CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, MAY 14, 2019, OR THEREAFTER
FOR RELEASE: TUESDAY, MAY 14, 2019, OR THEREAFTER
BY THOMAS D. ELIAS
“FIRES PUSH
UTILITY ‘KABUKI DANCE’ TO ABSURD LEVELS”
For the
last few decades, California’s largest utilities and the state’s Public
Utilities Commission have conducted an elaborate kabuki-style dance every two
or three years, whenever the utilities applied for general rate increases.
Now the
amounts at stake in these dramatic farces are rising to absurd levels, with all
three of the state’s big privately-owned utilities suddenly asking that
shareholders get rates of return on investment approximating what they could
net from risky junk bonds.
Pacific
Gas & Electric Co., the largest of these, asked in late April to increase
shareholder returns from about 10 percent to 16 percent, essentially trying to
reward itself and its investors for negligence that led authorities to hold it
largely responsible for two huge blazes in less than a year’s time. Southern
California Edison, No. 2 in state electricity sales, is gunning for a leap from
10.3 percent to just under 17 percent, while San Diego Gas & Electric seeks
a jump from around 10 percent to more than 14 percent.
Customers
around the state would pay an extra $11 to $12 per month for these ill-gotten
rewards, if the PUC grants them. Add in the approximately $2 each company will
seek to get in increased profits from the Federal Energy Regulatory Commission,
and the added tab goes to about $14 per month for the average customer.
This mere concept
outraged Gov. Gavin Newsom, who opined of PG&E’s bid for 16 percent that
“They’re not going to get it, period…It’s jaw-droppingly wrong.”
Newsom,
unlike his long-serving predecessor Jerry Brown, at least wants to protect
consumers. Trouble is, while he can appoint new PUC members, he can’t fire
anyone on the commission once they’ve been confirmed by the state Senate for
six-year terms. So Newsom won’t make the vital upcoming decisions; holdover
Brown appointees will do that.
It
appears these cases will proceed in the old-fashioned way, via a Japanese-style
kabuki-like charade. If past is prologue, it will work this way: After months
of public hearings and massive paper filings, the utilities will get something
above current profit rates on facilities and equipment, but less than they’re
asking. The PUC will brag about its toughness, while the utilities cry all the
way to the bank – or to Wall Street investment houses. As with an elaborately
acted out and costumed kabuki dance, everyone in the cast and audience knows
this outcome in advance.
The
utilities say they must offer shareholders junk-bond level payouts to draw
investors while their corporate futures are in doubt due to fire responsibility
and liability. Virtually all fire-related lawsuits against the companies have
not yet been decided or settled, but the firms are desperate to protect
themselves.
“We are
having to make significant investments to harden the grid and make it more
resilient to wildfire…,” one Edison executive told a reporter. “To attract the
capital we need (for this), we need a return on investments that reflects the
operating risks we have today.”
As
usual, the big utilities expect customers already paying some of the highest
rates in America to foot the bill. Employees are not being dunned, no matter
how negligent. Just customers, most of whom live nowhere near fire areas and
will get no new benefits for their higher rates.
Essentially,
these companies seek to deflect responsibility for their actions or lack of
action away from management and ownership and onto consumers.
No
matter what Newsom says, there’s little reason to doubt the PUC will act differently
from how it predictably has in the past, rewarding utility ineptitude and error
with increased revenues.
Rather
than sticking with that course, the better path for state regulators would be
to cut rates and punish the utilities for their cavalier attitude about past
errors.
This
could encourage formation of more publicly-owned Community Choice Aggregations,
which already supply power to dozens of cities and counties around the state,
and are answerable to elected officials, and thus to voters.
But
utility rate cases have long followed the same path. Chances are the new kabuki
dance will play out like the old ones, with the big utilities again making out
like bandits.
-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, visit www.californiafocus.net
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