CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, MAY 15, 2012, OR THEREAFTER
FOR RELEASE: TUESDAY, MAY 15, 2012, OR THEREAFTER
BY THOMAS D. ELIAS
“WHO WILL PAY FOR PIPELINE FIXES?”
Pacific Gas & Electric Co. now
estimates the cost of upgrading its decrepit pipeline system, the one whose
failure blew up part of the San Francisco suburb of San Bruno in 2010, at $2.2
billion over 10 years. Figure the price for updating the systems owned by
Southern California Gas Co. and San Diego Gas & Electric Co. will be proportionate
– about $2.6 billion for SoCal Gas and $600 million for SDG&E.
The question now is who will pay for
all that work? In its current proposal for handling this self-inflicted
problem, PG&E asks that its customers pay the lion’s share of the bill. The
giant utility, in a filing with the state Public Utilities Commission, says the
company and its shareholders should pay $360 million, leaving customers to pay
the rest – about $1.84 billion.
If past history means anything,
whatever the commission decides in PG&E’s case will also apply to the other
big gas utilities.
Of course, for consumers to pay any of
the cost would be rank injustice and absurdity. For the astonishing aspect of
all this is that gas customers have made payments to assure safety and
reliability of pipelines for decades through their regular monthly bills.
So customers have already paid their
share. Why
should they have
to pay anything more? Another question: What did the utilities do with all the
money customers have long paid in for the very same purpose as the fee now
proposed? While the companies say it was spent properly, the National
Transportation Safety Board concluded last year that – at least for PG&E –
inspections and repairs have long been inadequate. So the money plainly wasn't
used for that.
The real issue motivation here for the
utilities is an esoteric concept called the “rate base.” They are allowed a
“reasonable rate of return” for every cent they spend in capital improvements
like new equipment or construction of new facilities. Right now that’s about
11.35 percent, collected annually over 20 years.
So if the
PG&E request for customer payments gets PUC approval, Californians can
expect all the big gas companies to pull in 11.35 cents of profit for every
dollar they spend on repairs. The formula doesn’t care whether those dollars
come from customers or not. Because the customer dollars would be routed
through the companies, it would all go on the books as a corporate expense.
In short, the gas companies hope to profit
for decades to come from a need highlighted by one of their biggest failures
ever, one that proved lethal in San Bruno.
What’s more, the utilities commission
– headed by former Southern California Edison Co. chief Michael Peevey – has
essentially acted as a utility company rubber-stamp since the 1970s, when it
briefly adopted a slightly different stance.
So even if PG&E doesn’t get
approval for consumers to pay the full 84 percent of the safety repair and
update tab that it has requested, it would be most unusual if the company
didn’t get at least 60 percent of the fixup expense from its customers.
That would be more billions from
consumers beyond the billions they’ve already paid. Plus at least $300 million
a year in new profits to the companies because they’re expanding their rate
bases.
If it all seems unfair, that’s because
it is. The U.S. Department of Energy reports Californians paid an average of
$9.90 per thousand cubic feet of natural gas used last year, compared with
$8.03 in Colorado, $8.44 in Utah, $9.50 in Illinois and $9.17 in New Mexico.
California rates were not among the very highest overall, but were among the
highest charged in gas-producing states, of which this is one.
So far, nothing critical that state
lawmakers or anyone else says about the gas companies attempting to dun
customers for their own neglect has made any perceptible dent in the utilities’
proposals. Perhaps that’s because they figure the PUC always tilts their way.
“We knew this day was coming, when
PG&E would expect the ratepayers to pick up the cost of its repairs,”
griped Democratic Assemblyman Jerry Hill of San Mateo County, who represents
San Bruno. “They absolutely should not be allowed to profit from this.”
But it’s almost certain they will
profit from their longstanding dereliction. And right now it appears nothing
will be done about it, if only because there is no mechanism for getting rid of
utility commissioners when their decisions are unfair and illogical.
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Email Thomas Elias at tdelias@aol.com. His book, "The
Burzynski Breakthrough: The Most Promising Cancer Treatment and the
Government’s Campaign to Squelch It," is now available in a soft cover
fourth edition. For more Elias columns, visit www.californiafocus.net.
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