Chris Hill: Let’s check in on the PG&E saga. The California utility filed for
Chapter 11 bankruptcy protection. Shares of PG&E up 17% when
we walked in the studio? Am I supposed to put this
on my watchlist now?! I mean, we’ve talked before about how,
look, it’s a utility, it can’t just go away. Bill Mann: Right. Hill: But I just assumed it going to reappear
in some form that maybe was completely removed from the public markets. Am I now supposed to think, “Oh, maybe
there’s a future, not just for this utility, but a future for
investing in this utility?” Mann: Oh, yeah, absolutely.
Utilities are so weird. If you produce a product and it, for example,
catches on fire, and you get sued for it, and you don’t have money to cover it,
you go out of business and that fire-producing product doesn’t get produced anymore.
You can’t do that with utilities. You can’t say, “Well, electricity or the production
of electricity caused these fires in Northern California. The company’s going out of business. Let’s just
produce no more electricity in Northern California. There’s your solution.”
What’s going to happen? There were fires in 2017, and the
California Public Utilities Commission passed a ruling that allows the utilities to pass on the costs
of the liabilities for such events onto rate holders. Good thing that they did, too, otherwise we’d
have an enormous financial issue with PG&E. So, yes, it’s going bankrupt.
It has sufficient assets to cover its cash liabilities. It’s going to come out of bankruptcy, restructured
the equity, will in all likelihood have some value. The bonds were trading at $0.85 on
the dollar earlier. I think they’ll rally. What you have now in this place is a plan. Hill: Are you interested?
Mann: No. No! Here’s the thing. It’s going to become much more expensive to produce
electricity in this country for a couple of reasons. One, because the slate is changing. We can argue over global warming
a little bit, but utilities are having to respond. They’re having to change their slate. The cheapest forms of energy — coal, nat gas,
oil — are being ramped down, and other forms are being ramped up. But also, these types of liabilities
are popping up a lot more, as well. You could say that it’s because of climate
change, you could also say it’s because of a change in how people live. The town called Paradise, which is where the
fires were, and where the most damage was, where the houses were destroyed, was probably
not something that really would have existed in the same form even 40 years ago.
It was largely a retirement community. People, as a change of lifestyle,
went up and lived in the woods. So, no, I don’t find utilities to be a very
exciting investment because they’ll be boring until they’re exciting in the exact wrong way.