California is on fire, and yet again it’s partly the fault of Pacific Gas & Electric, a company that has decided to shut off power to millions of people rather than upgrade its aging and failing infrastructure. PG&E has failed the people of California; its customers should stop paying their bills.
We are in this situation partly because PG&E is a private company focused on maximizing profits for shareholders, not upgrading its infrastructure, serving people, or protecting the environment. It should be publicly owned.
When a privately-owned utility is not busy with maximizing profits, its burning money on lobbying and campaign contributions. In PG&E’s case, that meant spending billions on PR and lobbyists instead of safety upgrades, but also funding climate denialism to maximize profits from fossil fuels.
As shareholders and bondholders battle over who will own the utility company and its assets, organized collective action in the form of utility bill strikes could be one way to make a public takeover a reality. It’s a theory raised by economist Yanis Varoufakis, the former Finance Minister of Greece, at a talk last year.
“Today you have millions of people who are being exploited by public utility companies that have been privatized and financialized,” Varoufakis said. “They have already sold to financiers the next 20 years of the electricity bills that you will be paying. And as a result of this financialization is your bill is going up and up and up, completely disproportionate to the cost of producing electricity, water, whatever.”
“What if we could work out which financial derivatives [...]are packaging the bills in a particular neighborhood and another neighborhood and another neighborhood,” he continued. “And we organize through the internet so we can have an electricity bill payment strike that is timed in such a way as to explode those [derivatives] and make them bankrupt.”
There is a precedent for this type of action.
The Autonomism movement in Italy used a strategy called "autoreduction" where a group of people forced prices down via collective shoplifting, fare evasion, or continuing to pay at lower, older rates. When this strategy was deployed in Turin in the late 60s and 70s, workers, students, and trade unions were able to fight against rent, electricity, and transportation price hikes.
What Varoufakis is talking about here are municipal revenue bonds, which allow local and state governments to fund public projects and operations by asking investors to pay upfront for a piece of revenues across some specified time period. They can get packaged up as municipal collateralized debt obligations—nearly identical to the CDOs that allowed the housing crisis to become a global recession.
Essentially, investors are putting in money up-front in order to secure a share of consumers’ utility bills for decades to come. This helps drive energy bills up as investors try to maximize profits. If large enough utility bill strikes were organized, it’s not clear PG&E would be able to withstand both pressure from striking consumers and investors holding its bonds. But which way would the company bend?
Varoufakis’ suggestion then raises all sorts of questions. The act of discovering which homes and neighborhoods are in which CDOs, along with figuring out how to convince each to sign up for a utility bill strike, are all big question marks as to how to actually make this happen. Even if all this were answered, there’s still the question of what actually happens when the CDOs go to zero. Right now, PG&E’s bondholders are not letting bankruptcy interrupt their payday. But how would they react if the public killed the value of those securities?
Varoufakis has reason to believe that this would allow consumers to press collective power and demand concessions lest they go about destroying every bond. But since cities have increasingly restructured their budgets around these types of bonds and the debt schemes surrounding them, what may follow are cuts to social programs and government operations. Bondholders could force cities to sell their assets to pay up missing revenues or losses. t could even enrich other investors who were betting on the bonds to fail in the first place (see: credit default swaps).
PG&E is already doing a good job of making its stock worthless on its own. Its stock price has fallen from a high of $25 at the beginning of the year to just $5 on Tuesday. A Citigroup research note warns the recent Kincade fire, which the utility's neglected equipment may have helped start, "increases the probability of a zero share price."
The bottom line is that PG&E doesn’t have to be private, and that its stock price doesn’t matter at all to its customers. But PG&E cannot magically be taken over on its own. We should look into collective action options—after all, why should you pay your bills when your utility provider is failing to reliable service?
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