Pranav Gopal Week #10 - A Monopoly on Power?
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| Henry // Unsplash |
Wildfires in California is recent years have emphasized the shortcomings of our local Bay Area energy company Pacific Gas & Electric, PG&E, a household company for many throughout California. Because of these mishaps and failures, people have started to consider other options for their energy needs, which led me to think that PG&E could be a monopoly. Keeping in mind what I had just learned in a recent US History lesson, I started thinking about what exactly led to the immense influence that this company held over critical resources for such a wide area of California.
First, let's set the parameters and consumer base that PG&E operates for, to exactly determine how large this utility company is. PG&E serves 16 million people across more than seventy thousand mile service area in northern and southern California, with their only competitors being Southern California Edison and San Diego Gas and Electric, which serve the rest of the state. However, this comes from the idea that utility companies are often monopolies because of the massive cost of developing and maintaining infrastructure needed to operate gas and electric for entire states. Billions upon billions of dollars need to be dedicated to the construction and continued operation of utility equipment and infrastructure like transformers and transmission lies. To top it off, companies serving larger regions and higher amounts of consumers would be optimal for the operation of utility companies, as their infrastructure could be more widespread and thus their competition would be minimal, thus allowing their prices to be lower and thus benefit customers. In conclusion, yes, PG&E is a monopoly, but by no means is it an illegal one, as it is consistently regulated by the California Public Utilities Commission, or CPUC.
Unfortunately, this leaves few options for many residents in California, as a result of the widespread service area and uncompetitive market for energy. Examining PG&E's history, I could start to see a trend of errors and accidents that occurred throughout its longtime and widespread management of Californian gas and electric. One chain of incidents occurred in October of 2017, where PG&E-linked fires in NorCal burned away over 250,000 acres, displaced 100,000 people, and killed 44. Another such incident was in November of 2018, where another PG&E fire scorched over 150,000 acres of land, destroyed over 18,000 buildings, and killed 86. More instances like the above are readily available apparently, and throughout its history PG&E has caused over 50 billion in damages from the severity and frequency of these massive fires.
Following these immense claims and charges, PG&E has had to go through significant changes in management and its economics, filing bankruptcy in early 2019 and experiencing a massive drop of stock value from a high of 70 dollars to a mere 3.55 dollars. In its reconstruction phase, PG&E had many of its directors and upper-level managers come and go, in conjunction with modernization and replacement of many parts of its existing infrastructure.
Would these issues have become as bad under a government-owned utilities company, or even had there been competition for the company? It's a hypothetical many considered following PG&E's filing for bankruptcy, countered only by the long-running belief that a utilities company would serve better as a monopoly, or close to it. Another point of criticism is that PG&E's executive management are all members of the upper 1% of our American economy, leading to the development of an argument that this simply redirects the capital of the bottom 99% to the upper 1%, and thus only serves to make the rich richer. Alongside this argument is the ever-growing sentiment that the Californian utilities company should become a public company or have its infrastructure managed by the government directly.
Before delving deeper into this topic, I really had no idea PG&E had such a high amount of incidents or damages, nor did I really consider that it was a monopoly in the area. However, brief research into future plans for the energy company seem to be fairly promising, though significant issues will have to be addressed later on, such as how the company will manage to replace such a wide scale of infrastructure in a way that doesn't further harm the people it serves.
Hi Pranav! I too, did not know that PG&E was a monopoly although I do remember hearing about all the fires a while back in eighth grade and the air quality when we went to school. It was my first time seeing so many people wearing masks before Covid-19. The concept that utility companies usually end up as monopolies because of the enormous cost to start one up as well as the way they function is very interesting as it is different from normal abuses of power by monopolies. It just turns out that way and it is even more optimal for these companies to be a monopoly, so it is very difficult for people outside of the company to step in and reform it, which is pretty unfortunate. Also that is a dramatic drop in stock prices which is quite sad for the people who invested in it.
ReplyDeleteHello Pranav, PG&E is a monopoly mainly because of the support they get from the government, a lot like CollegeBoard. Even if they were a private company, I do not really think they would be concerned about being a monopoly anyways because most private monopolies have tricks to make sure that they are not classified as a monopoly. Google, for example, does not classify themselves as a search engine. If they called themselves a search engine, then they would be illegal because as far as search engines go they are definitely a monopoly (the most searched website on Bing is Google). Google instead ventures into other industries like the smartphone industry where they have a small market share so they could show the government that they are not a monopoly.
ReplyDeleteHi Pranav, thanks for yet another enlightening and educational blog! I learned a lot about things that I had heard about from my parents and briefly in the news, but did not really know about. I definitely think that PG&E is definitely a monopoly, as no other power company really exists, at least, not in the Bay Area. Everyone has to turn to PG&E for their power, and this has also enabled PG&E to raise prices to what many people consider unreasonable. However, ultimately there are not many other sources that dissatisfied PG&E customers can turn to. Moreover, the lack of government control and other competitors has allowed PG&E to get away with many deadly mistakes. Even after filing for bankruptcy, PG&E was able to get out of bankruptcy and still run as the primary source of power for people in California. By having such a strong monopoly on power, PG&E has certainly become a company with considerable power. Hopefully, PG&E takes the right steps to ensure that Californians have a reliable and safe access to power.
ReplyDeleteHi Pranav! I knew that PG&E was a major power company here, but I had no idea that it had such extensive influence over this much of California. I had always thought that monopolies were illegal for the most part, but it was sort of surprising to see that PG&E was technically able to be run as one just with regulations. Although, I suppose it was even more surprising to learn that such an essential resource like energy was mostly provided by a privatized company instead of the government. Perhaps if the government did have a larger role in supplying gas and electricity, there would also be more accountability for accidents, especially for the executive managers of these utilities services.
ReplyDeleteHi Pranav! Firstly, I simply wanted to say that I just loved the way you opened your blog by stating a very surprising number of around 16 million people being served around Northern and Southern California. Although their only competitors are the Southern California Edison, and San Diego Gas and Electric company, I believe that many companies can be operating as monopolies since the development and maintenance of the infrastructure of the gas and electric companies can have pricing costs that power the millions with increasing competition. In response to this, I really liked your idea on how these companies can aim for the common good of the public in terms of lowering prices by serving a larger number of consumers to improve the operation of multiple utilities, and the widespread growth of the infrastructure since this greatly decreases the competition in society. Despite these many loopholes that might be within the company’s procedural circumstances, this system is regularly regulated by the California Public Utilities Commission of the area. Errors in manufacturing units or damages that have formed in terms of severity has caused many charges to be placed on the company; however, the changes that were needed in management and economics allowed for a reconstruction phase that improved any inefficiencies in the system.
ReplyDeleteHi Pranav, i learnt about monopolies in apush too :) so this your blog post is definitely relevant. Monopolies are a great topic to cover when talking about power, and I definitely think PG&E has some monopolistic practices, which are required for a utilities company, as you mentioned. It's interesting to think about whether it would be better for the company to be government-owned and whether that would possibly help the company do better financially. I definitely know that if any state were to take this step, California would be one of the first. Thank you for this educational blog post, and I look forward to reading more from you.
ReplyDeleteHi Pranav! I remember learning more about monopolies this year in US history. Though I've heard of PG&E in many instances throughout my life in California (so basically my entire life) I really didn't know that it would classify as a monopoly. In fact I didn't even realize it was a privately owned company. I can't name any other companies that regulate electricity here in California and its crazy how extensive of an influence this once company has over us. I recall freaking out over any power outage and all of us waiting around a phone to hear back from PG&E. They've also been partially responsible for their poor maintenance leading to forest fires which I remember hearing about back in 2018 and 2019.
ReplyDeletePG&E is an absolute joke of a company. The power supplies of practically every single country in the world is controlled by the state, and for good reason. The state is less likely to lower standards for profit, or let safety regulations go unnoticed for something as vital and relevant as the power supply of the entire country that powers nuclear power plants as well as the lights of their citizens. To let a private company hold so much power and be so bad at achieving their goal is a farce: PG&E repeatedly dropped into Section 11 (bankruptcy) territory and has held far too much power over the citizens of California. There aught to be something done about this monopoly of power in Northern California, where your only choice is to purchase power from a company that cannot even ensure its delivery on time in certain places. Something needs to be done.
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