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.
That's....a novel take.
What I am trying to point out is how misguided the management is. Instead of looking inwards and fixing their issues they think that the lower rank and file people are the problem (i.e. the people who do not have a say in how the company is run) and lay them off and try to cut costs. Next they outsource their operations which will decrease their efficiency even more which will further exacerbate their problems.
The outsourcing companies had a big push to get into energy and utilities (in short ENU) sector and such companies provided a good revenue until they didn't.
Apparently, decades ago, PG&E employees simply pocketed the natural gas pipeline maintenance money instead of doing the work. Last I heard, PG&E was supposed to replace the entire pipeline network in California, since the fraudsters didn’t document which pipes were maintained, and which weren’t.
Just like the current bankruptcy will likely turn out, the only real impact of this on PG&E seems to be higher utility rates (which probably let’s them keep more for profit in absolute terms...)
As I understood things, that bit is being explored in court and it's looking rather grim for PG&E.
So fires will happen. But also with 176,000 MILES of wires through all kinds of terrain, there's a limit on how much they can do. Summertime those forests almost don't even need a spark to light up, it's so dry and full of combustible material. And then, a tree from 45 yards away falls on the wires...
I’m not a fan of PGE, and I’m personally very happy their filing for bankruptcy, but there does appear to be some political grandstanding and scapegoating here.
PG&E outsourced something like 70 jobs from their IT department. They laid off under 2% of their workforce.
You have engage in all kinds of "this is a symptom of" third-degree effects stuff. But if you want to just say "they have bad management" why talk about outsourcing of an IT team instead of....their actual core business?
You know who else outsources? Apple & Google. (Apple spends $100 million a year on Indian outsourced IT, for instance) According to the OP's thesis we should expect Apple & Google to shutdown soon.
No one believes that because, really, none of us believe the OP's thesis that outsourcing a tiny fraction of your workforce is a sign of anything material.
The same managers will run a very similar company with the same customers in less than 3 months.
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.
This is a recurring story in rate-regulated utilities all over the country. Public utility commissions want to keep rates low, generally artificially low. So they set rates in a way that causes utilities to externalizations risk or pollution. For example, water rates in the US are very cheap because water utilities routinely dump untreated sewage into rivers. If you forced say DC Water to never dump into the Potomac again, it would have to invest massively in storm water management systems, which would in turn drive up rates.
> 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.
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.
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.
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.
At the end of the day, people can't eat their cake and have it too. When delivering power to high risk areas, either of two things happen: either we accept the danger, or the utility charges higher rates to offset the risk of damage. There's no magic solution. A government take over of PG&E isn't guaranteed to change anything, other than making the taxpayers directly liable for any mishap.
It also didn’t stop giving bonuses to the executive board that make the budgetary decisions.
This is also a glib dismissal of the effects of decades of under maintenance resulting in ever increasing costs to bring things back in order. Essentially deferring maintenance until the point of failure, at which point you declare bankruptcy and get bailed out by the people you defrauded.
Since I analysis systems for a living and for fun, it would be interesting to look at PG&E books. How much maintenance was deferred? It is possible to properly maintain their equipment with the current rate structure?
Maybe the company was put in an impossible situation by the Public Utilities Comission.
"The utility company’s stock has lost more than 80% of its value since the 2017 fires broke out, and its credit rating has been downgraded to junk status."
How was the downside risk of the shareholders socialized?
PG&E doesn't have carte blanche, it is a regulated monopoly, any changes to the rate structure has to be approved.
As for the company dying, people in California will probably prefer to continue having the electricity
How often do the rate increases that they seem to announce virtually every month actually get rejected?
Do they even ever not get approved?
I have not done the comparisons myself, but I have heard that California's energy prices are some of the highest in the country. I don't understand how that can be if their prices really are held artificially low by the government.
I wonder what model of governance would properly account for rare disasters. A disaster fund? Of course, if wildfires become more common, as it seems likely, then in a sense this problem should solve itself one way or the other because it will not be possible to run a company like PG&E very long without being able to cover the costs incurred.
We privatize profit because there would be no company if profits weren’t given.
We socialize risk because the government is permeable to manipulation, and they freely accept whatever argument that makes them pay for the risk. Govts don’t have to invest in private sectors. They don’t have to borrow in the name of their subjects. Yet they do it, without the consent of their subjects, because it is a non-working democracy, and because people accept it like business as usual. So yes, good taxpayers have to pay for badly managed private companies.
Reminds me of some other arguments about economic systems.
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.
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.
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.
In the case of corporate governance, we hold board members accountable. not employees who do as they are paid.
You can disagree with the management, and say they should be the first against the wall. But why are the 14,000 the less worthy? Should we blame the 16,000 employees of Uber the next time Travis Kalanick opens his mouth? ;)
"Approximately two-thirds of PG&E’s employees are covered by collective bargaining agreements with three labor unions: the International Brotherhood of Electrical Workers (IBEW) Local 1245, the Engineers and Scientists of California (ESC) IFPTE Local 20 and the Service Employees International Union (SEIU) United Service Workers West."
Maybe paying those bonuses is required.
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).