TIME OF MAJOR TESTS FOR UTILITY REGULATORS

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, OCTOBER 15, 2013, OR THEREAFTER

BY THOMAS D. ELIAS

    “TIME OF MAJOR TESTS FOR UTILITY REGULATORS”

          No state agency over the years has so disregarded the interests of both ordinary citizens and business owners as the state Public Utilities Commission.

          Not only has it failed to adequately supervise safety of things like natural gas pipelines, but its decisions have consistently taken the side of large utilities over their customers.

    From secrecy about the costs of the huge new Mojave Desert solar power installations due to come online in the next two years to its dividing of more than $10 billion in restitution money paid by out-of-state electric generating companies that created the energy crunch of the early 2000s, the PUC has always favored the utilities it was created to regulate.

          But with four of its five current commissioners appointed by Gov. Jerry Brown, the commission now has several opportunities to change its ways.

          One key decision will come when it decides how to distribute $750 billion in cash and credits about to be repaid by Powerex Corp., a subsidiary of British Columbia’s government-owned BC Hydro, which gouged Californians during the crunch. If all or almost all that money doesn’t end up as credits on the bills of customers of Pacific Gas & Electric Co., Southern California Edison and San Diego Gas & Electric Co., you’ll know it’s the same old PUC, even if most of the members have changed.

          Then will come a key decision on how to penalize PG&E for its negligence leading to the 2010 gas pipeline explosion that killed eight persons and destroyed 38 homes in the San Francisco suburb of San Bruno.

          The PUC’s own staff has recommended fining PG&E at least $4 billion, partly because the company had collected money for pipeline maintenance from its customers for decades, but didn’t do an adequate job on it.

          But there may be complications if the PUC, as it should, goes through with the big fine. PG&E, pleading poverty, has told the regulators that if it has to pay the big fine – exponentially more than any penalty ever imposed on a California utility -- it will likely have trouble borrowing money for capital expenses.

          The company wants to pass any increases in the interest rates it pays through to consumers on their monthly bills for both gas and electricity. PG&E claims the fine would make its bonds less attractive to investors.

          That sets up yet another big test for the PUC: It can go along with PG&E according to the commission’s age-old pattern of always giving utilities at least the majority of any rate increase they ask for – and PG&E indicates it might seek as much as a 4 percent rate increase for added interest expense – or it can refuse and force the company and its shareholders to absorb that cost.

          The company says it will not pass along any direct costs of its fine to customers. But it says added interest costs would be an indirect cost and it feels entitled to pass that on.

          But why should consumers, who paid billions in maintenance money over several decades, pay anything for PG&E’s problems?

          As long as the company can absorb those costs and still remain solvent, there’s no way consumers should be charged even 1 cent for PG&E’s mistakes.

          It’s much the same question the commission also faces with Edison’s errors in replacing key parts of its San Onofre Nuclear Generating Station, now shuttered and about to be completely decommissioned and torn down as a result of faulty parts the company ordered and installed.

          No one has adequately explained why Edison and SDG&E customers, who paid the costs of building and maintaining San Onofre for decades – including hundreds of millions earmarked for the plant’s eventual decommissioning – should pay anything more for the teardown.

    Put these cases all together and this fall is plainly a time of serious tests for the PUC. Only if it decides all of them in favor of consumers can the new commissioners establish that they actually care about the interests of the people who pay all the rates and expenses of the state’s three big privately-owned utilities.

    -30-
    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, go to www.californiafocus.net