Monday, April 29, 2019




          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.

    Email Thomas Elias at 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

No comments:

Post a Comment