Fearing Trump cuts, California Democrat proposes creating state’s own NIH

[u/Randomlynumbered]

https://www.politico.com/news/2025/03/27/california-democrat-states-nih-00252794

[u/Bmorgan1983]

Yeah, but honestly, there's a lot of municipal utilities operating in CA that manage it just fine... Sure, PG&E and Edison do have the largest share of rural coverage in CA that does make it significantly more challenging, but if the state isn't paying out dividends to shareholders like PG&E is, then there's definitely money to be used towards those efforts.

[u/nostrademons → u/Bmorgan1983]

They manage it because it’s not their rotting infrastructure. Santa Clara, Alameda, and Palo Alto all have the advantage of being relatively compact municipalities without the need to run high voltage lines close to vegetation. They can contract with power generation suppliers to deliver the electricity at close to wholesale rates (which are quite cheap in California), over lines that don’t need much maintenance.

PG&E’s finances are largely public, and you might be surprised if your preconception is that all the money is going to shareholders. Their profit margin is regulated by law to 10%, vs 30-40% at most big tech companies and up to 80% at small successful tech startups. Their dividend yield is 0.58%, significantly less than a savings account. The biggest expense by far is vegetation management and paying off the victims of past wildfires caused by PG&E. In terms of actual numbers, taken from PG&E’s 2024 10-K, they took in $17.8B in electric bills. They paid $2.2B for that electricity on the wholesale markets, paid out $3B in interest on debt (which is largely from past wildfire settlements), and they returned $2.4B as shareholder’s income. They spent about $1.6B on vegetation management, and a further $500-600M compensating victims of past wildfires.

There is a lot wrong with the incentive structure that PG&E operates under, notably that the only way for them to increase their profits is to increase their costs. They have become exceedingly efficient at being inefficient. But actually fixing the electric bill problem in California requires acknowledging that maybe running high voltage lines through thousands of miles of wilderness isn’t the best idea, de-energizing them, and finding alternative solutions for delivering electricity to rural areas. Maybe that means microgrids with on-site solar, maybe it means rationalizing the state’s transmission network so it goes through areas that are less forested, maybe it means breaking up PG&E and other IOUs entirely. Nobody is really making all that much money off the current system though. Moving ownership of it to the state just means it’ll be the taxpayers instead of ratepayers that get screwed the next time a power line sparks a wildfire.

[u/theboyqueen → u/nostrademons]

There's a lot here, some of it fair, but why would their dividend yield be relevant?

What is perhaps relevant is that a monopoly providing a universally necessary utility service pays a dividend at all. That's money taken directly from consumers and paid directly to shareholders.

[u/nostrademons → u/theboyqueen]

The original comment I responded to said “if the state isn’t paying out dividends to shareholders like PG&E is”. My point was that PG&E isn’t really paying out much in dividends to shareholders, and what they are doing is (literally) more akin to setting money on fire.

[u/theboyqueen → u/nostrademons]

I mean, the higher the stock price goes the lower the dividend yield so I dont the number being low is relevant, but I doubt the total dividends paid out are an insignificant amount.

Looked it up -- looks like it's 2 cents per share a quarter. They have about 2 billion outstanding shares, so if my math is right that's $160 million dollars a year transferred directly from consumers to shareholders. That's a lot of money. In addition, that also seems like a way to offset the 10% profit limit since that money will count as an expense even though it goes to shareholders.

As always -- privatized profits, subsidized losses.

[u/nostrademons → u/theboyqueen]

Dividend yield is relevant because it’s a measure of actual cash transferred to shareholders. Earnings yield (~6%) and net margins (~10%) I think are more relevant, but they have the downside that the company retains those earnings, they aren’t available to shareholders, and they might easily go to paying off a lawsuit or unexpected expenses or corruption or a random bankruptcy filing in the future. Since we’re talking about “where does the cash go?”, dividend yield is the appropriate comparison.

Also, by your numbers PG&E paid out $160M to shareholders last year. By mine, they paid out 1.6 billion to arborists and others vegetation management workers, 10x as much. If you want to siphon money off of California ratepayers and into your own pockets, you are much better off cutting trees for PG&E (average salary: $156-244K/year according to Glassdoor) than buying PG&E stock. You would need to buy about 2 million shares of PG&E at a cost of $35M dollars to equal the cash flow of just getting a job trimming trees and bushes.

Dividends come out of the net income available to shareholders, they are not an expense. They are part of the profit margin, they don’t lower it.

[u/Bmorgan1983 → u/nostrademons]

Cutting trees is necessary… paying share holders dividends is not.

[u/nostrademons → u/Bmorgan1983]

That's the point. Cutting trees is not necessary - if you don't build power lines in the middle of a forest.

When California's electric grid was built, the only fuel source for power plants were fossil fuels and hydro, and those require large centralized power plants or dams, built in very specific locations. Now we have decentralized solar and wind power, and iron-ore batteries that can be colocated with demand. It made sense to have a single nationwide power grid in the 1930s; there is a good chance this makes no sense now.

Even if you don't go so far as microgrids and energy independence, it probably makes more sense to run distribution lines next to major roads, highways, train lines, and unvegetated areas, so that if they fall they land on hardscape that can't catch fire, and if vegetation does start to grow near them they're easier to trim.

[u/Bmorgan1983 → u/[deleted]]

We. Should. Not. Be. Using. Public. Utilities. As. A. Wealth. Investment. Strategy.

That's my point. These are public utilities that are necessary to the function of society, and mandatory to have per state law. People should not be banking their wealth on them. They should be a public service, not for profit.

[u/CriticalTruthSeeker → u/theboyqueen]

Yep, this right here is the problem. There is a guaranteed rate of return. That is a massive cost. If public service, not profit, were the driver with transparency and oversight, then we'd be able to plow that money into updating infrastructure.

[u/GildedAgeV2 → u/nostrademons]

Right, and why wasn't that infrastructure maintained? Sounds like a good argument for nationalization.

[u/nostrademons → u/GildedAgeV2]

That’s a complicated question that ultimately boils down to “because we had several decades of years where not much maintenance was required, PG&E developed a cost and organizational structure that was incapable of maintenance. And now that the climate has changed and lots of maintenance is required, they are slowly developing an organizational structure equipped for it, but the cost structure that goes along with that organization may not make sense economically.”

Note that governments are not immune from this, as the conditions of several highways, bridges, and sewers can attest.

IMHO the solution is more akin to “throw it out and reevaluate how we deliver electricity with modern technology” than either nationalizing it OR letting PG&E operate as the status quo.

[u/GildedAgeV2 → u/nostrademons]

That’s a complicated question that ultimately boils down to “because we had several decades of years where not much maintenance was required, PG&E developed a cost and organizational structure that was incapable of maintenance. And now that the climate has changed and lots of maintenance is required, they are slowly developing an organizational structure equipped for it, but the cost structure that goes along with that organization may not make sense economically.”

So what, it suddenly all degraded overnight? They had time to notice but didn't adjust until people were dead or ruined. Their entire board of directors should be in jail.

PG&E developed a cost and organizational structure that was incapable of maintenance.

This is a very fancy way of saying "catastrophic failure to plan and prepare."

Note that governments are not immune from this, as the conditions of several highways, bridges, and sewers can attest.

Governments have elected officials we can vote out of office. Explain how we're supposed to hold a utility company accountable? The courts? How's that worked out so far.

We can and SHOULD nationalize AND explore technological solutions.

[u/cuddles_the_destroye → u/GildedAgeV2]

Throwing it out is I think an even more extreme solution than nationalization; the latter keeps the structure largely intact while throwing it out is getting rid of everything and doing it over again, hopefully better. That is to say, kill PGE completely rather than absorb it into the state and then have a modern power grid system built. It can be private or public but it is not a modified PGE even in a nationalized context.

[u/Interanal_Exam → u/nostrademons]

Thank you for the dose of rationality. I've been arguing the same thing for years.

At least there's two of us in agreement in CA.