Deregulation, PG&E, and the Fires
by Jim Shields, November 8, 2017
PG&E is now under investigation by state authorities trying to determine whether the electrical monopoly’s power lines played a role in igniting Northcoast wildfires that destroyed thousands of homes and killed 43 people. Both the California Department of Forestry and Fire Protection (CALFIRE) and the state’s Public Utilities Commission have launched investigations.
Meanwhile, a group of state lawmakers have announced that they will introduce legislation in January to prevent electric utilities found culpable in wildfires from passing the costs for claims not covered by insurance as well as fines or penalties onto customers.
“This practice is an outrage,” said Senator Jerry Hill, who represents San Mateo and Santa Clara Counties. “Victims of devastating fires and other customers should not be forced to pay for the mistakes made by utilities. It’s time to stop allowing utilities to push the burden of their negligence onto the backs of customers.”
One of the state senators on board with Hill is Mike McGuire, who Northcoast district includes communities ravaged by the wildfires last month.
The proposed law is triggered by public outrage generated by the state’s “Big Three” utilities’ ongoing efforts to recover costs in wildfires not covered by insurance by passing them along to ratepayers.
For example, San Diego Gas and Electric Company wants to recover $379 million in costs from the 2007 Witch, Guejito and Rice fires. The utility’s powerlines and overhead equipment were blamed for the three fires that caused two deaths, burned 200,000 acres and destroyed more than 1,300 homes.
Two administrative law judges rejected the San Diego utility’s bid to recover costs in August, but their proposed decision is subject to the approval of the California Public Utilities Commission. SDG&E wants the commission to reject the decision, so do utility giants Pacific Gas & Electric Company and Southern California Edison Company, according to papers filed in the case. PG&E said in a document it filed that the proposed decision puts utilities in “an untenable situation.”
Separately, PG&E is laying the groundwork for an application to recover costs in the 2015 Butte fire, which was caused by PG&E powerlines and killed two people, burned more than 70,000 acres and destroyed 921 structures. The first step is to obtain permission from the CPUC to track costs associated with the fire. PG&E’s application to do so is pending with the CPUC. PG&E told the Securities and Exchange Commission in July that if the application is approved and if claims exceed its liability coverage, it expects to seek CPUC authorization “to recover any excess amounts from customers.”
The cause of the North Bay wildfires is still under investigation. In a document alerting the SEC to the fires, PG&E said: “It currently is unknown whether the Utility would have any liability associated with these fires. The Utility has approximately $800 million in liability insurance for potential losses that may result from these fires.”
Senator Hill said the bill that will be introduced January 3 when the Legislature reconvenes will also prevent electric companies from passing the costs of fines and penalties leveled against them for causing wildfires along to customers.
Gas companies are already prevented from shifting the burden of fines and penalties onto customers as a result of legislation he introduced after the San Bruno disaster that was caused by the rupture of a PG&E gas pipeline in 2010. The legislation, Assembly Bill 56, was approved by the governor in 2011.
According to a Bay Area News Group report,
For the better part of a decade, California’s utilities have helped to stall the state’s effort to map where their power lines present the highest risk for wildfires, an initiative that critics say could have forced PG&E to strengthen power poles and bolster maintenance efforts before this month’s deadly North Bay fires.
Sen. Hill and other critics have characterized the years-long state regulatory efforts as a long, meandering slog, with hundreds of utilities, telecommunication companies, internet providers and other stakeholders fighting over proposed regulations that could add significant costs to their bottom line.
State officials began working to tighten regulations on utilities and create the detailed maps after wind-toppled electrical lines in 2007 ignited catastrophic fires in the San Diego area. But nearly 10 years later, the state Public Utilities Commission — which initiated the process — still hasn’t finished the maps, let alone adopted strict new regulations.
A review of the mapping project by the Bay Area News Group shows that utilities have repeatedly asked to slow down the effort and argued as recently as July that, as PG&E put it, certain proposed regulations would “add unnecessary costs to construction and maintenance projects in rural areas.”
On Oct. 6, two days before the start of the deadliest outbreak of wildfires in California history, two administrative law judges assigned to oversee the project granted yet another delay at the request of PG&E and other utilities.
The timing of that 74-day deadline extension and the decade of seemingly endless debate about the maps has outraged lawmakers who have been pushing regulators for years to speed up a project designed to prevent catastrophic fires like the ones in Wine Country that killed at least 42 people and destroyed more than 5,000 homes and businesses.
The Big Three electrical monopolies are able to operate with a public-be-damned attitude is because of this state’s fatal blunder deregulating the electrical industry back in 1996.
It’s a history I’ve written and spoken about for years, but here’s a quick summary of what occurred.
The real culprits are the politicians who brought us deregulation back in 1996. The entire state legislature (Republicans and Democrats) voted unanimously to unleash economic havoc on an unsuspecting public. Those elected leaders, colossal imbeciles each and every one, are responsible for the deregulation fiasco that led to an unprecedented period of large-scale blackouts, rolling brownouts, electrical market manipulation and illegal shutdowns of pipelines by the Texas energy consortium Enron, and, of course, price gouging,
Here in Mendocino County back in 1996 most local governments, including the then-Board of Supervisors, were lobbied by PG&E to support electrical deregulation. The BOS was paid a visit by a PG&E exec who was the monopoly’s point man on the Northcoast. He was also the husband of Supervisor Patti Campbell, of Fort Bragg.
The Big Three, along with their facilitators in Sacramento, sold the public a bill of goods knowing that every experiment deregulating once-regulated industries has been a disaster. Let me count the ways: Airlines, railroads, savings and loans, telecommunications, banks, Wall Street, and the list goes on.
Truly great leaders like Teddy Roosevelt, a grand old Republican, figured out a century ago that certain sectors of our economy must be monitored and regulated because the typical forces of the free market could not control the resulting anti-competitive, monopolistic behavior inherent to such economic endeavors. Teddy used his big stick to bust the trusts, which is what folks called monopolies back then. He also brought the monopolies under their first public control.
While Teddy was bringing the monopolists to heel back East, Californians in the early 1900s were rounding up Southern Pacific Railroad and the gas and electric utilities which owned state and local government lock-stock-and-barrel. An aroused citizenry brought the railroad and utility giants to their knees, primarily through the creation of public commissions with broad regulatory authority over those industries.
I’ve said it before and I’ll say it again, for almost a hundred years, California’s utilities policy was pretty straight-forward. In return for allowing the Big Three to continue to do business as legal monopolies, their rates and services would be subject to control through the Public Utilities Commission. That was the basic trade-off. Theoretically, and most of the time in practice, the PUC set rates charged to the public on a standard of cost-based pricing. Whatever it cost the utilities to actually produce energy was factored into the basic rate, plus a reasonable margin for profit.
A century ago, our political leaders understood that the electric and gas industries were the types of economic endeavors that just didn’t work in the free marketplace. Besides, given the evolving public investment in critical utility infrastructure, such as dams and related activities for hydroelectric power, it was good public policy to maintain these kinds of private-public partnerships growing out of a regulated environment.
The system was not perfect, but it sure beats the hell out of what we have now.
(Jim Shields is the Mendocino County Observer’s editor and publisher, and is also the long-time district manager of the Laytonville County Water District. Listen to his radio program “This and That” every Saturday at 12 noon on KPFN 105.1 FM, also streamed live: http://www.kpfn.org)