By: Alex Duffant, 2L
2019 was the year when paradise plunged into darkness. The wealthiest and most populous part of the United States – California – was ravaged by a wildfire season that led power company Pacific Gas & Electric (PG&E) to preemptively shut off electricity for millions of people in the northern part of the state. PG&E is a for-profit utility that has been plagued by a crumbling infrastructure and jaw-dropping mismanagement since the 1990s. This includes multiple bankruptcies in the past twenty years. PG&E provides power to millions of Californians who live in the northern half of the state. Its dated equipment sparked wildfires that have burned over 400,000 acres and killed more than 100 people since 2015 alone, finally leading the beleaguered company to file for Chapter 11 bankruptcy in 2019. It claimed over $30 billion in fire-related liabilities and saw its share price plummet. The preemptive power shutoffs in 2019 represented the proverbial crossing of the Rubicon. Governor Gavin Newsom directed one of his advisors to draft a plan for a potential state takeover, and state senator Scott Wiener offered the first formal proposal to seize control of PG&E’s operations. A state takeover of private industry is referred to as nationalization.
Governor Newsom has publicly threatened to nationalize the company if it doesn’t reorganize itself in a manner that permits it to provide power service to customers, especially during fire season. If Governor Newsom and the state legislature decide to pursue this course of action, they can follow the legal precedent of another prosperous, influential region in North America: Quebec.
In the 1960s, Quebec’s “Quiet Revolution” led to the provincial nationalization of electricity companies. Prior to the Quiet Revolution—a period of rapid political transformation for Quebec—a number of foreign-owned private power companies served the province. When the Liberal government swept into power in 1960, Minister of Hydraulic Resources Rene Levesque led the charge for the nationalization of Quebec’s power industry. It was a decisive issue in the 1962 elections, where voters approved a mandate to pursue the policy. The provincial government placed the eleven private electricity companies under the control of a publicly owned utility, Hydro-Quebec. It cost taxpayers $600 million and led to better electricity service throughout the province, particularly for Quebecois in remote and rural areas. Today, Hydro-Quebec’s residential rates are the lowest in North America.
In South America, there is also movement towards public ownership of utilities. Bolivia nationalized its power industry in 2012. Part of the nationalization plan involved an aggressive push for universal electric power coverage by 2025. Foreign-owned private power companies failed to provide adequate service to many Bolivians, and the government finally stepped in to act. Nationalization also allowed the government to modernize the grid and set a national energy policy that focused on renewable sources.
While California considers its options, policymakers would be wise to look to Quebec and Bolivia. California faces many similar problems: underservice of rural areas, an outdated grid, and a desperate need for further regional development. The state should strongly consider adopting the Quebecois and Bolivian models of public utility ownership.