Pacific Gas & Energy (PG&E) just can’t seem to catch a break. The California utility’s woes have multiplied in recent years, with problems ranging from wildfires to burst pipelines. In its most recent development, the California Public Utilities Commission (CPUC) has begun evaluating different options for PG&E. In CPUC’s words, the commission will examine PG&E’s “current corporate structure to determine the past path forward for Northern Californian to receive the safest energy service.”

Among the solutions proposed by CPUC: reconstituting PG&E’s board of directors, establishing subsidiaries, and breaking up PG&E into separate units. The Northern California utility itself is not averse to the idea and told Utility Dive that it was “open to a range of solutions” to help make its energy systems safer for its customers. In its last two earnings calls, the utility extensively discussed its approach and increased expenditure on vegetation management.

Does An Operational Split Make Sense For PG&E?

It is too early to hypothesize on the benefits (or drawbacks) of a PG&E’s split. But it may not be such a bad deal, considering the utility’s current operating environment.

On its website, PG&E company, the utility and not the corporation, describes itself as a combined natural gas and electric energy company. Per its current energy mix, 80 percent of the electricity generated by the utility is greenhouse gas free.

But that might be a misleading statistic because it includes the 20 percent of its energy generated from natural gas, which has been proven to emit greenhouse gases.

While the share of renewable energy in PG&E’s energy mix has grown over the years, natural gas is still the cheapest form of energy available to the utility. In a bid to enhance the share of renewable energy on its platform, the utility announced that the cost of electricity and gas bills will increase by a dollar next month onwards. The increase is mainly due to a 5.1 percent hike in gas bills.

Considering California’s recent aggressive goals for renewable energy, it might make sense to spin out a new company dedicated to developing the infrastructure and grid necessary for such a shift. The rapid development and integration of new technologies, such as blockchain, will require an overhaul of sorts for operations, something that the utility cannot possibly achieve with natural gas as part of its energy mix.

An example from Germany might provide a blueprint for just such an approach.

In 2016, E.ON, a German utility, split its operations into two companies to better manage complexities in operations arising from Germany’s push towards renewable energy. E.ON focused on providing energy services using renewable sources while Uniper focused on conventional energy sources, such as coal and natural gas. “This (the split) liberates us from continually having to make compromises. Our ambition is for both companies, which soon will be legally independent of one another, to become leading players in their respective energy worlds,” E.ON CEO Johannes Teyssen said at the time of the split.

Almost three years later, the split seems to have been a success. E.ON reported positive earnings in its latest quarter and, more importantly, has been successful in adding new customers at a rapid clip. Uniper struggled during the first nine months of this year but is on track to reach its financial goals for 2018, its CEO said during the utility’s latest earnings call.