PG&E pays out dividends out of profits. The amount of profit it makes is strictly regulated by the government, based on the California Public Utility Commission’s rate-making. (What’s called an “authorized rate of return.”) PG&E would submit detailed proposals to the government about what it was planning to spend money on, and how much it would cost and what rates would have to be, and the government would approve those proposals and award PG&E a profit as some percentage of the investment: https://www.cpuc.ca.gov/uploadedFiles/CPUC_Public_Website/Co...

So it is 100% false to say that “PG&E was avoiding maintenance to pay out dividends.” If PG&E didn’t spend money on safety and maintenance, then the rates, and PG&E’s profit, would go down. Conversely, if PG&E wanted to spend the money on safety, that wouldn’t cut into profits. It would submit a rate case to the CPUC with that proposed spending. CPUC would authorize raising rates, and award PG&E a larger profit (in absolute terms) because PG&E was spending more.

> PG&E pays out dividends out of profits. The amount of profit it makes is strictly regulated by the government, based on the California Public Utility Commission’s rate-making.

If you want to blame the state for PG&E management decisions, you are essentially saying that PG&E’s shareholder ownership and its own management are irrelevant, in which case they are at best a superfluous expense that should be avoided by making PG&E’s functions the domain of a publicly-operated utility.

> If you want to blame the state for PG&E management decisions, you are essentially saying that PG&E’s shareholder ownership and its own management are irrelevant, in which case they are at best a superfluous expense that should be avoided by making PG&E’s functions the domain of a publicly-operated utility.

Well the second part hardly follows from the first part. PG&E provides private capital for investments the State may not be willing or able to provide. PG&E provides the expertise in building and maintaining a power grid, and manages the day to day operations. For that they get a reasonable margin of profit.

But the State sets prices, and decides what is a “prudent investment” that can be recovered from rate payers. As a result, it is the State that is responsible for the trade off between keeping retail rates low and investing in infrastructure upgrades such as enhanced fire safety. The State is also responsible for setting big picture policy goals, and has done so for example by imposing requirements with respect to purchasing renewable energy. (Which I think are a good thing by the way.) When the State is the one making those decisions, then yes, it should be held accountable.

As to publicly operated utilities—they have the same problem, because their rates are regulated by agencies like the CPUC. Underinvestment in utility infrastructure is a chronic investment around the country, and there seems to be no difference between public and investor owned utilities in that regard. The problem is utility boards.

That's right. And without that return to investors, PG&E would not have the private capital it needs to operate.

Modern PG&E have been repeatedly sued for raiding tree maintenance budgets, which they are legally required to use, going back to at least 1999. In the same era, executive bonuses have been consistently large. When Enron happened, during discovery, they found out that a large and carefully covered holding company had been pulling cash out of the tightly regulated main body, to buy similar power producing assets internationally, despite no charter to do so.

They also had massive negative cashflow going back over a decade and paid for those dividends with lender’s money. The entire thing wasn’t sustainable.

It isn’t necessarily fair to single out California because many other public utilities are in a similar situation, California just has added significant natural disaster risks. Regulated utilities have been considered a safe investment for so long that many shareholders and probably management have been asleep at the wheel for years. The regulatory aspect means there isn’t much those parties can do without state/voter approval.

I’m hardly an expert in capital markets, so I’m not going to claim if PG&E did or didn’t pay dividends X would happen. I don’t know. What I do know is PG&E probably needed 3-4x the revenue they had, either by increased rates or borrowing which would lead to even greater rate increases eventually.

I would say in general this is a good thing. California’s residents are now extremely incentivized to move to home solar + battery storage. California may even hit their renewable energy goals ahead of schedule.