California Wildfire Bailouts Are A Terrible Idea

With fires blazing in California, homes destroyed and lives lost, California’s government seems to only be concerned with one thing. Protecting corporate profits.

While many are blaming fires on campfires, global warming and an unmaintained buildup of dry brush, California’s biggest power company PG&E may have just admitted that a fallen power line was responsible for starting the fires. This could mean that the company could be sued by Californians for all their losses, which could add up quickly.

The first thing that I’m sure comes to mind when asking whether or not a government should bail out a company like this, is what will happen if they don’t. Of course, this is where all the fear-mongering comes in. Residents and taxpayers would be told that if they don’t bail out the company, surely all the electric cables would vanish into thin air, and nobody would ever have electricity again. Of course, this couldn’t be further from the truth.

The reality is that this company was trusted by its shareholders and by its customers to operate in a safe and efficient manner. They have failed and should be punished – not rewarded with a free pass that will surely not incentivize them to prevent another future disaster. But can Californians really afford to let that company fail?

Well, let’s look at what would happen. First, the company would be sued beyond every asset that they have. But this could take years to process. In the meantime, their stock prices will plummet, but that doesn’t make operations stop. The company still has power going to millions of homes, and they would continue to collect revenue and operate their business. They still have a lot of employees who want to get paid, and this would be their incentive to keep working. They’d eventually rebuild the infrastructure that was lost in the fires to restore power to blacked-out zones whose homes haven’t been burned down. They’d still operate almost just as they are now.

The stock itself plummeting usually has zero effect on a company’s ability to operate. They’d have insurance to cover a lot of the damage and cost of rebuilding what they have lost. The shareholders would likely be screwed unless they can get out fast. A corporation can hold some of its own stock to sell in case of an emergency. If this is the case with PG&E, that opportunity would be lost, but they likely have plenty of cash on hand, as they are a big utility company.

When the lawsuits start making their way through the system and judgemental are passed demanding the company pay some number in the billions more than it has, the company will have to liquidate it’s assets. What that means is some new investors will come in and buy up the infrastructure and start a new company. They will take over all the existing accounts and assets as well. This would be a new company with new shareholders. If they don’t want their stock to fail like the previous formation, they’ll likely do something like hire officers who are more responsible and care more about safety and planning. I know a lot of people like to believe that big corporation owners don’t care about safety and only profits, but no owner or board member of any corporation wants to lose everything like the previous incarnation of PG&E would have.

Most people would keep their jobs, the company might undergo some restructuring, the people who overlooked the safety issue would be out of a job and probably un-hirable anywhere else, the “greedy shareholders” would have lost most or all of their investments, and the taxpayers never would have spent a dime! How can anyone think this is a bad thing? If a company is meant to fail, it needs to be left to fail.

0 0 votes
Article Rating
Notify of
Inline Feedbacks
View all comments