CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, JANUARY 29, 2019 OR THEREAFTER
FOR RELEASE: TUESDAY, JANUARY 29, 2019 OR THEREAFTER
BY THOMAS D. ELIAS
“WHO COULD
BENEFIT WHEN BIGGEST UTILITY FALLS APART?”
If there’s one
classic line in the controversial movie “Vice,” it probably comes early in the
film, when then-Vice President Richard Cheney is portrayed thinking about the
World Trade Center attacks of 9-11 as “an opportunity,” rather than a tragedy.
So it
might be today in California, where tragedies partly of its own making afflict
the state’s largest utility, whose chief executive has left the firm just when
it says it will declare bankruptcy.
Pacific
Gas & Electric Co. faces as much as $29 billion in uninsured lawsuit
liabilities from homeowners and others harmed by the massive fires of the last
two years, at least some of them started by sparks from PG&E electric
transmission lines. Previously, the company suffered a criminal conviction and
billions of dollars worth of fines and negative publicity over the 2010 natural
gas pipeline explosion that killed eight persons in San Bruno.
But
just as the filmic Cheney is shown realizing that in other people’s misery lies
potential opportunity for him, so it can also be in real life. That’s the case
right now with PG&E’s predicament. As the potential extent of the company’s
responsibility emerged in recent weeks, its stock price dropped precipitately,
losing more than two-thirds of its previous value.
Opportunity
for others has been expanded both by statements from the state Public Utilities
Commission about possibly breaking up PG&E because of both proven and
possible misdeeds and by the company’s own public comments. PG&E openly
contemplates both bankruptcy and selling off its natural gas operations.
Bankruptcy probably would help no one, as fire victims likely would not be paid
fully.
But two
major players on the California utility scene could benefit from a PG&E
breakup or selloff while keeping customers supplied with the energy they need.
Those
are investor Warren Buffett’s Oregon-based PacifiCorp, owned by Buffett’s
Berkshire Hathaway investment firm, and San Diego-based Sempra Energy, parent
of both the Southern California Gas Co. and San Diego Gas & Electric Co.
PG&E’s
natural gas assets could make excellent synergy for both Buffett and Sempra,
bidding rivals last year when Sempra paid more than $9 billion for 80 percent
ownership of Oncor Electric Delivery Corp., the largest electric utility in
Texas, serving Dallas, Fort Worth, Waco and other large cities.
Though
in expansion mode, Sempra last fall sold off 42 billion cubic feet of natural
gas storage in the Deep South for $332 million, demonstrating both the
company’s readiness to wheel and deal and the fact it has cash on hand.
Buffett,
meanwhile, has bought up electric and gas utilities in 10 Western states. His
PacifiCorp already serves 45,000 customers in several Northern California
counties. Berkshire Hathaway also owns the Kern River gas pipeline, a major
transporter of Colorado natural gas to California utilities.
Berkshire
Hathaway had no comment on reports it might be a bidder if PG&E’s gas
operations, which serve 4.5 million metered customers in a large swath of California
including cities like San Francisco, Sacramento, San Jose and Bakersfield, come
up for auction.
Sempra
also refused comment. Its SoCalGas and SDG&E units serve 6.5 million
metered gas customers across Southern California. Each meter generally serves
multiple persons.
For
both Buffett and Sempra, then, the synergies are obvious. Sempra, for one, could
gain access to vast new supplies from the natural gas fields of western Canada,
from which PG&E imports much of its supply.
PG&E
has said its gas operations might sell for more than $9 billion, but that could
prove low if there is active bidding between Sempra and Buffett and especially
if a surprise third party should enter the auction.
A
complete natural gas selloff to either large company might be more efficient
and cost effective for consumers than selling off PG&E’s gas operation
piecemeal, as the state PUC has discussed.
However
this plays out, it’s clear PG&E’s self-inflicted wounds present a major
opportunity for others who could make hay with almost half that company. Which
might also bring some satisfaction to disgruntled PG&E customers and
homeowners harmed by the huge utility’s safety problems.
-30-
Email Thomas Elias
at tdelias@aol.com. His book, "The Burzynski Breakthrough: The Most
Promising Cancer Treatment and the Government’s Campaign to Squelch It,"
is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net
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