PG&E (Pacific Gas and Electric Company) is one of California's largest investor-owned utility. 
Earlier in 2019, state fire investigators had determined that private electrical systems were responsible for wildfires. In January, PG&E filed for bankruptcy protection, after being sued for nearly $30 billion. The lawsuit was put in place because this specific electric company has liable for 12 of the fires that tore through Northern California (in 2017) can cause nearly 86 people to die. The company had taken responsibility and planned to have a public safety power shutoff program. On Wednesday, October 9th, PG&E had shut down close to 800,000 customers. That may seem like a huge portion of California, but PG&E plans to include its entire 5.4 million electric customer base in the shut off program, if it were to continue. This issue was affecting homes, schools, but more importantly small businesses.
In the San Francisco Business Times, Kathe Nelson said that specifically convalescent facilities and retirement homes are among those that could be seriously impacted. Following with private restaurants and eateries, which would have to deal with food spoilage. It is not just a portion of the businesses in California that are going to be struggling with this outage. Yes, grocery stores and restaurants are particularly vulnerable due to perishable foodstuffs, with most businesses equipment powered by electricity, ALL businesses share some level of exposure. This would lead to repairment issues and the costs of trying to prepare for the outage. Harry Hamilton, marketing coordinator for business development at Oakland's Economic & Workforce Development Dept. encouraged owners and managers to use FEMA's Power Outage Toolkit.
This PG&E shut down caused detrimental effects on California's economy. According to so some estimates, the impact of PG&E preventative power cuts could be upwards of $2 billion. With businesses and schools being forced to close, there is obviously going to be big economic repercussions. Power outages on small businesses hit harder because they don't always have the same large-scale infrastructure and power generators such as bigger businesses. CNBC News said, "A day of lost business can have a greater impact on their bottom line since it's a larger portion of annual revenue."
Although this outage may have caused frustration and quite frankly, a huge inconvenience, PG&E along with many residents recognize that the cuts were ultimately in their best interest and for the safety of California citizens.
Johnson, Todd. “Here's How Bay Area Businesses Will Cope with Huge Power Outages.” Bizjournals.com, SAN FRANCISCO BUSINESS TIMES, www.bizjournals.com/sanfrancisco/news/2019/10/08/heres-how-bay-area-businesses-will-cope-with-huge.html.
Stevens, Pippa. “PG&E Power Outage Could Cost the California Economy More than $2 Billion.” CNBC, CNBC, 11 Oct. 2019, www.cnbc.com/2019/10/10/pge-power-outage-could-cost-the-california-economy-more-than-2-billion.html.
It is definitely important that safety is taken into consideration especially after last year when huge fires were thought to have started because PG&E did not properly maintain their equipment. However, if the equipment had been routinely checked and maintained, it would have been a much better investment than taking responsibility for the California fires and causing thousands if not millions of people to lose power, miss school, and lose business.
ReplyDeleteCourtney raises a good point in her comment. It seems like PG&E considered the marginal costs between increasing spending on maintenance or shutting power off and found that it would cost them less to shut the power off while satisfying the majority of costumers.
ReplyDeleteIt is interesting how big of an influence PG&E power outage has on everyone, and how detrimental it is to our economy. This demonstrates the lack of elasticity in demand when it comes to a monopoly.
ReplyDeleteIt was interesting to learn how the main effect of this problem was brought onto small businesses. I agree with Leo who stated that there is a lack of elasticity in demand for PG&E's products because it is a monopoly. There is a small change in quantity by the consumer relative to changes with the producer. This shows PG&E as a pure monopoly where it is the sole supplier of a service. This is why the actions of one company affect others so much.
ReplyDeleteAs we learned in class, PG&E is a natural monopoly - a monopoly that makes sense to have as it is unnecessary to have multiple power providers who control multiple sets of electric transmission lines. In part, the power outages can be blamed on the Californian government for allowing housing to be built in fire-prone areas and forcing PG&E to provide power for those areas without being allowed to mark up the price of electricity. The power outages are slated to continue for at least 10 years as PG&E upgrades its infrastructure. However, many people have said that they would rather have power and face the small risk of wildfires - only 1 out of 10 wildfires are related to power lines.
ReplyDeleteSources: https://www.wsj.com/articles/do-californias-blackouts-make-sense-11570832232
https://www.wsj.com/articles/pg-e-ceo-says-it-could-impose-blackouts-in-california-for-a-decade-11571438206