For a decade and a half, California’s investor-owned utilities — Sempra Energy, Pacific Gas and Electric (PG&E), and Edison International — have controlled their purported regulator, the California Public Utilities Commission. Legally, it should be the other way around: the regulator should regulate the big utilities. However, since 2002 when Michael Peevey, a former president of Edison, was named head of the commission, its overriding emphasis toward the publicly traded utilities has been boosting profits and stock prices at the expense of customers.
Peevey left under a cloud of scandal on the first day of 2015, but his successor has been no better.
During this period, the state’s local nonprofit government-run utilities — municipal districts, city departments, irrigation districts, and rural cooperatives, which are not regulated by the public utilities commission — have by and large done better. The three stockholder-owned utilities generally have the highest rates in the nation, while the government-run utilities sometimes charge customers around half of what Sempra, Edison, and PG&E charge. And the government-run utilities often provide superior service.
Needless to say, the investor-owned utilities, with their sky-high rates, have fat profits. That’s because “they make money based on how much they spend on investment,” says San Diego lawyer Maria Severson. Whenever utilities spend a bundle, the commission permits them to make money that bolsters profits. So, San Diego Gas & Electric is rewarded on the bottom line for building gas-fired plants when the world is moving toward wind-, solar-, hydro-, and geothermal-based energy.
Clearly, the momentum is headed toward clean energy, says Severson. The Trump administration’s plan to massage the coal, oil, and gas industries by wiping out the 2015 Clean Power Plan will ultimately fail, and even Wall Street understands that. “We don’t expect [Trump’s coal, oil, and gas initiative] to have any impact on the utilities sector,” says analyst Andrew Bischof of Morningstar. Carbon emissions will continue to fall. “The move to abandon the Clean Power Plan could even embolden states to strengthen renewable energy standards.”
Cities are championing Community Choice Energy programs (also called Community Choice Aggregation plans), which allow public agencies to purchase electricity on behalf of customers while permitting investor-owned utilities to be responsible for delivering power, maintaining the grid, and handling services. Solana Beach intends to launch such a program next year, and Encinitas, Del Mar, Carlsbad, and San Diego have groups pushing the concept.
The Bay Area has several community choice programs: East Bay Community Energy, Marin Clean Energy, CleanPowerSF, Peninsula Clean Energy, and Silicon Valley Clean Energy. “They have survived whatever obstacles Pacific Gas and Electric has put in their way,” says Mindy Spatt, communications director at the Bay Area’s Utility Reform Network, who agrees with Severson that “there is no question we are moving in the direction of clean power.”
Through a community-choice program, Los Angeles County is preparing to take over electricity procurement in a large swath of territory now served by Edison. When this is completed, backers say Los Angeles Community Choice Energy will have the largest customer base in the movement.
But San Diego’s Sempra Energy is still fighting. It has recruited pro-business groups, such as the San Diego Regional Chamber of Commerce, the San Diego County Taxpayers Association, and the Downtown San Diego Partnership to put up roadblocks to the Community Choice Energy plans, according to the Union-Tribune. This raises a poignant question: Why should business groups fight the community-choice movement if it can lead to lower electricity rates for companies, too?
Summing up the mentality of the utility industry and its lackeys, Severson observes, “Computers used to be large mainframes; now everybody has a more powerful computer that they can put in their pockets. The energy industry should be no different.”
But don’t count on it. Profits, not progress, are paramount among utilities. Sempra Energy boasts that shareholder return from 2011 to 2016 was a swashbuckling 112 percent — almost double the gain of similar utilities. “Our strategic objective is to grow our earnings per share and dividend over the next five years at roughly double the rate of the utility industry,” exults Debra Reed, chief executive, in a message to Sempra shareholders.
But Sempra’s message to ratepayers? Screw you! On October 6, San Diego Gas & Electric told its patsy, the California Public Utilities Commission, that it wants an 11 percent increase in 2019, followed by further fat increases through 2022.
SDG&E also wants to settle an old score. Although turned down once, SDG&E wants ratepayers to pick up the tab for uninsured costs of the 2007 fires. In reports on those devastating fires, the California Department of Forestry and Fire Protection (Cal Fire), along with a division of the state public utilities commission, concluded that two fires had been started by San Diego Gas & Electric power lines that the company had not maintained safely; a third fire was blamed jointly on SDG&E and Cox Communications. A utility commissioner snuck in a phrase sticking ratepayers with the cost, but local activists caught the ruse, and the embarrassed commission had to thumb it down. But as commission watchers predicted, the company is trying again to stick the bill to ratepayers. At public meetings, consumers have expressed outrage, and the commission keeps putting off a vote on the staggering proposed ratepayer rape — $379 million — until the company thinks it has the public in its pocket.
Since those 2007 fires, the state’s three investor-owned utilities have punched ratepayers in the nose several times. Southern California Gas, a unit of Sempra, stumblingly discommoded customers during its Aliso Canyon gas leak. Edison, majority owner of the San Onofre nuclear plant, is trying to stick consumers with 70 percent of the $4.7 billion cost of decommissioning the facility, after meeting secretly and illegally with commission officials in the investigation phase. Pacific Gas and Electric brass got off without any penalties after the company’s negligence in the deadly 2010 San Bruno explosion; a federal audit concluded that Pacific Gas had taken advantage of a lax public utilities commission.
Now, however, the commission has asked Pacific Gas and Electric to preserve any evidence in case the company’s negligence played a role in the recent Northern California wildfires. So maybe we will see some headway.