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The Internet may be bringing us all closer together, but the companies powering it are as fractured as ever. There are hundreds of utilities in the U.S., both public and privately owned, overseeing an aging power grid. And each is run differently, even in data hungry […]

The Internet may be bringing us all closer together, but the companies powering it are as fractured as ever. There are hundreds of utilities in the U.S., both public and privately owned, overseeing an aging power grid. And each is run differently, even in data hungry areas: PG&E in the Bay Area, ConEd in New York, NSTAR around Boston, Seattle City Light in the northwest, and so on.

Om’s post about the power grid as the Web’s weakest link got me thinking about where utilities like PG&E are spending their money if it’s not going into capital expenditures to fix the cables that are decaying beneath our feet.

I singled out PG&E because it oversaw the crippling outage yesterday and because, with a billion dollars in profits, it should have had enough money to invest in capex.

What I found out was even more disconcerting than I had expected.

  • Since 2005, according to PG&E’s filings with the SEC, the utility has spent $4.3 billion on capex, or about a sixth of its revenue in that period.
  • But it’s spent almost as much on investors: $1.9 billion in stock buybacks and $905 million in dividend payouts, all of which went to its parent, PG&E Corp.
  • The city of San Francisco and the state of California sued PG&E in 2002, alleging that these kinds of transfers were illegal. The plaintiffs estimated that $5.2 billion in such transfers had been made between 1997 and 2000. The case has since been tied up in courts.
  • The nine non-executive members of the board of the parent company, which approved the controversial repurchases, received $1.1 million in compensation last year alone, or about $125,000 each.
  • The seven top executives of PG&E Corp. took in $22.9 million last year alone, or more than $3 million per head.
  • Those seven executives were granted, on average, $53,000 more in perks. For example, CEO Peter Darbee received $128,000 for commuting expenses. (Darbee lives in a tony East Bay suburb, where a round trip BART ticket costs $8, or about $2000 a year.) Similarly, company president Thomas King received more than $1,200 for health-club fees. Most received between $2,000 and $5,000 a year for parking.

Now I know repurchases are all the rage these days, and that executives of large companies bring in large salaries. I even know how expensive it can be to park in downtown San Francisco. And yet, while don’t mean to sound anti-business, I do think there is a serious flaw in judgment when it comes to spending money at PG&E.

You could even say PG&E’s priorities are themselves anti-business. How much money did Six Apart, Facebook and others lose? How much were their brands hurt? Their common client, 365 Main, will find it tough to recover from this snafu only because its backup diesel generators failed to kick in. But PG&E is unlikely to suffer at all.

Yes, many companies pay more to have their sites hosted by clients whose data centers work around power outages. But even then, why should companies have to pay a premium for a utility’s failure to make basic upgrades? The more sophisticated the Web becomes, the scarier it is to think of it having to run on diesel fumes.

  1. [...] and because, with a billion dollars in profits, it should have had enough money to invest in capex. Continue Reading. Share This | Sphere | Topic: Shorts [...]

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  2. There should be an escalating penalty for outages to give incentives to the companies to prevent them. I.e. a 6 hour outage results in a 1 day credit, automatically. (the user doesn’t have to call to get it).

    Until it’s more expensive to not fix a problem than to fix one, they won’t have a reason to do it..

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  3. [...] will continue to prove satisfactory. Although we blamed excessive hubris for the crash, some are pointing fingers at the utility PG&E, for letting the underlying power outage happen. Of course, this doesn’t explain why 365 [...]

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  4. [...] will continue to prove satisfactory. Although we blamed excessive hubris for the crash, some are pointing fingers at the utility PG&E, for letting the underlying power outage happen. Of course, this doesn’t explain why 365 [...]

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  5. [...] Is PG&E fiddling while the grid burns? The Internet may be bringing us all closer together, but the companies powering it are as fractured as ever. There are […] [...]

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  6. [...] occurred last week at some of Web 2.0’s brand name companies – Technorati, Yelp, Craigslist. (Om, Kevin and Adena’s thoughts). Well, here’s the latest update, 365 Main now says that three of [...]

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  7. [...] will continue to prove satisfactory. Although we blamed excessive hubris for the crash, some are pointing fingers at the utility PG&E, for letting the underlying power outage happen. Of course, this doesn’t explain why 365 [...]

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