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Uninsured Wildfire Billings Still Tied Up in Negotiations

SDG&E Already Pushing Z-Factor Alternative If WEBA Not Approved

According to a California Public Utility Commission filing by Southern California Edison, investor owned utilities and opposing parties are still meeting and conferring on the utilities' Wildfire Expense Balancing Account (WEBA) application. CPUC was informed that another follow-up status report will be filed on or about May 28.

SCE, PG&E and SDG&E (the investor owned utilities or, as CPUC knows them, IOUs) requested WEBA authority last year to pass on uninsured wildfire legal expenses and other related costs to ratepaying consumers. SDG&E-caused wildfires in 2007 motivated the largest mandatory evacuations in San Diego County history, damaged or destroyed well over 1000 homes, and resulted in numerous homeowners being counter-sued by SDG&E for having the misfortune of living next to flaming power lines and losing their homes to the Rice-Witch-Guejito wildfire complex.

Since 2007, insurance companies have either raised SDG&E premiums or left the wildfire insurance market as too risky, riskier than holding on to an under-collateralized credit default swap. For future IOU wildfire legal expenses and related costs that are not covered by insurance, SDG&E and the other IOUs expect ratepaying consumers to cover the tab, without waiting to consider if utility negligence was involved.

Numerous groups such as UCAN have filed protests against WEBA as an unfair tax by SDG&E on consumers for SDG&E equipment failures. CPUC's Division of Ratepayer Advocates opposes WEBA as an open-ended consumer liability of unlimited size. DRA is also fighting a scheduling logjam that will have three major rate-setting cases before CPUC at the same time, where neither CPUC nor DRA will have sufficient staff to review many thousands of pages of testimony as SDG&E, PG&E and SCE seek higher gas and electricity rates on consumers. According to DRA, the result will be CPUC not having the time to set rates properly and reasonably to the disadvantage of millions of California power consumers.

In a related story, SDG&E has filed opening briefs in its wildfire insurance Z-Factor application as a back-up plan in case CPUC denies the IOU WEBA application. The “relic” Z-Factor scheme from incentive-based ratemaking allows SDG&E and other IOUs to claim unforeseen and extraordinary expenses as payable by ratepaying consumers. DRA and UCAN have filed opposing briefs, where both ask that CPUC deny the SDG&E Z-Factor application as unjustified. If the Z-Factor application is approved along with WEBA, there is a chance for double billing of consumers for certain wildfire-related costs of about $28 million.

Previously, the recently announced CPUC intervention by former San Diego City Attorney Michael Aguirre in the SDG&E wildfire cost issues was quickly followed by both SDG&E and parent Sempra Energy settling at shareholder expense in disputes ranging from California Attorney General probes of utility conduct during the 2000 electricity crisis to the CPUC's 2007 wildfire investigations.

In the context of the June primary election, California voters will make a decision on Proposition 16, PG&E's constitutional amendment to prevent IOUs from being ousted in favor of municipal utilities or consumer choice aggregation. If passed, Proposition 16 sets a two-thirds voter threshold for replacing an electric or gas franchisee. Currently in San Diego, a simple majority of votes can terminate the current franchise agreement with SDG&E. Utility proposed billing practices over wildfires could be a factor against passage of Proposition 16.

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SDG&E Already Pushing Z-Factor Alternative If WEBA Not Approved

According to a California Public Utility Commission filing by Southern California Edison, investor owned utilities and opposing parties are still meeting and conferring on the utilities' Wildfire Expense Balancing Account (WEBA) application. CPUC was informed that another follow-up status report will be filed on or about May 28.

SCE, PG&E and SDG&E (the investor owned utilities or, as CPUC knows them, IOUs) requested WEBA authority last year to pass on uninsured wildfire legal expenses and other related costs to ratepaying consumers. SDG&E-caused wildfires in 2007 motivated the largest mandatory evacuations in San Diego County history, damaged or destroyed well over 1000 homes, and resulted in numerous homeowners being counter-sued by SDG&E for having the misfortune of living next to flaming power lines and losing their homes to the Rice-Witch-Guejito wildfire complex.

Since 2007, insurance companies have either raised SDG&E premiums or left the wildfire insurance market as too risky, riskier than holding on to an under-collateralized credit default swap. For future IOU wildfire legal expenses and related costs that are not covered by insurance, SDG&E and the other IOUs expect ratepaying consumers to cover the tab, without waiting to consider if utility negligence was involved.

Numerous groups such as UCAN have filed protests against WEBA as an unfair tax by SDG&E on consumers for SDG&E equipment failures. CPUC's Division of Ratepayer Advocates opposes WEBA as an open-ended consumer liability of unlimited size. DRA is also fighting a scheduling logjam that will have three major rate-setting cases before CPUC at the same time, where neither CPUC nor DRA will have sufficient staff to review many thousands of pages of testimony as SDG&E, PG&E and SCE seek higher gas and electricity rates on consumers. According to DRA, the result will be CPUC not having the time to set rates properly and reasonably to the disadvantage of millions of California power consumers.

In a related story, SDG&E has filed opening briefs in its wildfire insurance Z-Factor application as a back-up plan in case CPUC denies the IOU WEBA application. The “relic” Z-Factor scheme from incentive-based ratemaking allows SDG&E and other IOUs to claim unforeseen and extraordinary expenses as payable by ratepaying consumers. DRA and UCAN have filed opposing briefs, where both ask that CPUC deny the SDG&E Z-Factor application as unjustified. If the Z-Factor application is approved along with WEBA, there is a chance for double billing of consumers for certain wildfire-related costs of about $28 million.

Previously, the recently announced CPUC intervention by former San Diego City Attorney Michael Aguirre in the SDG&E wildfire cost issues was quickly followed by both SDG&E and parent Sempra Energy settling at shareholder expense in disputes ranging from California Attorney General probes of utility conduct during the 2000 electricity crisis to the CPUC's 2007 wildfire investigations.

In the context of the June primary election, California voters will make a decision on Proposition 16, PG&E's constitutional amendment to prevent IOUs from being ousted in favor of municipal utilities or consumer choice aggregation. If passed, Proposition 16 sets a two-thirds voter threshold for replacing an electric or gas franchisee. Currently in San Diego, a simple majority of votes can terminate the current franchise agreement with SDG&E. Utility proposed billing practices over wildfires could be a factor against passage of Proposition 16.

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Comments
1

RE #1 & removal:

I did not see the comment and just found out about its removal, but if it questioned the veracity of the above blog, then I urge Reader readers to subscribe to the California Public Utility Commission's daily bulletins on documents recently filed by utility companies and by other parties in support or opposition.

There are many, many things going on behind the scenes that most of us simply have no clue of.

Having more eyes on the dozens of CPUC filings happening each month will make us all a more informed electorate, especially now that investor owned utilities have developed a taste for California constitutional amendment at the ballot box.

May 20, 2010

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