WHY UTILITY FINES MEAN SO LITTLE

 

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, APRIL 19, 2022, OR THEREAFTER

BY THOMAS D. ELIAS
     “WHY UTILITY FINES MEAN SO LITTLE”

 

        California regulators are in the habit of assessing what look like gigantic fines on the state’s largest public utilities.

But the utilities don’t even blink when forced to fork over nine-figure amounts to pay for their misdeeds.

 

        What the state’s Public Utilities Commission did in February, with two new acting members – one shy of a majority on the five-person commission – shows just why these big companies don’t bat an eye when penalized:

 

        They know they’ll get the money back, and then some, the next time the commission considers a rate increase.

 

        In February, just such an increase went to Pacific Gas & Electric Co., which only two months earlier was assessed a $125 million penalty for its actions that helped cause the 2019 Kincade fire in Sonoma County that sparked massive evacuations and did at least $600 million damage to homes and other property.

 

        So PG&E’s fine came to less than a quarter of the damage it caused.

 

        The amount would hurt or at least sting almost any other company. But PG&E went on as if nothing had changed.

 

        The PUC soon showed why the sanguine attitude of utility executives was right on the money. That’s when the commissioners gave PG&E a 9 percent rate increase to compensate for rising natural gas prices.

 

        If the commission really wanted to hurt PG&E and not merely give the appearance of assessing a penalty, it would have forced the company to foot part of that expense itself, hitting shareholders and executives where it hurts.

 

        Instead, it will be electricity and gas customers who get hurt. The average residential PG&E customer will see an increase of about $14 per month to about $166. Overall, PG&E will get about $974 million more from its customers in the first year this increase is effective. No mechanism was set up for rate reductions when prices drop.

 

        Why would the cost of natural gas affect electric rates? Because most California power is produced in plants burning natural gas fuel.

 

        Southern California Edison customers can expect similar treatment. That company last September was fined slightly more than $500 million for its role in five big fires during 2017 and 2018. Edison also fires generators mostly with natural gas, so its customers, too, can anticipate a compensatory rate increase.

 

        Meanwhile, both big companies are approaching the end of their general rate increase cycles, with PG&E first in line to boost prices again by somewhere around 10 percent or more before year’s end.

 

        That would give the company at least $1.9 billion in added revenue beyond the many billions it was already taking in. And the more transmission lines it builds to bring power from solar thermal farms in California’s deserts to its existing system, the more profits it will add, since utility companies in this state generally get 10 percent profit or more guaranteed for every customer dollar they spend on capital improvements.

 

        All this is very like taxation without representation, for the consequences of non-payment make utility rates feel like taxes. There is only one constituent for the PUC members these days: Gavin Newsom, the governor who has appointed four of them. Newsom has taken tens of millions of dollars over the years in campaign donations from PG&E and its brethren.

 

        By law, Newsom should not have much power over the commission, even if he did appoint its members. That’s because PUC members and judges are the only appointees no governor can fire.

 

        But under Newsom, things work differently. The last two PUC presidents have been former Newsom aides.  One word from him is enough to completely change the commission’s supposedly well-considered policies.

 

        So it was that a word of doubt from the governor caused the PUC to return to the drawing board to redesign a rooftop solar policy change it was on the verge of adopting in January.

 

        This is all sleight of hand favoring the utilities. Regulators fine the companies millions for their misdeeds,  then give them billions in rate increases.

 

        Which makes the fines phony even if they are collected (and some reportedly never are).

 

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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, go to www.californiafocus.net