprise, in order to not reward the behavior.

As a last resort, eminent domain offering fair market enterprise value and an orderly transfer of control.

In bankruptcy, wouldn’t all their assets be encumbered by security interests owned by their creditors/hand holders? Wouldn’t any normal bankruptcy just be a reorganization around the interests of the secured parties? I’m having trouble seeing how an obligation to pay subsidies, be it executory or not, would give the subsidisor any leverage in bankruptcy.

Is the idea that the secured creditors need the subsidy too?

You have a lot of wiggle room to make what you want happen when you're the government, and arguing the finer points until an insolvency event occurs requires copious amounts of speculation. One of the country's largest utilities entering insolvency isn't a normal bankruptcy is a fact I hope we can agree on.

If your suggestion is that a $39 billion utility filing in federal bankruptcy court means that an unsecured counterparty would be given enough “wiggle room” to insist they be paid before secured creditors on the theory that they owe the utility subsidies, then no, we definitely can’t all agree. No bankruptcy would be that abnormal because that wouldn’t be a bankruptcy; the goal of a bankruptcy is to preserve the estate for the creditors, while the model you seem to present destroys the estate for the good of the debtors.

At a bankruptcy auction, assets are sold free of encumbrance. Generally, secured creditors participate in bankruptcy auctions because they would prefer good funds over holding the assets that failed to provide for a solvent business.

Neither of these is nationalization, and both examples you provided that are a different approach of trying to use state power to crush a private business have never been tried or tested in court, where they would fail. So I'm hoping the parent poster can correct their post since there is no method for a US state to nationalize a company. It doesn't exist, and as a fiction, it should be treated as such.

The state of Maryland was famously going to seize the Baltimore Colts. The owner got wind of it, packed the franchise's files into a semitrailer and was across the state line before morning. Sorry, Maryland, it's an Indianapolis team now.

Not quite.

NFL teams are franchises of the NFL, and owners of the other teams have to agree to ownership changes of each franchise. It's also not true that he suddenly "got wind of" anything, he'd been planning to move the team for 7-8 years and had very public spats with the city for years over it. He didn't tell the city ahead of time about the move because they had been at war with each other for many years.

Generally the way socialists nationalize is by bankrupting the company with massive tax bills, fines, or price caps. They then take control out of bankruptcy or buy the company for a pittance.

NYC took control of the subways by capping fares which bankrupted the private operators.

There are already public utilities in California. LA, San Diego, and (I believe?) Sacramento already have them. San Diego performed better in both of the brownout times, including 20 years ago-ish.

Palo Alto as well: electricity, natural gas, water, sanitary sewer, and commercial fiber optic services.

<https://www.cityofpaloalto.org/Departments/Utilities>

An existing public utility is nothing remotely close to seizing an existing private company and nationalizing it.

The more accurate term would be muncipalisation.

This is commonly practiced in various city and county services: fire and police services, ambulance, public transit (virtually all extant bus and rail services began as privately-owned companies), school bussing, schools, childcare, parks and recreation, utilities (water, rubbish, electricity, gas, Internet, sewerage, ...), etc.

There's a long history of this, in California and elsewhere.

The Wikipedia article unfortunately doesn't dive much into the details of mechanism though it does point out numerous instances and issues.

<https://en.wikipedia.org/wiki/Municipalization>

Where I live, my electricity is maintained and provided by my town. I pay less than nearby towns that use National Grid.

That's how.

You seem to have misread the sentence. Having a municipality that runs a utility is not at all related to how a US state could seize the assets of a private company, fire the Board of Directors and steal the ownership shares from all of its investors (large or small) in order to make it a state run enterprise.

So no, that's not how.

I did misinterpret the point of issue.

However, lets say that California couldn't seize PG&Es assets directly (transmission lines, etc.) - that doesn't really matter as California can force PG&E's hand, given that they could easily put them out of business.

California is in control, it just doesn't have the political capital to do what's needed.

Google the minutes from a PG&E and PBUC meeting. PG&E can’t replace a fence around a substation without PBUC approval.

PG&E is privately funded but effectively managed by the state.

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