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Between fire risks and other problems growing due to the climate emergency, related state mandates and endless corporate chicanery by Pacific Gas & Electric — the largest of the state’s investor-owned utilities — the challenge of keeping the lights on in California without battering ratepayers is complicated. No easy answers are available.
But one issue that hangs over all others is the fact that average Californians have simply no reason to believe that they have aggressive advocates for their interests in the government oversight process. The state Public Utilities Commission appears to be exhibit No. 1 for the “regulatory capture” theory embraced by many economists. It holds that companies are often far more invested in wooing powerful regulators than pleasing individually impotent customers. A case in point: It remains stunning that the PUC in 2014 gave a sweetheart deal to Southern California Edison and SDG&E allowing them to make their ratepayers cover 70 percent of the $4.7 billion cost of the closing of the broken San Onofre nuclear plant. While the commission ended up agreeing to increase the utilities’ share of shutdown costs by $775 million, that only came after a state probe — and explosive reporting by The San Diego Union-Tribune’s Watchdog team — showed the original deal had been surreptitiously arranged by PUC President Michael Peevey and an Edison executive at a fancy hotel in Poland.
This disturbing history of utilities getting what they want behind closed doors continued in 2022 with the age of Assembly Bill 205, a vague state law that “required” public utilities to eventually implement income-based billing. This “requirement” was a rule that the utilities desperately wanted so they could continue to maintain their healthy profit margins but do so more on the backs of wealthier residents. The belief was this group presumably wouldn’t be as likely to grouse about sky-high bills as the 4 million electric utility customers in California who live paycheck to paycheck and are months behind on payments. That this approach actively discourages energy conservation — a cause that used to be considered as noble as it gets — hasn’t been discussed at all.
Now there is more evidence that the energy regulation and oversight process in California is askew. It comes in a Nov. 26 analysis by U-T energy reporter Rob Nikolewski: “A review by the Union-Tribune of federal financial submissions shows SDG&E profits have been steadily increasing for about a generation, with the pace accelerating since 2008,” he wrote. “Last year’s earnings came to $915 million, the highest in company history. At its current pace, the utility may crack the $1 billion mark by the end of 2023.” The earnings are driven not by SDG&E’s sky-high rates but by infrastructure projects the utility has undertaken in response to the climate emergency. Such projects add to the value of properties that utilities, under state law, are allowed to earn a specified rate of return on.
Yet are these projects truly necessary to respond to the Legislature’s call for a vigorous response to the climate emergency? Or are they at least partly incentivized because of how they pad profits? A benign explanation is certainly possible — and a case can be made that SDG&E has been a much better corporate citizen than PG&E or Edison. But the problem for SDG&E is that it’s the California Public Utilities Commission that has the least credibility of all. At this point in the PUC’s history, its blessing of costly projects by the utilities it regulates isn’t a reassuring sign of due diligence. Instead, such endorsements are more likely to inspire dread among utility watchers about unrevealed details and possible unintended consequences.
Given that the State Auditor’s Office also questions the adequacy of efforts by the PUC to vet electricity and natural gas rate increases, if many California utility customers feel trapped by circumstances, they’ve got good reason. In the private meetings in which profoundly consequential energy policies are hashed out by powerful insiders, no one has their backs.
