
PG&E files for bankruptcy - pxeboot
https://www.latimes.com/business/la-fi-pge-bankruptcy-filing-20190129-story.html
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mindentropy
I partly remember seeing this company outsource all the work to my former
company. Digging a little deeper you can see that the company in its final
years laid off all the workers and outsourced most of its operations.

It looks like a pattern now. If you see a company outsourcing everything and
laying off its own workers it means that the company is not going to survive
for long. Whenever the management feels that workers are a problem and not the
way it operates its business that company will soon die in the next few years.

~~~
freddie_mercury
You think PG&Es problem was outsourcing and not Californian law making them
liable for wildfire damages even in the absence of negligence?

That's....a novel take.

~~~
slashink
Interested to hear your full angle on this, not trying to flame bait here but
genuinely curious.

~~~
colechristensen
My impression based on limited information is that many of the areas were so
overloaded with dry dead vegetation that who sparked the otherwise inevitable
fire should be irrelevant. The state forcing liability like it is amounts to
nothing but a back-door tax propping up areas which should be uninhabited
because of the risk.

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salawat
Why is it acceptable to privatize profit, but socialize risk again?

A company shouldn't have carte Blanche to pass the cos of it's incompetence
and neglect on to the customer. If anything, they should have their rates
frozen until such time as they have made whole all those who have been harmed.

It _is_ okay for companies to die. It should happen.

~~~
manfredo
Probably because the risk is such that no industry would go into that business
if costs weren't socialized to a degree.

> If anything, they should have their rates frozen until such time as they
> have made whole all those who have been harmed.

So the fire apparently started because PG&E didn't have the resources to
properly maintain rural lines. And the response is to further deprive them of
funds?

This is what I'm talking about here. If PG&E is supposed to shoulder the
burden of forest fires caused by downed lines, then electricity is going to
get a lot more expensive. I'm not sure where this idea that utilities are
supposed to take more responsibility for risk while simultaneously dropping or
freezing rates. That's not how money works. More risk means higer costs.

~~~
olliej
Which is why utility companies get tax breaks, direct tax funding, and legal
monopolies.

What you’re saying is the current system of _zero_ risk, high gain, is
acceptable.

In this case pg&e deliberately chose not to perform maintenance on their
lines, despite turning a profit (meaning they could afford to do more) and
despite receiving tax payer money specifically for the purpose of that
maintenance.

Instead the issued dividends to private people and orgs, and to executive
bonuses.

Those people have now have that money, a lot of which already came from
taxpayersz the same tax payers that have now been left with the bill for
damage caused by pg&e not doing what it had agreed to do.

That is a pretty canonical example of heads I win, tails you lose.

In fact as long as companies are allowed to behave like this (eg with no
criminal liability in management), there is no downside to this kind of theft.

~~~
rayiner
Utilities do not generally get tax breaks, or direct funding. What they do is
endure regulated rates and low profit margins in return for a low risk
business (e.g. getting a legal monopoly). Forcing them to bear massive,
unlimited risk, while having their rates regulated to ensure modest profits
totally breaks the model.

At the end of the day, we depend on private capital to build our electric
grid. It’s not public money building power lines and transmission stations.
There is a business case for investing in a utility, where you might eke out
5-10% profits, but are guaranteed that your business won’t be obsolete
tomorrow or be in the hook for huge liabilities. That can be an alternative to
investing in say something like Facebook where you’ve got 25% profit margins
but a business that could be obsolete in face of the next new thing. Low
profits _and_ massive risk of your shares becoming worthless makes it very
unattractive to investing in that infrastructure.

~~~
olliej
The "private capital" you're talking about is largely on top of the massive
funds from government sources. In most countries it was _entirely_ built out
by central governments.

Re: taxes - please look at your line items and notices the various "fees"
you're charged.

I think the problem here is that you believe that utilities should be
generating massive profits. Given they're backed by the state - PG&E literally
got laws made to retroactively reduce their liability - then _any_ profit that
they make or distribute is tax payer money.

Let's put this super simply:

Let's say the company makes $X a profit, and distributes $Y to shareholder and
executive remuneration (annually).

After N years they have made N _$X, given out N_ $Y to owners, etc, their bank
balance is Z=N _($X-$Y) (obviously exact amounts change year to year, but we
're being simple here). If Z is less than 0 then they've been running at a
loss for N years, and we'd have no problem saying they should go bankrupt -
they would have long since lost the ability to get loans, etc.

Now, let's say this is a public utility, then their annual profit is made up
of:

1\. Revenue in the form of below market resources costs (e.g. they don't pay
market rates for land) 2\. Revenue from state granted fees 3\. Other tax
related subsidies

So lets put these altogether and say $X = (actual profit) + $T (T=tax payer).

So after N years, they've received N_$T funds. So if their bank balance is
below $T, and $Y is greater than zero, they have been running at a loss, and
they've been paying out the owners with tax payer money. Eg. they are taking
tax money that is intended to support the utility and divesting it.

This is what PG&E did.

They took fees, and they took tax payer money. Then they "reduced" their
expenses by reducing maintenance. That gave them a "profit" they divested to
private interests. Now, when the costs of their failure to maintain
infrastructure came due they couldn't afford it. Which means they're now
taking even more tax payer money. Even if the company is taken apart, that
money doesn't cover the costs they have inflicted.

~~~
fingerlocks
I believe may be confusing investor-owned utilities like PG&E with government-
owned public utilities. PG&E does not receive taxpayer money. They are a
private company such that their entire revenue stream is dictated by a
government commission [1]. The commision-fixed pricing benefits the consumer
because we pay less than what electricity is "actually worth". The drawback is
that PG&E cannot afford to mitigate risks such as forest fires. Presumably, if
the "true price" of electricity included the costs required to prevent forest
fires, it would be significantly higher.

[1][https://www.energy.ca.gov/pou_reporting/background/differenc...](https://www.energy.ca.gov/pou_reporting/background/difference_pou_iou.html)

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momentmaker
Perhaps the only people less worthy of receiving a bonus of any kind than the
Moody's and S&P analysts who as recently as three weeks ago rated now bankrupt
PG&E as investment grade is the management of PG&E, which one year after the
most destructive fire in California history sparked, literally, another "most
destructive fire in history" with no hedges or fallbacks in place. And yet as
part of its first day bankruptcy motion, the California utility that filed for
bankruptcy early on Tuesday is seeking to pay employees about $130 million in
performance bonuses for last year, an amount which is due to be paid in March
2019.

According to compensation and benefits court filing, the company - which is
facing $51.7 billion in total debts - said that the bonuses "are critical to
ensuring that employees stay motivated." About 14,000 employees are eligible
for short-term incentive plan cash awards for 2018, for achieving performance
targets and individual goals. The payouts range from about $5,000 to $90,000
per person, not including senior officers and directors.

PG&E also said it wants to maintain a rewards program that gives gift cards to
workers who go "above and beyond" their regular duties, at a total cost of
about $15.2 million a year; the company is also seeking to pay out $650,000 in
outstanding awards.

In separate filings, PG&E said it will keep paying $327 million annually for
pension benefits. The decision to keep paying into its pension plan means
about 54,000 current and former employees are unlikely to be drawn into the
bankruptcy case, company says in court papers.

The utility also pays $109.2 million annually in 401(k) matching funds for
22,000 current employees and $28.3 million annually toward retiree health
care, and has asked the court to keep such payments.

Also of note, the company’s $5.5 DIP loan (which was arranged by J.P.Morgan,
Bank of America, Barclays, Citi, BNP Paribas, Credit Suisse, Goldman Sachs,
MUFG Union Bank and Wells Fargo) doesn’t set any deadlines for PG&E to sell
assets or adopt a detailed reorganization plan, which gives the utility far
more freedom than most companies operating in Chapter 11. In fact, one can
almost claim that the only limitation imposed upon PG&E is for litigants to
seek relief for the tens of billions in legal fees that they will be entitled
to as a result of the deadly California fires.

~~~
dfsegoat
Santa Rosa, CA here.

You have no idea how hard those PG&E workers busted their ass up here in Nor
Cal during and after the Tubbs fire - a lot of them lost their own homes, and
they were still out doing their jobs before the firefighters were even allowed
to start doing their jobs 24 hrs in.

On the gas side, they went to every house in the city - thousands of houses -
and turned off gas, and then did the same thing to turn it back on. An army of
workers went neighborhood to neighborhood just to make sure we didn't explode.

Factor in that there were no hotel vacancies, and the PG&E workers were
willing to live in their trucks with 4 other dudes for 2 weeks straight, and
yeah - I think they should be compensated.

~~~
wheelerwj
thanks for jumping in with this I think its a pretty rare case that an
employer facing tens of billions in claims keeps paying into the comp plan and
im pretty happy with PG&E right now. I think that likely its a good sign that
they want to keep the employees motivated.

one other thing OP talks about is that the payouts are up to 90k for senior
members. that's a far cry from the millions that we see bank execs getting. I
dont think we should treat this with such hostility.

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drivingmenuts
Why should the senior execs get _anything_ other than a pink slip and/or a
very long look at the bad side of a prison cell door?

~~~
wheelerwj
frankly, because they were promised it. if we create scenarios where employers
can skip out on paying due compensation to employees who have already
performed the work then our corporate system would be even more rigged then it
is.

In the case of corporate governance, we hold board members accountable. not
employees who do as they are paid.

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masonic
"State Sen. Bill Dodd (D-Napa) said the situation is “extremely disappointing
and underscores the need for change at PG&E in both its leadership and
corporate culture.”"

Hypocrite. Senator Dodd just happens to be the _author_ of the big PG&E
bailout bill of just a few months ago (which became law).

~~~
talltimtom
If a ship is sinking it’s perfectly logical to first save the ship and then
criticize the crew afterwards. Calling someone a hypocrite because they
critique the captain but didn’t let the ship sink seems kind of odd.

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aboutruby
Maybe California will have something better than third-world electrical
infrastructure (quasi inexistent interruptions, secure, underground cables,
etc.)

