I have the privilege of serving as the Vice Chair of the Senate Energy, Utilities and Communications Committee this year. And what a year it has been. With the recent Public Safety Power Shutoff resulting from the Santa Ana and Diablo winds, a special hearing was called for November 18th and every State Senator was invited to attend this committee’s discussion on Public Safety Power Shutoffs. However, most of the Senators in Sacramento yesterday were members of the committee.
I presented opening remarks, which I will provide in a future UPDATE. For a sense of what I shared, see MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019.
The three major investor-owned utilities (IOUs) were represented by key executives, but only PG&E’s new CEO, William Johnson, was present and testified. To see the agenda, go to https://seuc.senate.ca.gov/content/#November182019.
PG&E was pummeled during the day by Senators and various speakers. Therefore, I appreciated Mr. Johnson attending the entire hearing. There is a need to reduce utility-caused wildfires, and it is apparent that PG&E was not proactive in its approach, especially when compared to SDG&E and SCE. The state of California is also guilty of a late reaction. The hearing certainly emphasized that there is much more to do.
On the issue of a state takeover of PG&E, I asked Mr. Johnson his concerns about being “nationalized.” He was fully aware that it was an option.
I asked each of the utilities what they were doing to install newer and more advanced electric lines and power diverters or current limiters, a newer technology that is being implemented in Australia to react to the surge of current that is unleashed when a high voltage line strikes the ground or is struck by a falling tree or tree branch.
Mr. Johnson said that, over the last 10 years, PG&E had spent $30 billion, but he did not mention newer technology. So, I asked him where PG&E spent this large amount of money.
Some highlights are provided below in Dan Morain’s daily email blast for CalMatters.
Cities 241 to 288
We’re now in the 50th percentile of cities. These cities have below-average balance sheets. In this sixth group, there is only one Orange County city, Seal Beach (#245). This means 15 Orange County Cities are in the 60th percentile or lower.
Riverbank, Arroyo Grande and California City have not completed their annual audits for June 30, 2018. They are almost a year behind in what should be the anticipated completion date. This is a signal to Sacramento, cities are having difficulty meeting their reporting requirements. Consequently, I have projected their Unrestricted Net Deficits based on conservative assumptions.
The city of Porterville (#262) dropped 96 places. It did something highly unusual, it increased its restricted net assets by $25.5 million. Its pension liability rose by $6 million and the other post-employment benefit liability rose by $4.4 million. This would explain why its unrestricted net position went from a positive net assets of $13.7 million to a net deficit of $20.3 million, or a $34 million decrease in one year.
|Rank||City||Pop.||UNP 2018 (Thou-sands)||UNP/ Capita||2017 Rank||Rank Change|
25th Anniversary Look Back
The Moorlach Memo continues with Chapter 6. In this segment, I lay it all out: “We have a County Treasurer who has borrowed staggering amounts of money to invest in highly speculative strategies that are totally inappropriate for a trustee of public funds to engage in.”
if you really want to understand what im talking about, watch “The Big Short,” a 2015 movie with a plotline reminiscent to my personal experience, A quick view of the trailer will show you what I mean: https://www.youtube.com/watch?v=vgqG3ITMv1Q. I just couldn’t make money betting against Citron’s bets.
For The Bond Buyer article referenced, see MOORLACH UPDATE — Mail Bag and Group 8 — October 2, 2019.
For the introduction and first five chapters, see:
Intro — Context — MOORLACH UPDATE — Constitutionally Flawed Legislation — November 5, 2019.
Chapter 1 — Introduction — MOORLACH UPDATE — Business, Electricity and Top 48 Cities — November 7, 2019
Chapter 2 — Hold to Maturity — MOORLACH UPDATE — 3P, Cities 49 to 96 and Holding to Maturity — November 12, 2019
Chapter 3 — We Do Not Mark To Market — MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019
Chapter 4 — Prognosis — MOORLACH UPDATE — Officers, Audits, CIRM and Cities 145 to 192 — November 14, 2019
Chapter 5 — Current Media Revelations — MOORLACH UPDATE — SB 640 and Cities 193 to 240 — November 18, 2019
SCARING CREDIT MARKETS
We have a County Treasurer who has borrowed staggering amounts of money to invest in highly speculative strategies that are totally inappropriate for a trustee of public funds to engage in. That, in a nutshell, was the personal belief I communicated during my candidacy to unseat our six-term Democrat incumbent.
Mr. Citron’s assistant, Matthew Raabe, said as much in the October 3rd issue of “The Bond Buyer,” “‘Over the years, we’ve developed a reputation for being aggressive investors.’ He said the aggressive reputation is accurate: ‘We like to take our base portfolio and leverage it.’”
Leveraging is wonderful if the market goes with you. It can be devastating when it goes against you. “I wish we had been right about where interest rates are going, because I would be breathing a lot easier these days,” Raabe observed.
Citron and Raabe have assembled a “Jenga” block stack (a game where players pull out blocks and risk losing if the stack should fall). Why was it built in the first place, especially with tax dollars? And why does a challenger questioning this scheme draw Citron’s claims of “scaring” the credit markets? My goodness. If asking questions about a bond portfolio causes problems, then there are problems!
Questioning Citron’s management of our tax dollars was a legitimate campaign strategy; it hit too close to home for one of my critics, Peer Swan. Let me elaborate.
Lawmakers challenge PG&E, as utility warns of more mass power shutdowns
By Dan Morain and Judy Lin
Good morning, California.
“We don’t want Californians to think they’re living in Puerto Rico because they are not.”— Ana Matosantos testified at a Senate hearing Monday. She’s Gov. Gavin Newsom’s energy czar and also serves on a board overseeing the financial restructuring of Puerto Rico, including the island’s electric grid.
- PG&E Chief Executive Officer William Johnson told the senators: “Repeatedly turning off power for millions of people in one of the most advanced economies in the world, even in the interest of safety, is not a sustainable solution to the wildfire threats we face.”
- PG&E warned that 800,000 people could lose their power Wednesday and Thursday as wind-driven fire weather is expected to return.
PG&E faces tough questions
PG&E CEO William Johnson at a Senate Energy, Utilities and Communications Committee hearing Monday
California lawmakers heaped harsh criticism on PG&E for its massive power shutoffs, with some calling for a public takeover of the bankrupt utility.
Democratic Sen. Scott Wiener of San Francisco: “This company in my mind has forfeited its right to operate as an investor-owned utility.”
High hurdles and huge cost: The California Public Utilities Commission would have to revoke the utility’s franchise and the state would have to overcome the 5th Amendment, which prevents taking private property for public use without just compensation.
In a daylong Senate oversight hearing, PG&E Chief Executive Officer William Johnson said: “I do work for the shareholders, let’s not kid ourselves about that.”
He’d like to keep PG&E in private ownership but sought to strike a conciliatory tone, acknowledging that an Oct. 9 blackout affecting 2 million customers “wasn’t perfect.”
He said the utility is working to reduce the blackout footprint by one-third by next year’s wildfire season, even as the wildfire risk has dramatically increased.
- Sen. Bill Dodd, a Napa Democrat: “I looked at what happened on Oct. 9 as a big ‘screw you’ to your customers, to the Legislature, to the governor.”
- Sen. Mike McGuire, a Democrat who represents fire-ravaged Sonoma County: “You are behind in modernization, grid hardening and vegetation management.”
Johnson said the utility has invested $30 billion in its system over the past decade.
- Sen. John Moorlach, a skeptical Republican from Costa Mesa: “Where did you spend that $30 billion?”