California's Public Utilities Commission has granted permission for San Diego Gas and Electric Company, Southern California Edison Company and Pacific Gas and Electric Company to track their AB 32 green house gas emission fees in memorandum accounts. Each utility's account may be used in later CPUC proceedings to pass on those specific fee expenses onto power utility customers in each utility's service area.

AB 32 requires the Air Resources Board (ARB) to adopt measures necessary to reduce California's greenhouse gas (GHG) emissions to the 1990 level by 2020. AB 32 provides that ARB adopt fees on GHG emissions to recover its administrative costs of AB 32 implementation. ARB adopted the AB 32 Fee on September 25, 2009, and the final version was approved by the Office of Administrative Law on June 17, 2010. The AB 32 Fee regulation instructs ARB staff to issue invoices for the first annual AB 32 Fee obligation within 30 days of the passage of the state budget, which was signed by Governor Schwarzenegger on October 8, 2010. AB 32 fee payments are due within sixty days of receipt of invoicing.

A Form Of Corporate Welfare?

Utilities are often allowed by CPUC to pass on their internal operating expenses directly onto customers rather than applying them against corporate income. CPUC has recognized in a 2001 decision that power utility holding companies such as Sempra Energy have a call on utility profits to the point that utilities have less to pay for their own operating expenses. That decision provided that the utility holding companies have what CPUC calls a "First Priority Condition" of ownership to infuse working and other capital to utilities even if it causes a loss for any of the holding company.

SDG&E, SCE and PG&E never refer to the First Priority Condition in their regulatory rate hike filings. Most consumers are not informed of the First Priority Condition requirement and thus are unable to file effective protests to those proposed rate hike, insuring their eventual approval by CPUC.

In contrast to CPUC-authorized pass through of power utility expenses onto consumers' monthly billings, a more traditional accounting model used by firms in most other industries applies operating expenses against gross income to derive an amount for stating net income for a given accounting period. Against that financial accounting standard, the state regulatory practice of utilities passing expenses onto consumer monthly billings appears to be a form of CPUC-sanctioned corporate welfare not enjoyed by other industries.

Power utility customers should expect language in each utility's upcoming general rate case to include consumer liability for paying off the AB 32 memorandum account balances.

Another Consumer Liability For Utility Damages and Expenses

Currently, the investor owned power utilities are attempting to establish a Wildfire Expense Balancing Account (WEBA) for each to pass on wildfire legal and other costs to consumers, apparently without concern as to any utility negligence for causing the wildfires in the first place. Intervening parties opposed to WEBA suggest that utility shareholders and not ratepaying consumers should be responsible for those liabilities. The IOUs also are attempting to have CPUC limit their future wildfire liabilities in a proposed second phase of the WEBA application proceeding, something that even CPUC attorneys in its Division of Ratepayer Advocates recognize is a legal power not authorized by constitutional provision or statute for CPUC regulators to do.

A scan of equity analyst websites show favorable income outlooks for SDG&E owner Sempra Energy.


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