Here Are Photos of Some of the Dilapidated Equipment San Francisco Wants to Buy from Bankrupt PG&E for $2.5 billion

Californians have had it with PG&E, a convicted felon infamous for sacrificing safety, maintenance, reliability, and people to enhance “shareholder value.” But is San Francisco overpaying? Take a look.

This – the offer made on Sunday – has been kicked around in San Francisco since the catastrophic wildfire in Butte County in Northern California last year that killed 85 people, the cause of which was determined to have been PG&E’s electrical transmission lines – how they’ve not been maintained, including not removing vegetation near them. PG&E is infamous for skimping on maintenance and investment to maximize “shareholder value.” PG&E filed for bankruptcy in January, and its shares have collapsed by about 84% over the past two years, a good example of the results of maximizing “shareholder value.”

On Sunday, the City announced a plan to bid for PG&E’s “assets” in San Francisco for $2.5 billion. These “assets” are poles, power lines, transformers, and other electrical equipment, some of it under ground, some of it above ground, infamously maintained in the manner of PG&E, including this power pole and transformer a few feet from our balcony:

This pole is just an example. Note how the pole is completely rotten, how old the transformer is, and the insulators, and the wires. The pole was placed over 100 years ago, the transformer decades ago. I’ll show some additional stunning details in a moment. These types of power poles are all over San Francisco.

As you can tell from the pole, there is no competition in the power transmission business. This is the only set of wires to the building. It’s the same all across the country. Whoever owns the wires has a total monopoly. In the transmission business, there is no free market – so forget relying on the “market” to fix this issue. All the market wants from PG&E is dividends and a high share price, which translate into cost cuts, shitty maintenance, and inadequate investment.

The city of San Francisco would buy the power from power generators, including PG&E, which is also buying power from other power generators. There is actual competition among power generators with something like a real market, including market manipulation.

The $2.5 billion purchase price would be funded by a revenue bond issue. Last November, voters approved Proposition A that authorized San Francisco’s public utilities commission to issue bonds for the purpose of acquiring PG&E’s power equipment in San Francisco. “Funding secured,” as Elon Musk would say.

PG&E is headquartered in San Francisco, but it no longer has a lot of friends here. Power outages, sometimes lasting for hours, are fairly common. I have never lived in a city where they were as common as those I have experienced in San Francisco. Some of the outages are planned and come with advance notice. Others are surprise outages because of equipment failure of some sort. I have bought extra equipment to deal with them because I can’t just shut my business down. So there is no love lost.

PG&E also provides gas in San Francisco, and this would continue.

PG&E’s 30-inch gas pipeline in San Bruno, a town near San Francisco International Airport, exploded in 2010, killing eight people and incinerating the neighborhood. A federal investigation found that the pipeline, installed in 1956, had many defective welds; but as demand grew, PG&E increased the gas pressure to force more gas through the pipeline, rather than putting a modern gas pipeline into the ground. And there were numerous other shortcomings and revelations. Shareholder value had priority.

In 2017, a federal judge convicted PG&E on six criminal charges related to the gas pipeline explosion and imposed the maximum fine of $3 million, a barely audible slap on the wrist. No one went to jail, obviously, not even the regulators that had been in bed with PG&E. But it turned PG&E into a convicted felon, for whatever that’s worth.

So, where I sit, in my WOLF STREET media mogul empire, headquartered in San Francisco, electricity service cannot get a lot worse, in terms of price and reliability, but it can get a lot better. Ultimately, the City is responsible to local voters. PG&E is responsible to its bondholders and shareholders. Those are very different priorities, from my point of view.

But is San Francisco overpaying for dilapidated outdated equipment?

Here are more photos of the utility pole out front of our global corporate headquarters. There are many of these poles around. What I want to show is just how old this thing is.

There are wooden protectors still on the pole. In modern times, protectors are made of other materials, such as plastics. But these are wooden half-pipes along the pole, put over cables to protect them. There are two types of these wooden protectors on the pole, a large one for a big cable and a small one for a small cable.

These photos show further how PG&E has handled its maintenance (“what maintenance?”) and how it has invested in its equipment. This is the same pole, seen from the bottom up. Follow the red arrows to the large wooden protector half-pipes (click to enlarge):

The photo below shows the same wooden half-pipes a little further down the pole:

In the photo below, follow the red arrows to the small wooden half-pipe:

The photo blow shows the whole rickety top. Note the large wooden half-pipe along the right side of the pole:

The question here: Is San Francisco paying too much for “assets” that will then turn out to be “liabilities” instead, namely accidents waiting to happen due to PG&E’s run-down equipment and negligent maintenance? Who is going to be toast when the ancient transformer blows up that is eight feet from our balcony? And how much would the City have to pay for this toast?

Separating out San Francisco’s electric infrastructure, for a population of about 880,000, is not going to be another fatal blow for PG&E, given that it serves about 16 million customers in much of California. But it would be a blow.

There are discussions under way at the state level to split up PG&E into smaller electric utilities and selling them to the various cities. And there are discussions underway to split the gas and electric utilities.

PG&E, has long had regulators in its pocket, as numerous investigations and scandals have shown, including the investigation into the San Bruno pipeline explosion.

California also forced ratepayers to bail out PG&E after its 2001 bankruptcy via forced above-market rates, which continue to this day, while its bond holders and stockholders were made whole at the time.

Now Californians have lost patience. And dismembering PG&E is a real option. Earlier this year, San Francisco’s public utility commission, in studying the feasibility of purchasing PG&E’s electrical equipment in San Francisco, found that a municipally owned utility could provide lower electricity rates due to lower funding costs in the bond market, and because the municipal utility would be a non-profit and would not have to make Wall Street happy. It might actually focus on its customers, who are voters.

Given the mess we’ve been in with PG&E, just about anything is better than the status quo of a monopoly whose bondholders and shareholders continue to get bailed out by rate payers, and whose rate payers in turn continue to get shafted and even killed by inadequate maintenance and investment. But that $2.5 billion looks like a lot of money for this crappy infrastructure.

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  148 comments for “Here Are Photos of Some of the Dilapidated Equipment San Francisco Wants to Buy from Bankrupt PG&E for $2.5 billion

  1. ZeroBrain
    Sep 9, 2019 at 3:47 pm

    So to summarize, now that the “assets” have turned into a liability through lack of private investment, they get turned over to the public sector at to fix up and then eventually re-privatize.

    Things won’t get better until financial clawbacks and jailtime become the norm for regulatory capture and insider dealing.

    • Alberta Davidson
      Sep 9, 2019 at 4:14 pm

      Thanks Wolf for another spot on investigative report.

      Anyone from the Mayor/City Finance office care to ‘shed light’ on the proposed theft of public funds?

      • Javert Chip
        Sep 9, 2019 at 9:50 pm

        San Francisco may be one of the least competent jurisdictions to run a critical public utility.

        Don’t think so? Look at what had to happen to get SF to maintain the Hetch Hetchy water feed (basically supplying the entire peninsula).

        Next thing you know, we’ll have poop dangling from high voltage wires.

        • Tony
          Sep 10, 2019 at 2:15 am

          Why is it that this myth about governments being unable to outperform privately run common good services persists? It goes along with this myth that austerity is the salvation for our economic problems. The myth that public debt has to be paid back, while the private economy get’s bailed out again and again. There is a paradigm shift coming where renewed investment in our common good and infrastructure is the only effective stimulus available.

      • Lynn Wood
        Sep 11, 2019 at 1:07 am

        OK, do SF takes over the utility. SF must run for the same purpose, profit. The responsibility to place and meet Fiduciary Duty above all else will preclude the waste of public resources on unnecessary infrastructure expenditures.

        This is the reality of our system today.

    • OutLookingIn
      Sep 9, 2019 at 4:18 pm

      ZeroBrain – Bingo!

      You have hit the nail directly on the head.
      So-called “assets” that are now maintenance starved liabilities.
      Infrastructure is only as good as the maintenance of such.
      PG&E will make one last laughing trip to the bank, having sold a complete bag-of-s**t to the tax payer. Only to buy it back with pennies on the dollar, once the antiquated, dilapidated, rotted out system is totally rebuilt compliments of the tax payer. Then turn around and charge that exact same tax payer a hefty monthly user fee!

      First rule of business:
      Privatize the profits and socialize the debts.

      • 2banana
        Sep 9, 2019 at 7:21 pm

        Utilities, especially electrical utilities, are the most heavily regulated industries in America.

        They are allowed to operate as a monopoly, and make a profit determined by the regulatory committee, in return for these heavy regulations.

        Nearly the entire electrical transmission grid THROUGH OUT America has the same exact setup.

        And yet, despite all these government rules and regulations, it failed miserably in the San Francisco area. But works fairly well most other places.

        How could that be? Oh – total government corruption in the State of California.

        And then there are fools who think government can run the health sector the same exact way.

        https://en.m.wikipedia.org/wiki/Natural_monopoly

        • Zantetsu
          Sep 9, 2019 at 10:45 pm

          Wait — do the public utilities work fairly well in most places, or is the government incompetent to the degree that they cannot run a public health option? You are on both sides of the issue, apparently in an effort to serve a political agenda.

        • GP
          Sep 10, 2019 at 12:53 am

          @Zantetsu,

          Public utilities work in very inefficient manner in almost all places. They are government chartered monopolies after all. Free from competition and tied down with bikeshedding of numerous regulators.

          Single payer would be the same exact scenario.

        • Wingus
          Sep 10, 2019 at 8:59 am

          Where I’m from has one of the largest public utilities in the nation. Its at least half as cheap and 100x safer and stable.

    • Jessy James
      Sep 9, 2019 at 7:41 pm

      Oh c’mon. This is an easy fix. Just give PG&E a bailout like we gave to Jamie Dimon and Warren Buffet’s Wells Fraudgo back in 2009. Everything is all fixed now, right?
      Wolf, just paper over that pole, dude. It’ll all turn out just fine…

    • Blue
      Sep 9, 2019 at 8:15 pm

      America is a country of privatized gains and socialized losses. The 1% is too big to fail so they keep all their gains, and get bailed out by taxpayers and customers when things go bad.

      After every recession the middle class falls further behind and the 1% jumps further ahead.

      Now they engineer disasters like Brexit because they’ve figured out they profit from disaster, it just an excuse to get bailed out with more money.

    • D Grant
      Sep 10, 2019 at 4:52 pm

      It looks like it will cost more to repair than to buy in the first place. PG&E keeps their shareholders happy, but they also keep their employees happy. I understand they can only pay what the state says they can pay, so they make up for it in benefits, like Cadillac health insurance and 20% discounts on their power bill.

  2. Joe
    Sep 9, 2019 at 3:48 pm

    Politicians enjoy paying top dollar and slapping the bill on their citizens.
    Canada paid almost 3 times the worth of their pipeline company and were so darn proud of it.

    • Prairies
      Sep 9, 2019 at 6:02 pm

      It wasn’t a company, it was just a project that company was given the contract to(Trans Mountain Pipeline was a project of Kinder Morgan). The icing on that cake is the Bill they put through killing any chance of completing the project.

      I am assuming this is what you are referencing anyway.

      • Dale
        Sep 9, 2019 at 6:53 pm

        Is this the same Kinder Morgan that was the successor to Enron?

  3. andyinsdca
    Sep 9, 2019 at 3:48 pm

    sure seems like a way to transfer more money from tax/rate payers to PG&E. Who do they have dirty pictures of?

  4. nick kelly
    Sep 9, 2019 at 3:57 pm

    I was going to argue with WR until I saw those photos. Yikes!
    Maybe the guys who are always talking about what a mess Japan is would like to weigh in.

    • nick kelly
      Sep 9, 2019 at 5:26 pm

      If SF buys this stuff does it acquire a liability when it fails with possible injury/ fire?

  5. Keith
    Sep 9, 2019 at 4:08 pm

    Oh, quit complaining, just slap a coat of paint on it and they’ll be good as new. :)

  6. Island Teal
    Sep 9, 2019 at 4:21 pm

    LOL…..Having travelled and seen “Electrical Equipment” in many 3rd World countries there is no problem with that PGE certifed equipment. Residents of SF should be happy.

    • alex in San Jose AKA Digital Detroit
      Sep 10, 2019 at 3:24 am

      Come on down to “Silicon Valley” we’ve got a lot scarier looking poles.

    • Sergio Serrano
      Sep 10, 2019 at 6:12 pm

      You really think san francisco can run an electric company? I dont think so, they cant even run muni. Its a joke if you people seriously think san fransicko can handle the task. Let them buy it and see what happens.

  7. drdj
    Sep 9, 2019 at 4:21 pm

    Can’t the city just seize the equipment like they would any dangerous dilapidated property?

    • Kswc
      Sep 9, 2019 at 5:35 pm

      It’s been awhile since I was an institutional investor lending and investing to public utilities but the value of the physical assets includes the right of ways so yes, the poles are in lousy shape but the right to sink the pole in that spot is worth a lot.

  8. KGC
    Sep 9, 2019 at 4:22 pm

    Of course SF will pay too much. To pay the correct value you’d have to get it assessed impartially, and PG&E can’t allow that because they’re using “book” value to support the loans they run the business on.

    It’s just like trying to pay true market value for property in Spain, Italy, or Greece.

  9. Endeavor
    Sep 9, 2019 at 4:23 pm

    If the Romans had electric power the equipment used would look better than that today:-)

    • 2banana
      Sep 9, 2019 at 7:39 pm

      The Roman’s didn’t have to deal with public unions either.

      They did have “bread and circuses” – buying votes the Roman way near the end of empire.

      Which caused massive deficits and the debasement of thier currency….hey wait a second…

      • Saltcreep
        Sep 10, 2019 at 6:46 am

        The Romans had to deal with disgruntled citizenship, though. The bread and circus stuff goes way back into republican times.

        I’d suggest the late financing problems og Rome are more due to unsustainable overextension and huge military costs (…hey, wait a second…).

        Re bread and circus, during Republican times, the incumbent Aediles, who also happened to have responsibility for maintenance of Rome’s public infrastructure, would often finance games at huge personal expense, even going deep into debt, in order to try to secure the popularity and votes to ascend the Cursus honorum, get themselves a praetorship and ideally then get the Senate to award them a juicy province to govern, which could then be squeezed a bit in order to extract huge wealth into their pockets, usually more than sufficient to repay the large ‘investments’ made during their aedileship.

        Initially the grain supply also formed part of the duties of the Aediles, with a special prefect appointed during times of emergency. The first formal law passed to subsidise grain through the treasury was introduced by Gauis Gracchus, with eligibility being expanded and it becoming a free handout just before the end of the republic. It appears that the free handouts became less important during the later days of The Principate, as the population of Rome declined.

        The later inability to finance public expenses probably had a lot more to do with the limits of new wealth derived from expansion being reached, combined with a need to maintain at huge expense the enormous military force required to be capable of fighting on several fronts simultaneously.

        Previously the conquest of new territories had provided much wealth for the treasury. But Dacia was probably the last really profitable conquest of significance, with later conquests, like Armenia and Parthian territories proving too remote to control, and northward and southward expansion being stopped by the low return on investment of military ventures into hostile lands of low material wealth not connected by sea lanes, with Varus’ loss of three legions in the Teutoberg Forest made clear the high cost/low benefit proposition of such ambitions.

  10. Lars
    Sep 9, 2019 at 4:27 pm

    Hi Wolf, almost sounds like you’ve constructed the last straw in the winning argument for you, wife, and business, to move OUT of the Bay Area !!! Lower taxes, no poop on the sidewalks, no druggies sleeping in the doorways, no power outages, more for your Real Estate dollar, and a generally safer environment. Ahh, but can you live with a different view ? Hope to see you here soon ! Best, Lars

    • Lars
      Sep 13, 2019 at 9:46 pm

      While driving home from town today, and enjoying the total lack of traffic on the roads, as they just replaced 5 miles of poles along the main road by my house, got to thinking about your 100 year old power poles and what stories they could tell !!! Imagine they had surveillance cameras with sound, wouldn’t it be a trip to dial up a decade and see what was happening on the street back then !!! Be careful if you wish for new power poles, they’ll likely look like London or Beijing, covered in cameras !

  11. Old Engineer
    Sep 9, 2019 at 4:31 pm

    The only things of any real value in those pictures are the transformers and the copper wire connecting the poles. Not sure if they are buying the copper wire as well as the poles. The copper wire has only scrap value based on the total weight. And depending on the age of the transformers they also may only have scrap copper value. The ceramic insulators might have value if companies re-use them, they are more expensive than you’d think. But the poles? The company should be paying someone to put them in a landfill or burn them as the creosote seems to be mostly evaporated into the atmosphere by now. If everything else is in this shape San Francisco shouldn’t be paying more than scrap value for the copper.

    • Paulo
      Sep 9, 2019 at 6:15 pm

      Those transformers shown are antiquated junk. I had to buy a new one two years ago for a house service we installed. It cost $1500 for a brand spanking new one …hung on the pole by the Utility. Bought my own pole for $500, certified, and installed it with a backhoe including guy anchor. This saved me $500. Think 2K for a DIY. By the time each service is replaced by the City contractor, to the building, including replacing each dilapitated pole and transformer plus disposal, I would imagine a price at $5,000 minimum/per. But here’s the cruncher, the poles are in sidewalks in cities so you have to dig/jack them out and pour a new chunk of sidewalk every time. Plus, the need for flaggers during installation, traffic tie-ups, and security after pour until the concrete dries so kids don’t ride their bikes through or write “F*** You” in the fresh concrete….what are we at now, 10K per pole?

      Engineering and Planning skim ahead of time? Ouch.

      Public utilities, like BC Hydro, have an ongoing maint program for pole replacement. Even rural poles are not anything like the ones shown in the article. Can you imagine what it feels like working for an outfit like PG&E? Pride begins with Management, and distributes down all the way to the customer. If everything is provided for profit, for shareholder profits and management bonusses, the first priority is to go cheap on operations. However, sooner or later bills have to be paid, utility poles replaced, upgrades completed, etc. Why turn every obvious cost into a debt crisis? This is privatised utilities in action.

      • bungee
        Sep 9, 2019 at 11:21 pm

        You hit the nail on the head with flaggers and traffic tie ups. I know where the pole in the picture is. That stretch has been murder cause they’re redoing a park up the street and roadwork. Hey also on Lombard. Wait a minute, on Vanness too! Whoa, the streets are congested with double-parked uber and fed-ex drivers. Here comes another ambulance. What are freaking 100+ year old trolleys doing in this mess!? My point is that real, mechanical work has become impossible here. If you are hit and run small time it’s great because you can charge. But if you need permits, road blocks and all that forget it. Big companies only deal with whatever current disaster is biggest. There can be no maintenance.

    • John3
      Sep 9, 2019 at 6:19 pm

      Old Engineer, hey, don’t be so pessimistic ;-) Maybe the city wants to buy those old ceramic insulators because they know they can get more for them at an antique market.

    • Paulo
      Sep 9, 2019 at 6:30 pm

      Old Eng,

      Service lines are aluminum due to weight considerations. Creosote poles are considered to be hazardous material in most jurisdictions and have to be disposed as such. They cannot be burned. Old transformers may still contain PCBs. When I think of PG&E I always think of Erin Brokovich…the movie.

      “According to the EPA, even though it regulates creosote, PCP and CCA, preservative-treated wood is not hazardous waste if it is disposed of in its originally intended state. This means that as long as the utility pole remains an intact pole, disposing of the pole by throwing it into a landfill does not violate EPA requirements. Be aware that many states and local governments do not agree, however, because the chemicals are known to leach into soil. Therefore, many maintain stricter guidelines. For example, while the EPA states that creosote treated wood is appropriately disposed of by ordinary trash collection or burial, San Joaquin County in California does not allow the disposing of creosote treated telephone poles anywhere other than special landfills designed for hazardous materials.

      Incinerating or Mulching is not acceptable.

      The EPA agrees, however, that altering preservative-treated wood, for example, by burning or chopping it up, releases toxins from the preservatives into the environment. Therefore, disposing utility poles by incineration or mulching must be done in an approved facility capable of appropriately containing the chemicals, according to the EPA, as well as state and local laws.

      https://legalbeagle.com/6825513-epa-telephone-pole-disposal-regulations.html

      • Old Engineer
        Sep 9, 2019 at 9:06 pm

        I hadn’t considered the PCBS in the transformer, it would be a shame to waste the copper. But I wonder if there is any creosote left in those poles? They are pretty decomposed.
        But you bring up a salient point. It may actually cost more to dispose of this old stuff than it’s salvage value. So it seems to me that PG&E should be paying San Francisco to take it and not the other way around.

    • Old-school
      Sep 9, 2019 at 9:21 pm

      My son-in-law and daughter are both engineers with a lot of different utility experience. Utilities are monopolies that need an intelligent and noncorrupt utility regulator. They also need good management. I think most problems are because of bad decisions at the regulatory and upper utility management. The entire system can be nearly fail safe, redundant all under ground but it just isn’t affordable by rate payers. My son-in-law says underground is about 10× more expensive.

      Most utilities like to spend on capital because it has a regulated rate of return.

      The danger of the city taking over the utilities is they usually end up not being competitive with larger utilities, but I would imagine would be more service oriented.

      • wkevinw
        Sep 10, 2019 at 9:37 am

        Exactly right on utilities as natural monopolies- proper regulation is paramount. Usually failure is shared by regulators and executives of the utility- I’m sure it’s so in this case.

        Shareholder value is NOT allowing short term gains so that longer term there is catastrophic failure. That is pure and simple incompetent short sighted risk taking (see BP oil “spill”).

        PCBs- there was some kind of mitigation/removal plan for all transformers in the US. I’m not sure whether some were exempt.

        Lots of shareholders have been completely hosed by PG&E history.

    • fajensen
      Sep 10, 2019 at 1:49 am

      Those ancient transformers are probably loaded with PCB too – to keep Monsanto more profitable.

      “Here” that would mean that the content goes to a specific facility in Germany that can burn PCB. It is expensive.

      • MC01
        Sep 10, 2019 at 7:37 am

        If I remember organic chemistry, PCB can be completely destroyed in pretty brutal fashion by burning it at least 1,000°C. There are no ordinary waste-disposal incinerators that can achieve that temperature.
        There are a couple methods to lower combustion temperature but both are time-consuming and make less sense than using a high-temperature incinerator.

        Thermal desorption is the method commonly used to clean up contaminated sites. While effective it’s also very expensive to operate and you still have to deal with the offgas, AKA the nasty stuff you want gone from the soil. Offgas treatment actually costs even more than thermal desorption itself and contributed to bankrupt at least a couple of firms doing environmental cleanup work for the Italian and Austrian governments.

        Waste treatment may be the business of the future but I am so glad to have avoided working in it…

  12. Thomas
    Sep 9, 2019 at 4:32 pm

    Typical of asking pricing.. San Fran should pay about 1/3 to 1/2..

  13. Buddha
    Sep 9, 2019 at 4:32 pm

    It is sad what the politicians and financial wizards have done to a once great company. In the 1980’s, PG&E was one of the best run and most progressive companies in California. Since then politicians have legislated it into mediocrity by preventing them from performing maintenance and upgrading their infrastructure. All in the effort to provide lip service to their constituents around reducing costs. Additionally, the politicians forced PG&E to invest in ill conceived investments in solar and other “alternative” projects which would never have a payback. Let’s not forget that the politicians also allowed the ever greedy financial wizards to gut the company financially in order to grease their PACs pocketbooks. All at the constituents’ expense.

    California has with it deserves:
    1) Massive homeless population
    2) Rampant healthcare problems
    3) Archaic water/power/sewage infrastructure
    4) K-12 education in taters (it was one of the best now ranked 50th)
    5) Housing that is no longer attainable by the middle class
    6) Shrinking residency of US citizens
    7) Massive influx of illegal aliens who are used and treated like slaves

    I probably missed a few items. I’m just glad I left when I did.

    • EchoDelta
      Sep 9, 2019 at 7:14 pm

      No one goes there anymore, it’s too crowded. -Yogi Berra.

      • 2banana
        Sep 9, 2019 at 7:24 pm

        Overcrowding by illegals counts too.

        • nick kelly
          Sep 9, 2019 at 8:59 pm

          Someone has to pick the lettuce and strawberries etc. The latter is stoop labor and called the crop from hell. Usually below Hispanic Mexicans and falls to Mestizo Indians based in Mexico. They are often ‘housed’ on site in plywood shacks so no crowding in the city by those guys.

          Without this labor much of California’s crops would rot.

    • Nicko2
      Sep 10, 2019 at 2:37 am

      California is the technological innovation centre of the world, and would be the world’s fifth largest economy if it were a country, all those other things you listed are irrelevant.

      • tommy runner
        Sep 10, 2019 at 9:15 am

        I don’t believe you will find 10m strawberry pickers in the Oxnard bracero program.
        putt by any construction site in the state.

      • wkevinw
        Sep 10, 2019 at 12:27 pm

        Is the highest percentage of residents in poverty of any state relevant?

        Also, yes, California is large, but its productivity numbers are not particularly stellar.

        Good luck.

  14. Old Engineer
    Sep 9, 2019 at 4:33 pm

    Oh, and by the way, scrap value is not necessarily the same as book value.

    • Dave Chapman
      Sep 9, 2019 at 7:53 pm

      Shocking. Does this mean that PG&E might turn out to have a Negative Net Worth???
      I am shocked. Shocked.

      • Javert Chip
        Sep 9, 2019 at 10:06 pm

        Duh…of course it does, that’s why it’s in bankruptcy.

  15. Senecas Cliff
    Sep 9, 2019 at 4:34 pm

    For 25 years I lived in Salem Oregon where the Western half ( where I lived) was served by an Electric Coop that was 100% owned by the customers. When I sold my house and went in close out the power account because I was moving out of town they gave me a check for $3500, which was my share of the ownership of the system. The service was great and the infrastructure was top notch. Puc’s and utilitys coops are superior to investor owned utilities in my experience.

  16. Satya Mardelli
    Sep 9, 2019 at 4:36 pm

    Wolf – be careful what you wish for. In most states municipally-owned utilities are governed by a local board or city council. Utility rates and service policies are always set by these local entities.

    Not sure how it’s done in Cali. But if it’s as described above, the city council will rubber-stamp its own request for higher rates.

    • Sep 9, 2019 at 5:30 pm

      We can fire the city council (Board of Supervisors and the mayor). There are elections, after all. But we cannot do anything about PG&E.

      • GSW
        Sep 9, 2019 at 6:01 pm

        Theoretically, yes.

        But I have never seen a place where voters are complete sheep like they are in SF. They find the ‘D’ (or lately, the most left ‘D’) in the list, pull the lever, and find the candidate that will spend the most money on them, whether or not they have any solutions.

        You read what goes on in these Board of Supervisors meetings and just shake your head and wonder where fiction ends….then you go home and turn on the TV, and Donald Trump is the president tweeting about weather maps, and you just pour a drink.

      • Anon1970
        Sep 9, 2019 at 7:28 pm

        When is the last time San Francisco elected a Republican for anything? At least 30 years? Considering what a lousy job the city does keeping the streets clean, be careful what you wish for.

        • Sep 9, 2019 at 7:52 pm

          Hey, wait a minute… we did elect a Republican governor in 2003, and that turned into a fiasco: Six years after he came to power, during his second term, California ran out of money and began issuing IOUs to pay its bills :-]

        • Jack
          Sep 9, 2019 at 8:20 pm

          30 years?! Nahhh

          When was Arne governor?

          To be honest I was disappointed by that chap , I always thought he would declare California independent from the US start his own dynasty and get cracking on those “ Essential Services “ something akin to the Singaporean benign dictator!

          But that was only a dream:)

          On a serious note though if there is an adequate survey of 100 or so incidents of dilapidated infrastructure like the once shown by Wolfie,

          Wouldn’t it be prudent to hire a good legal firm to start chasing these scoundrels that are putting the public’s lives and property in dangerous straits?!

          Note: make physical working repairing these “assets “ for any jailed CEO or high management part of their sentences ! :)

          I mean this is the US after all the home of litigation!

        • Ex Kahlifohnian
          Sep 10, 2019 at 5:27 pm

          What corresponded with 2009 and CA running out of money? Could it have been that tax revenues had fallen due to the recession? That’s roughly when we bought my daughter’s house (2010) in East Bay for 50 cents on the dollar. Made nearly 100% ROI in 7 years…

      • 2banana
        Sep 9, 2019 at 7:34 pm

        You can also serve on the regulatory committees for municipal monopolies.

        I have known quite a few “average joes” who have done just that.

        It is a yuuuuge time commitment for not that much money. But you do get on TV every once in a awhile.

        All of the folks I knew that served on these committees hated the utilities and approved rates increases very sparingly like it was their money. And made utilities take money from any percieved surplus. And mandated how much to be spent on maintenance and executive salaries.

        A very adversarial relationship.

        Which was probably missing in San Francisco.

      • Dave Chapman
        Sep 9, 2019 at 7:57 pm

        When I lived in Sonoma county, the PG&E service was the single best argument for solar panels anyone could see.

        The West County got a seven-day blackout every year, and PG&E would always claim that it was a “100 year storm”.

        I had a backup-generator wired up with a plug, so that it was easy to disconnect the mains and then plug in the house.

        Don’t worry. California is so corrupt that they will figure out some way for PG&E’s lawyers to prevent anything from changing.

      • Buddha
        Sep 11, 2019 at 11:11 am

        Your comment “we cannot do anything about PG&E” is incorrect. PG&E is a publicly traded company. People influence publicly traded companies all the time. It has already been proven that you can do something about the company. A primary reason why PG&E is in its current position is due to elected officials and the general public influencing and even coercing PG&G into actions they otherwise wouldn’t have taken.

  17. Anthony Aluknavich
    Sep 9, 2019 at 4:38 pm

    Just wait until those old transformers and capacitors in the system start leaking PCBs (polychlorinated biphenyls) all over the place and someone will have to pay big bucks to do heavily regulated cleanups! Releases and management of PCBs items is regulated under the federal Toxic Substance Control Act (TSCA).

    I don’t recall what the PCB cleanup level used to be but 10 parts per billion rings a bell.

    • AlamedaRenter
      Sep 9, 2019 at 5:37 pm

      Must keep quiet. Must keep quiet.

      Great subject, wish I could make lots of comments.

    • Paul Bartell
      Sep 9, 2019 at 5:48 pm

      Exactly! They are taking over a massive toxic waste site with 880,000 people exposed. Wow, what a bargain and they get to pay $2.5B for the rights to it.
      Maybe this is what the politicians had planned all along. Give them super strong marijuana, let em all smoke it for a couple of years and now they will not even realize all the graft involved with paying $2.5B for a toxic waste site that covers the entire city. They can take their millions and move out to paradise. Oh well, that was the plan anyway.

  18. NARmageddon
    Sep 9, 2019 at 4:52 pm

    I’m surprised those poles survived the 1989 Loma Prieta earthquake…

  19. CoCosAB
    Sep 9, 2019 at 5:15 pm

    Capitalism is AWESOME!

    • 2banana
      Sep 9, 2019 at 7:44 pm

      Please point out the capitalism in the most heavily regulated monopolistic industry in America.

      This is exactly what Bernie wants to do with healthcare.

      Any you cheer him.

      https://en.m.wikipedia.org/wiki/Natural_monopoly

    • robt
      Sep 9, 2019 at 9:37 pm

      It’s nothing to do with capitalism. If it did, the cost of power would be accurately priced and equipment would be to current standards and maintained properly.
      It’s to do with regulations, which effectively turns a ‘business’ into a public utility, whose policies and prices are determined by politics. Maintenance and capital investment are neglected.

  20. GSW
    Sep 9, 2019 at 5:30 pm

    Wolf:

    PG&E is a joke. That said, SF’s city budget for this fiscal year is $12.2 billion; for a city of 875k people. If you’re looking for fiscal and/or spending prudence, you’re in the wrong place. The Chinatown subway soap opera alone is all you need to know how SF is the ultimate witch’s brew of public sector corruption, cronyism, terrible short-sighted decisions, NIMBYism and overall incompetence.

    As bad as PG&E is, I can’t picture any scenario where I could utter the phrase, “man the City of SF could manage this better”. The City of SF exists first and foremost for the employees of the City of SF; if there’s anything left after they are done, it goes to the bevy of insider non-profits ‘tackling’ the homeless crisis (which is itself a giant black hole of accountability) – after that, it gets allocated to actually fixing potholes, infrastructure, or something like this.

    “Ultimately, the City is responsible to local voters.”
    Direct democracy was created with good intentions, but has gone completely haywire. How many voters actually read the 300-page booklet that contained Prop A, or can figure out the time value of a bond to fund this spending, or care whether property taxes will go up (as a sizable amount of the city is renters)?

    It’s how a first-world city ends up with third world infrastructure, dystopian scenes daily on the streets, and yet spends its time banning paper straws and sugary beverages.

    • Elektra
      Sep 12, 2019 at 4:48 am

      Coming from Europe, Netherlands, it’s a mystery how the most powerful and wealth country on the globe ends up with such infrastructure.. potholes? I had never heard of the word before landing in Chicago. Power cables above ground, really? Seems to me it’s all amatter of allocation of resources. There is so much wealth, surely a bit of maintenance is not an issue?

      Ah well, each their own, wish you all the best of luck!

  21. unit472
    Sep 9, 2019 at 5:42 pm

    PG&E has a new CEO and 10 new board. Probably a lot more competent than whomever the SF Board of Supervisors would put in place to run their Muni utility.

    Given the political leanings of SF’s politicians and voters I doubt you would see much improvement. Delinquent accounts would likely soar as no SF politician is going to turn off the gas or power to a ‘voter’. People have a ‘right’ to heat and light so rates would have to be subsidized for the ‘poor’ which in San Francisco would likely mean anyone earning under $100,000 per year. Assuming SF acquires PG&E’s labor force they will also assume their pension obligations and I just be more the workers are near retirement age already.

    • Old-school
      Sep 9, 2019 at 9:38 pm

      The CEO used to be head of Progress Energy in NC. When it was purchased by Duke a larger utility he was going to be top dog, but they fired him at first board meeting because they said he hid information about run away cost for a nuclear power plant containment building repair. It was big news here for a long time because it was thought it might have been political.

      Duke was the utility that loaned the DNC a lot of money to host the convention and then DNC didn’t repay it. Johnson moved on to TVA and then to PG&E.

      • doug
        Sep 10, 2019 at 9:28 am

        Duke(‘progress’ energy) was the utility who had their employee elected governor of NC. They had big plans for him until the bathroom bill derailed them. They had a lot invested in him…too bad…

  22. HB Guy
    Sep 9, 2019 at 5:58 pm

    Wolf, thanks for an excellent eye-witness report. The question neither you nor anyone else answered is: why does the City of SF want these assets in the first place? And if they’re as dilapidated as they appear to be, is the real motivation something other than power distribution?

    There are several municipal utilities in So CA, chief among them are City of LA’s DWP and Anaheim. Their rates are somewhat lower than SCE’s, but DWP has been a slush fund used by LA to pay for all manner of projects that have nothing to do with electricity.

    I also wonder if this is about being able to control 5G distribution, which I’d imagine will be a big issue in SF as it has been here in OC and elsewhere in So CA.

    • Sep 9, 2019 at 7:24 pm

      HB Guy,

      In terms of antennas for mobile phones (current generation and I assume future 5G), they’re on street lights and on roofs, not utility poles.

      There are some good reasons for this utility to be municipally owned. This includes local control, more updated equipment, more efforts at undergrounding wires and equipment, better service, and lower rates – the last two I mentioned in the article.

      Some commenters here — and I cannot quite shake off the concerns either — are wondering how well SF will manage this utility, given SF’s legendary history in such things. But I think the status quo is terrible, and any change might be a change for the better.

      • MCH
        Sep 9, 2019 at 11:24 pm

        Wolf,

        Take a look at Silicon Valley Power. They tend to serve Santa Clara pretty well. When I moved out of Santa Clara in the early 2000s, I wished I could have taken them with me.

        I believe those guys also have some dark fiber in place which would be really useful when the day comes that they can kick out Comcast and AT&T from providing internet service.

        • Sep 10, 2019 at 8:14 am

          MCH,

          Yes, I’ve heard good things about Silicon Valley Power.

        • MCH
          Sep 10, 2019 at 3:24 pm

          Wolf,

          it’s all about making the up front investments and not only doing it when its too late. I think some decades ago, Sunnyvale decided to crosstrain their cops and firefighters. At the time, it was a huge expense, and everyone thought Sunnyvale city council had lost their mind. But now, it’s paying dividends, more efficiency, and improved services. I think they still do that today, a good model, but no city is emulating it because it’s too expensive up front.

          Well, you have to pay at some point, either now, or later. The problem with later is that it might be out of your control, and could cost a whole lot more.

  23. GirlInOC
    Sep 9, 2019 at 6:09 pm

    Wolf, maybe next time include pictures of crumbling infrastructure and dilapidated equipment from across the US in all 50 states (of which I suspect PLENTY exist), so as to minimize the CA bashing. Of course, CA being the darling of the right to hate, I know that is laughably unrealistic.

    Orrrrrrrrr……. is this yet another attempt at reducing the population in CA thereby making our living experience more pleasurable? Because if that’s the case….

    YES poop and needles and homeless illegals living with free housing, free food, free iphones EVERYWHERE!!!

  24. Bruce
    Sep 9, 2019 at 6:22 pm

    I remember dealing with PG&E on some of their buildings & sites back 80’s and 90’s. Maintenance money was always in short supply. They sort of followed the rules that some casinos and hotels go by – i.e don’t spend maintenance money, until a crisis occurs and you have to.
    I agree with Wolf about being skeptical that the city is overpaying. I trust SF more than PG&E but not much.

  25. Jim
    Sep 9, 2019 at 6:34 pm

    It is an unfair and inaccurate assessment of the deal by providing a few photos. Every long term going concern operation will have infrastructure at different phases of useful life, both physical and economical. What the state of california is buys is not simply pole and wire, but existing right of way that doesn’t need to be acquired on an individual basis and existing paying customers that provide cash flow. If there’s cash flow it’s much easier to conduct a maintenance plan to upgrade crumbling infrastructure. However, whether the price paid is reasonable or not is impossible to tell from a few photos. The more important question to ask is whether the government should be in control of such assets and/or in business of providing power, which they have no experience or expertise. It is much better for the power provider to go under, sold at auction at a lower cost basis, which will provide the necessary multiple to attract private investment to upgrade infrastructure. Instead, CA residents subsidize an inefficiently run operation, which by mere acquisition will require additional expenditures from taxpayers to bring it up to date. Where’s the value added? None. It seems like a subsidy sponsored by SF and CA taxpayers.

  26. Raymond Rogers
    Sep 9, 2019 at 7:13 pm

    It’s not old, nor is it not maintained, it is “rustic “.

  27. tim
    Sep 9, 2019 at 7:21 pm

    Sounds like PG&E already has tons of regulation that isn’t working. Maybe that’s the problem. Making money for the shareholders is another way of saying they’re trying to be efficient which isn’t possible with a bunch of environmental wackos to deal with. How efficient is the city of San Francisco going to be? You think they’re going to do better just because of votes? Politicians routinely screw the electorate and get away with it. Did votes keep Illinois from nearly bankrupting the pension fund? Nope. Just like they’re not keeping Obama/Trump from bankrupting the country. The political machine does what it wants. Now you think the solution is to give them more power ( literally)??

    Maybe PG&E could have maintained their facilities better if they hadn’t spent tons on lawyers fighting the envirowackos and tons of other red tape that makes it difficult for any business on the left coast. Once the city govt owns it how much oversight or accountability do you think they’re going to have? Governments don’t have profit and loss statements they only have budgets. If PG&E goes to the city it will become just one more boondoggle like education, public pensions or the oil company in Mexico. Just more favors handed out to political insiders while the cost of electricity continues to skyrocket. They will then tell the mind-numbed voters of San Fran we don’t have enough money and we need to raise your bill even more. And in the end there will still be problems but nobody to hold accountable.

  28. Otto Maddox
    Sep 9, 2019 at 7:47 pm

    Yeah, let’s get the government to own and run the utility. Great idea.

    • MCH
      Sep 9, 2019 at 10:20 pm

      Honestly, Santa Clara Utilities is one of those islands of sanity in the Valley. It runs electricity for the city of Santa Clara, and does a pretty good job from the time I lived in Santa Clara. PG&E on the other hand is a total rip off.

      Now, I have no idea how SF will work running electricity, but if it is anything like how they take care of their homeless problems, I suggest that we start moving out of the city now. But on the other hand, if they end up like Silicon Valley Power (the name for Santa Clara’s municipal utilities these days), then I think that same model should be slowly rolled out to most of the counties around here.

  29. Halsey Taylor
    Sep 9, 2019 at 7:55 pm

    California got what it wanted: electrical utility deregulation in the 90’s. The state pimped out PG&E as a transmission company which undercut its ability to subsidize transmission costs via generation.

    Looks like a case of natural consequences. No sympathy here.

    • 2banana
      Sep 10, 2019 at 6:56 am

      Power generation was somewhat deregulated. As California is not self sufficient in creating electricity.

      Power transmission not at all.

      But please don’t let facts get in the way of your narrative.

    • wkevinw
      Sep 10, 2019 at 12:37 pm

      Some truth to that, but also they regulated the costs that could be passed to consumers, thereby guaranteeing bankruptcy when wholesale costs of energy rose- which they did (probably illegally/see Enron)- but if you legislate such “market manipulation” you get these predictable results.

      Regulators/governments definitely share the blame.

  30. Chauncey Gardiner
    Sep 9, 2019 at 8:45 pm

    Thanks for an excellent article, Wolf. Looking at the deferred maintenance in the photos of these so called assets and mindful of the tragic loss of life in last year’s fires, how do you spell “contingent liabilities”?… TOTAL market cap of the entire company is $6.1 billion after today’s 9.8% jump in PG&E’s stock price.

    So what’s up with this, really?… After reading this post and watching televised news segments about other willfully negligent behavior by public utilities around the country regarding coal ash disposal, adverse effects on public health including mortality rates, etc., I am finding myself increasingly receptive to Bernie Sanders’ recent public utilities nationalization proposal.

  31. Michael Gorback
    Sep 9, 2019 at 9:51 pm

    Let’s not be hasty. Some of those pictures look a lot like Dr Brown’s gizmos from Back to the Future.

  32. Sep 9, 2019 at 10:30 pm

    Hooterville has better telephone poles, with phones too!

  33. Art
    Sep 9, 2019 at 11:04 pm

    Upcycling is trendy these days. Perhaps SF can repurpose the surplus of sidewalk-poop into a cement to patch the rotting poles. Sorry, couldn’t resist.

  34. DR DOOM
    Sep 9, 2019 at 11:48 pm

    Didn’t San Francisco vote down in 2002 an initiative for municipal ownership? Also didn’t it take Sacramento 8 years to pull it off . Besides the cost of getting the ol’ two step on buying assets , municipalities have to buy power on the open market. They are not eligible to purchase government surplus power and quite frankly municipalities are not part of the FERC / Utility cabal in Washington DC and its well funded lobby and as such are exposed to volatility in the PPA market .Those boys will clean your clock when buying power, municipalities will be brought to heel. This is a corrupt system and its power is rooted in The New Deal apparatus.San Francisco may have better luck dealing with its homeless than being a utility. As your post stated its about shareholder value and more precisely Wall Street shareholders and not the citizens of the beautiful city of San Francisco.

  35. blackstarlight
    Sep 10, 2019 at 12:29 am

    The doctrine, known as “inverse condemnation,” exposes California utilities to liabilities from wildfires regardless of their negligence, as long as their equipment is involved.

    A bankruptcy judge could even refuse to approve PG&E’s reorganization and exit from court proceedings if the judge finds that inverse condemnation calls into question its future as a viable company, according to U.S. law.

    “Inverse condemnation is a state law but a bankruptcy judge is god,” said Robert McCullough, principal at energy consulting firm McCullough Research in Portland, Oregon, noting that PG&E faces widespread lawsuits. “He’s going to have to figure out, once he releases the company from bankruptcy, if it’s actually a viable entity.”

  36. Patrick
    Sep 10, 2019 at 12:52 am

    Owned a large amount of PCG for a few years and collected dividends until it fell in one day from around $60 to $42. Sold then and there for a small profit as one of my hard rules in investing is…

    ‘There’s no such thing as “The worst is over” for a stock (until zero).’

    PCG is now $11 and, as Wolf infers, is still likely overvalued.

    • Sep 10, 2019 at 7:58 am

      PG&E has been tragic in many smaller ways too, not just the lives lost: In California, it was an iconic utility that retirees owned and relied on. For example, the wife of a friend of mine (she is now in her early 70s) has held a large chunk of PG&E as main part of her retirement. She inherited it from her dad who’d told her to not ever sell it because a company like PG&E will always be around and will always pay dividend. So she lost a big part of her capital and her income stream that she had relied on to fund the rest of her life. This happened to many older folks around here.

      • wkevinw
        Sep 11, 2019 at 8:08 am

        Absolutely true.

        Too bad for all the stakeholders.

        The utility and regulatory leadership are absolutely shameful.

        It’s another one of those “California is special so we couldn’t possibly have too many problems”– “we’re the largest economy in the US, etc., etc….”

        Just like the public elementary and HS educational system: from top 10% to bottom 10%.

        I’ve been gone long enough to dodge all of this, but my family is still there.

  37. TownNorth
    Sep 10, 2019 at 12:58 am

    The photos of that equipment are shocking. We live in Southern California Edison territory and I can tell you, they aren’t much better. During the early spring and summer, we had frequent power outages. Some lasting for hours and forcing businesses to close. As with internet and cable TV, there is no real choice of a provider.

  38. Bob
    Sep 10, 2019 at 1:50 am

    Let’s not forget Gray Davis and previous California legislation that forced PG&E to be limping on since 2000. Government crippled the company almost two decades ago. But hey, they will do a better job this time around…right?

  39. Tony
    Sep 10, 2019 at 2:20 am

    It’s interesting that a place like San Francisco still uses overhead cable for its electricity. Is that common in the USA? I always thought, that only out of the way country places had overhead cables but I must be wrong….We have as many problems, as you do, here in England but overhead cables has never been one of them (in the towns and cities)…we do have them in the countyside but hardly anyone lives there anyway…It’s also interesting that you have transformers as well on poles, I assume that is because you use the low 110 volts in your homes…its all very interesting the way different countries deal with the same problem in so many ways….it also explains why we have so many holes in our roads with all utilities going under our roads… lol

    • Nicko2
      Sep 10, 2019 at 2:40 am

      It’s because of the risk of earthquakes.

    • Lance Bartel
      Sep 10, 2019 at 8:13 am

      2.5 billion dollars that could be used for a better purpose. LIKE THE HOMELESS CRISIS. Ok the power grid is outdated but people lives are in danger! Wake up San Francisco. My prayer is that God will open your eyes before it’s too late.

      • fajensen
        Sep 11, 2019 at 7:54 am

        More peoples lives than only the homeless will be in imminent danger without electrical power. Drinking water, sewage system, cooking ones food to kill germs, cooling used to preserve food – all that will go away if the power system fails. The epidemics will begin after only two weeks of that, unless FEMA moves in. In a city the size of LA, the FEMA containment efforts will cost a lot more than only 2.5 billion USD.

        One irony is that the Twitterer In Chief hails that the US military just wasted at least several million USD’s worth of precision guided munitions (and some nice actuators and electronics) on the task of making some rubble into much smaller rubble on a river island in Iraq that doesn’t actually matter to anyone and that nobody will even remember in two weeks time.

        All this great showing of effort while at the same time providing the simple things like clean drinking water and reliable power for all “at home” is always “too expensive”, which is sad and depressing.

        Looks a lot like the fall of the USSR, they had great parades with lots of military hardware, but, out in the bars one has to share the soda pops because there is no sugar right now, but at least the Vodka and Juice is 3-1 Vodka because all the juice (only sometimes) comes from Cuba. God, I feel OLD.

    • Sep 10, 2019 at 8:33 am

      Tony,

      Overhead cables are standard in less densely populated areas, which is much of the urban US (single-family houses with yards). In many densely populated areas (mostly multistory apartment and condo buildings), utilities have long undergrounded their cables. This is the case in Manhattan, for example. In SF, in the wealthiest neighborhoods, there has been some undergrounding, for example in some areas of Russian Hill and in Pacific Heights, which includes the neighborhood where Speaker of the House Nancy Pelosi lives. Cables are ugly, and in SF, they disappear when there is enough money and power involved.

    • DF
      Sep 10, 2019 at 9:22 am

      Newer neighborhoods are moving to underground wiring. My 30yo neighborhood in Albuquerque has buried lines, but older neighborhoods don’t.

    • wkevinw
      Sep 11, 2019 at 8:10 am

      ASk any utility expert, cost is too high to go from overhead to underground.

  40. medial axis
    Sep 10, 2019 at 4:43 am

    “All the market wants from PG&E is dividends and a high share price, which translate into cost cuts, shitty maintenance, and inadequate investment.”

    No, that’s what shareholders want, not the market. At least not the market PG&E sell into.

    So how can we ensure/encourage suppliers to give the end user (the market sold into) a decent deal? Well, for a start, don’t give suppliers monopolistic access to the market. Think along the lines of Henry George, perhaps?

  41. Kenny Logouts
    Sep 10, 2019 at 5:20 am

    You mean society sells it’s assets to private enterprise in good condition, and at cheap prices.

    They then run it to the ground to maximise profits.

    Then when it fails it’s bought back at a high price by society.
    They then fix it up and rejoice.

    But what stops it happening again?

    SF needs to build it’s own (new) network that becomes owned by the users who’ve paid for it (like a mutual), and those shares are provided to connection owners and can’t be sold.

    • medial axis
      Sep 10, 2019 at 10:44 am

      I see two ways to remove the monopoly Wolf mentioned[1]

      (1) SF owns the poles, cables etc, charges suppliers rent[2] to use them and uses the rent to finance maintaining the poles etc.

      (2) SF charges firms[3] rent on each pole they erect (or mile of cable strung), sets standards the poles and cables must meet and uses the rent to finance inspection of the poles etc.

      Not sure which is best but think I favour (1).

      [1] 4th para: “Whoever owns the wires has a total monopoly.”

      [2] Rent should probably be proportional to population density.

      [3] Firms that ererct poles, cables etc need not be suppliers.

  42. Winston
    Sep 10, 2019 at 8:16 am

    That pole looks like it’s in the 3rd world.

    • Sep 10, 2019 at 8:40 am

      Winston,

      This article was linked by a site in China and got some traffic from there. I think they’re laughing about our utility infrastructure here, just like we’re laughing about their “ghost cities.”

      • joe
        Sep 10, 2019 at 9:09 am

        If you live in SF – third world crap city -, you may wish you had a “ghost city” to retreat to.

      • Old-school
        Sep 10, 2019 at 4:54 pm

        It would be nice of someone really looked at the pole and described what is going on in detail.

        I know that usually electric, wire phone service and cable share the pole. Sometimes I think the phone company actually owns the pole. You can imagine all of the additions that have been bolted on to the pole. Once a pole is showing signs of weakness it’s life can be extended by bolting on strentheners. Usually power lines are beside roads that get widened and powerlines get moved and I would guess that is when new poles are installed. Also I am sure that the utility has a cost for replacing a pole. Might be $2000 or more, but they may have tens of thousands on this kind of shape. If it will last 20 more years, should rate payers replace early.

  43. Mark
    Sep 10, 2019 at 8:56 am

    Howdy Wolf,

    “Some of the outages are planned and come with advance notice. Others are surprise outages because of equipment failure of some sort. I have bought extra equipment to deal with them because I can’t just shut my business down.”

    What kind of extra equipment have you deployed? UPSes or something else?

    • Sep 10, 2019 at 2:49 pm

      Yes. And backup internet service via cellphone data because that still works when Comcast broadband doesn’t when the power in the neighborhood goes out.

  44. joe
    Sep 10, 2019 at 9:02 am

    Meh. Still meets Indian and Nepalese standards. But not Chinese.
    What does that tell you?
    I would post pictures if I could – Indian rats nest pole vs Chinese cell tower in desert.
    BTW, my Internet went down while I was posting this. Had to re-enter.
    3rd world here we come.

  45. tommy runner
    Sep 10, 2019 at 9:40 am

    by whom/how will the city’s new asset be maintained/serviced.
    speaking of ‘smoking wires’ did anyone purchased oj’s gloves or jd’s silverware, charlie’s bus would make a nice service vehicle.

  46. A/C in SD
    Sep 10, 2019 at 9:53 am

    “Here are more photos of the utility pole out front of our global corporate headquarters.”

    Wolf, love your humor! I deal with both SFPUC and PG&E in my business and both seem to be reputable and professional, they pay their bills, on time!
    Now if SFPUC wants to issue a tax free muni at say 4% I’m in!!!

  47. Ishkabibble
    Sep 10, 2019 at 10:22 am

    Good metaphor for the whatever-you-want-to-call-it economic system (in which LARGE SCALE capital equipment is owned or controlled by a microscopic percentage of the population for their own astronomical profit) that was bailed out by haven’t-been-born-yet future US taxpayers.

    Don’t worry. No doubt the new owners will do a much better job “maintaining” that worn-out-long-ago equipment (economic system) than the old owners, right? (And those increasing numbers of homeless people living on SF’s streets are going to simply disappear as soon as “our” whatever-you-want-to-call-it economic system inevitably, miraculously evoles into utopia. Just keep printing those USDs out of thin air to keep those TBTF banks and military-industrial-complex doing what they do so well, and things are going to turn out just fine.)

  48. Sep 10, 2019 at 11:20 am

    PGE’s problems are in the back country, (so this is a bit of a misdirection). I am interested to see who wants their assets. My own power company is owned by Sempra and they have done pretty well, with many of the same problems. Finding the right fit, and perhaps some changes to they way they handle rural customers, more onsite renewable, so that places like Paradise truly are “off the grid”.

    • Old-school
      Sep 10, 2019 at 5:06 pm

      In NC we have a co-op system that supplies power to rural areas. They purchase power from Duke and they are responsible for transmission. You pay a little more, but they have a higher cost rural area to cover. Usually the customer service is excellent and because their area only covers maybe 10,000 or so customers they really know each customer.

      On the easy coast reliability is mainly a tree trimming issue which is a bit of a catch 22. People love having both electricity and trees.

  49. Seneca's cliff
    Sep 10, 2019 at 11:59 am

    Wolf,
    Now you know why at the end of the Roman Empire the citizens opened the gates to let in the Barbarians. They got to the point where they would accept any new leadership as long as they could hope they would do a better job of keeping things running.

  50. Ben Davies
    Sep 10, 2019 at 12:19 pm

    Everybody seems to forget that the people of California (through the PUC) bankrupted PG&E in 2001 by requiring that it buy fraudulently priced power from the likes of Enron and sell it at a loss to it’s customers. (AB 1890, the poster child for what is wrong with deregulation.)

    And the legislature now requires strict liability for natural disasters through a policy of inverse condemnation.

    And we wonder why PG&E skimps on maintenance.

    Whether or not this purchase by San Francisco makes sense in the long run will be determined by whether the City can do a better job than the State of California in managing the business of power distribution.

    • Sep 10, 2019 at 5:11 pm

      CCA is back in place in California. Ratepayers should have the right to negotiate electric rates, now with smart meters the utility has the authority to determine who gets power, and who doesn’t. The provider can selectively deny service. Which is how SDGE handles the wildfire problem and so far the courts have backed them up. Rather than risk causing a fire they shut off power.

  51. Chris
    Sep 10, 2019 at 1:18 pm

    Be careful in your choice of words, Wolf. That stuff is “vintage”, “distressed” and “antique”. It “adds to the charm of the city” (right, a city with we-all-know-what in the streets). It might sell for a premium over new, streamlined, and efficient equipment.

  52. Sep 10, 2019 at 2:13 pm

    I hate to belabor the obvious, but the electric infrastructure is nothing but a liability. The only asset here is the same thing that the Flint City, Michigan water department claims, which is a number of gullible rate payers who are idealistic enough to believe that the popular vote will discern a council with majority possessing the wisdom and supernatural ability to fix it.

    Has Wolf Street management ever considered relocating its Global Corporate Headquarters to an unincorporated area with good power lines and an abundant supply of pure ground water BEFORE San Francisco begins to de-populate???

    • Sep 10, 2019 at 2:26 pm

      “Has Wolf Street management ever considered relocating its Global Corporate Headquarters to an unincorporated area with good power lines and an abundant supply of pure ground water BEFORE San Francisco begins to de-populate???”

      But our millions of employees love the gorgeous views of the SF Bay from the headquarters building (not shown in the pics above), and the great restaurants, and the neighbors that have been here forever, and the cold-water swimming in the SF Bay three blocks down the street, and the fog horns, and the barking sea lions, and the pelicans and seagulls and parrots flying about in big flocks, and the fog, and the mostly perfect temperature, and a million other things that are all reasons for putting up with this stuff described in the article and elsewhere on this site :-]

      And I would welcome a little “depopulation” of San Francisco. Most people here would.

      • Sep 10, 2019 at 9:51 pm

        OK

        I understand the pluses. Some are tangible and some are intangible. It is hard, especially for stable people, to separate from that. Even if it weren’t pleasant to the senses people, myself included, cannot easily separate from their acquaintances, doctors, dentists, butchers, bakers, their bookkeepers, ministers and so on….

        However, you are dreaming if you believe that a profit-seeking board or a publicly elected board is going to manage the utilities to provide better and safer service at lower costs.

        You are going to have to hope that your service and safety improves and forget any hope that it might be done cost efficiently.

        When the taxes and utilities get expensive enough, house prices will mitigate.

      • Sep 10, 2019 at 9:52 pm

        OK

        I understand the pluses. Some are tangible and some are intangible. It is hard, especially for stable people, to separate from that. Even if it weren’t pleasant to the senses, people, myself included, cannot easily separate from their acquaintances, doctors, dentists, butchers, bakers, their bookkeepers, ministers and so on….

        However, you are dreaming if you believe that a profit-seeking board or a publicly elected board is going to manage the utilities to provide better and safer service at lower costs.

        You are going to have to hope that your service and safety improves and forget any hope that it might be done cost efficiently.

        When the taxes and utilities get expensive enough, house prices will mitigate.

  53. deep black well
    Sep 10, 2019 at 2:44 pm

    For some reason this utility infrastructure problem reminds me of bankrupt golf courses, i.e., the Capitalism model, which is a Ponzi scheme rolls forward with great speed. Golf course communities essentially rely on a small group of people, who invest in their own commodity-like creation, which apparently will live on in perpetuity. Utility companies as commodities and monopolies are thought to be investments that will always provide income to shareholders, versus being like golf courses that burn up money. Pretty stupid game really.

  54. Fred
    Sep 10, 2019 at 2:46 pm

    Honestly when I read and see these stories it amazes me the country is still in business. The only reason I want to live to be really old is to see how the historians spin this whole period of history. We had it all and it’s gone. The problem is Americans are just too blind to see. The hubris, graft, greed, and utter criminality of it all is breathtaking. I cant see how this all ends well.

    • p coyle
      Sep 12, 2019 at 12:55 am

      ” I cant see how this all ends well.”

      that’s because it won’t.

  55. John McGinnis
    Sep 10, 2019 at 2:59 pm

    This is rich. The author sits in a city that has a feces map online to avoid human waste on the streets while at the same time having dreams of new concrete power poles and transmission lines from the same city council if they owned the utility service. The definition of insanity comes to mind.

    Do me a favor Wolf, 5 years after the acquisition give us shots of that power pole and an run down on number of outages, provided you still have electricity. Is it a deal??

    • Sep 10, 2019 at 4:44 pm

      I hope everyone out there believes that people in SF walk knee-deep in feces. Those ZH articles are really effective. We need more of them. It’s way too crowded here and too congested and too many people want to live here. This needs to stop. People who think about visiting or worse moving to SF need to be scared away.

      • PressGaneyMustDie
        Sep 10, 2019 at 8:05 pm

        Hahahahaha. WR that has to be your best comment of the year. My 15 yo is giving me the stink eye for laughing so loudly. As an aside, I live in a suburb of Portland Oregon with a similar climate to SFO except colder Dec/Jan/Feb. My public utility district spends a ton on maintenance & tree trimming. They have a 99.9% uptime. My worst monthly electricity bill was $110. I have a heat pump with natural gas furnace back up. My worst monthly natural gas bill was $150 (19 degrees in January and my house is a 3000 sq foot yuppie barn) from a private gas company that has real government oversight. Most months it’s $30 and we take long showers. Then there are the poor schlepps near me who have to suffer with the other PGE, Portland General Electric. Drive a country road in PGE territory and you see branches caressing power lines all over. Even mild 40-50 mph Pacific Northwest storms result in thousands of outages while my PUD has outages measured in the teens. In fairness to PGE, I have never seen such a “necrotic” power pole like your pix. I used to work near PGE hq and it was once a well run utility until it got Enron-ed. A lot of nice, hard-working employees got knifed at PGE. One party rule isn’t doing any favors for California and it looks like things don’t bode well for my left coast state, either.

      • John Denver
        Sep 11, 2019 at 12:05 am

        I used to love SF. I stopped visiting after about 2010, because it finally became just too damned obvious that the city I used to love to visit had been turned into an expensive hell by a whole bunch of people I really didn’t like. I hope the city is knee-deep in feces because that’s what the people who’ve ruined what used to be a truly wonderful city deserve.

        And people better not even dare to think about moving to Colorado. We’ve already got too many damned Californians here. The weather sucks, and it gets really cold. Temps at around -30 deg F last winter. No Californian can stand that, so please don’t make me buy a gun to keep the Callies from destroying this place the way they’ve already totally ruined and destroyed SF.

    • fajensen
      Sep 11, 2019 at 4:35 am

      It is easy to set up a Raspberry PI to do a shot every 5-minute and then make a movie of it. At night there might even be some neat corona to be seen too, the way those HV-wires are poking out everywhere.

      Maybe you want to install a looping video too, to get the Money-shot when the thing blows up!

      However, Yves Smith has carefully documented a decades long, sad, saga about the going-on’s and shenanigans involving Calpers, presumably the new public utility will follow a similar pattern?

  56. ft
    Sep 10, 2019 at 7:18 pm

    While there is much to criticize about PG&E, I’ve got nothing but praise for the service people they send out to turn on power for a new acct, chase gas leaks, restore power to a dark neighborhood, or whatever is needed. In my experience over the past 45 years, they are simply…the best. I hope they don’t get shafted by any ownership changes.

    • fajensen
      Sep 11, 2019 at 4:38 am

      In these times, it will be seen as a stunning lack of real leadership that they haven’t been sacked yet! All resources must go to stockholders and CEO’s!!

  57. Bearly
    Sep 10, 2019 at 11:59 pm

    What happens when a society is so foolish as to take what should be a public utility and instead make it a capitalist profit-center. And of course, the capitalist pigs want to overcharge the public when the public finally decides to stop being ripped off and to take over the necessary public infrastructure.

    The state of CA should just ‘nationalize’ PG&E. By now the citizens of CA have already far overpaid any fair value for this junk. Especially on top of the damages incurred over the years due to PG$E’s poor maintenance. Paying even one cent more is foolish. Send in the bailiffs and seize the stuff.

    Hey, the good news Wolf is that the poles outside your global corporate headquarters would probably be even older and in worst shape except for that big earthquake they had over a century ago.

    • medial axis
      Sep 11, 2019 at 5:47 am

      “What happens when a society is so foolish as to take what should be a public utility and instead make it a capitalist profit-center.”

      Yes. As I’ve said elsewhere on this thread, society ought take control of the infrastructure and charge suppliers, such as PG&E, rent to attach to and supply through it. The rent pays for maintaining a good/safe infrastructure (there are various ways that can be done).

  58. Sep 11, 2019 at 8:08 am

    It is possible for a shareholder-owned utility to reform. Avista did it after a 1991 fire that burned part of Spokane. Avista had been letting trees grow into the lines. After the 1991 fire, they grudgingly started to cut and trim.

    Since then we’ve had a number of similar windstorms, but none of them caused fires.

    A 2015 windstorm caused a prolonged outage, and Avista had to replace half of the poles in town. They followed up by replacing the transformers and revising the grounding on all poles, not just the ones that had been toppled. The grid is considerably less fragile now.

    It might be worthwhile to investigate how the Washington state regulators got UNcaptured. Who applied pressure and how?

  59. CreditGB
    Sep 11, 2019 at 1:21 pm

    Study the proposal very carefully. It could be that along with the hundreds of classes of PG&E assets, they slipped in there the “Beneficiary of PG&G, Tesla, and its shares of stock and corporate bonds”.

    What a coup that would be, engineered by the Genius himself!!!

    I’d buy tickets to see that one!!

  60. c1ue
    Sep 11, 2019 at 2:08 pm

    I don’t disagree that the equipment in place is likely worth less than zero, in many case, however, the purchase isn’t just about that equipment.
    It is more likely about the real estate/easements. So long as PG&E owns these, they can easily obstruct anyone else from doing anything.
    It is this monopoly position which allowed PG&E to get away with decades of underinvestment.

  61. Lenny
    Sep 12, 2019 at 2:57 pm

    I can’t wait till Cali beaurweenie get ahold of this pork barrel and stuff it patronage beaurcrats. Think it’s bad now?

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