PUC Loves SDG&E

Wall Street absolutely loves the state’s Public Utilities Commission (PUC). That’s a major reason why backcountry folks may have to swallow San Diego Gas & Electric’s loony scheme to shut off those rural residents’ power during fire season. Michael Shames, head of Utility Consumers’ Action Network, says bluntly, “The PUC is owned and operated by the utilities.”

He is referring to the five commissioners. The PUC’s staff and administrative law judges are balanced and can be tough on utilities. But in all too many cases, they are overruled by the commissioners, whose mission is massaging utilities and maiming consumers.

On September 10, the commission meets to consider the implementation of SDG&E’s so-called Emergency Power Shut-Off Plan. The utility, a unit of Sempra Energy, proposes to turn off electricity to 57,000 backcountry customers and 125,000 residents during periods of high fire danger. That’s the total that would suffer. But during any given 12- to 72-hour period, 18,600 people would be affected, says SDG&E. The commission earlier issued a temporary restraining order preventing the utility from unilaterally implementing the plan prior to the September 10 meeting.

The idea is vigorously opposed by water districts, schools, disability rights advocates, and others. They point out that if a wildfire broke out in a powerless area, people might not get critical information because their phones, TVs, and computers wouldn’t work. If they learned of the fire by word of mouth, they might not be able to evacuate quickly because garage-door openers, street lights, traffic signals, and gas pumps wouldn’t function. People with disabilities could be trapped in their homes. The lives of people who depend on medical life-support equipment would be in jeopardy.

And how could firefighters battle the blaze if the electric water pumps that supply water to the area would not work? And wells that could supply water would also be worthless?

Those who would not be inconvenienced by the shut-off are all in favor of it. These include the San Diego fire chief and city council. (The county board of supervisors, however, thumbed down the idea.)

SDG&E tells backcountry citizens that they should have their own generators. But these are not rich people, in the main. The answer, say opponents, is for the utility to do what the law requires: design and maintain lines properly, particularly keeping trees away from them.

An administrative law judge for the utilities commission studied the shut-off plan and said it would pose excessive safety risks. He said it should be nixed. But any one of the five commissioners can write an alternative decision: Commissioner Timothy Simon, who is cozy with Sempra, did just that. He suggested that the plan could move forward on a test basis, with certain changes in place. On September 10, the commissioners can turn down the plan, adopt Simon’s approach, or come up with an alternative.

SDG&E’s concern is financial liability. After the October 2007 disaster, the PUC’s Consumer Protection and Safety Division looked into causes of the Guejito, Witch, and Rice fires. The division found that those three fires were linked to SDG&E power lines. In the Witch and Rice fires, SDG&E was in violation of state utility rules; Cox Communications was the major culprit in the Guejito Fire.

“The [Consumer Protection and Safety Division] believes that SDG&E’s unwillingness to provide immediate access to witnesses and evidence prevented [the division] from conducting a more timely investigation,” said the report.

Them’s strong words. SDG&E’s laxity in keeping trees away from power lines and its failure to correctly design and maintain its lines caused two of the fires; the utility’s uncooperativeness prevented a rapid investigation of all three fires. Nonetheless, “There has not been one mention of any kind of penalties” for the reprehensible behavior, says Shames. The key word for regulators is “imprudence.” It means that utilities have not spent ratepayer money properly and should get a monetary penalty. “The PUC is fond of tongue-lashings, but rarely does it spank utilities where utilities feel it — in their pocketbooks.” Regulators are mum on the word “imprudence.”

Eventually, SDG&E paid almost $700 million to insurance companies that had settled with fire victims and then sued SDG&E. Other suits against the utility are pending. Through its new plan, the company wants to be shielded from liability for damages caused by power shut-offs, points out Shames, noting that once the company reaches its insurance liability limit, it will want to raise consumers’ rates to pay for that liability.

Shames worries that the September 10 decision will be “Sunrise redux” — or a rerun of the Sunrise Powerlink decision. This proposed 123-mile transmission line through environmentally sensitive backcountry areas was opposed by two administrative law judges and the PUC commission staff. But the commission voted to let it go through. SDG&E can rake in $1.4 billion in guaranteed profit if federal authorities approve the project, says Shames. The commission bought the argument that it would stimulate renewable power development but then didn’t make sure that the line imported renewable power. The Utility Consumers’ Action Network has appealed the commission’s Sunrise decision.

On September 10, PUC commissioners may stand where Wall Street stands: for more Sempra profits and less consumer protection. Mark Barnett of Morningstar, the stock analyst firm, gushes that Sempra is aided by “the best regulation in the country.” Just a few years ago, Sempra’s major focus was on nonregulated businesses, such as energy trading. But now that regulation is so favorable, the company is emphasizing the regulated gas and electric businesses. “The California Public Utilities Commission is considerably more friendly than it has been in the past,” enthuses Barnett, and the same is true of federal regulators who oversee transmission projects.

Standard & Poor’s points out that in July of last year, the PUC approved almost $200 million of total rate increases for Sempra’s two main operations, SDG&E and SoCalGas, providing for rate jumps of 3 percent a year for both entities through 2011.

Gary F. Hovis of Argus Research says that Sempra’s “overall excellent experience with regulators should go a long way in preventing a precipitous falloff in profitability. We view the regulatory commissions at both the state and federal levels as fair and balanced.”

That’s fair and balanced for investors. Not consumers.