California's Wildfires
This is the second of two newsletters about California’s wildfires: the debate and science surrounding their causes and management, and legislation at the federal and state levels addressing them. Part 1 dealt with the nature of wildfire destruction, forest management, and building issues. Part 2 addresses state energy policy and the responsibilities of utility companies whose negligence caused some of the fires to begin.
Why Your Electricity Bill is About to Go Up
When the Diablo Winds rose in Northern California on the night of October 8, 2017, tree branches and electrical wires fell, power poles failed, and transformers exploded. The wires sparked and caused dry vegetation to catch fire, igniting the most destructive firestorms in California’s history.
The safety regulations for electrical equipment would have been stronger had PG&E not dragged its feet for a decade in creating state-required maps to show system weaknesses in high fire risk areas. Had they done so in a timely fashion, PG&E would have had to replace problematic equipment, eating into profit margins and shareholder gains. As it was, winds only half as strong as the equipment was required to withstand caused the equipment to fail.
Cal Fire, the state agency responsible for fire prevention, analysis, and fighting, would later find PG&E equipment responsible for 16 of the fires that erupted in Northern California in October 2017 (the cause of the Tubbs fire, the deadliest one, is still being determined). Cal Fire also found that PG&E's violations of state law regarding vegetation management had caused at least eight of the fires. That wasn’t the first time a California utility had been found accountable for loss of property and life.
Previous judgments have included:
California state law holds utility companies liable for fires started by their equipment, even if the utility hasn’t committed safety violations. That means PG&E would be responsible for all 16 or 17 of the complex of fires that occurred, at a cost of $10–$17 billion. But, according to Legal Watch, the company’s insurance max’s out at around $840 million. PG&E’s total revenue in 2017, according to Market Watch, was $17.14 billion, with $3.1 billion of that being gross income. Clearly, it was time for the heads of the corporation to panic.
SB 901 - Foisting the Cost onto Rate Payers
SB 901 lets the Public Utilities Commission allocate the cost of liability claims across ratepayers and shareholders. The general thinking is that if the utility filed for bankruptcy, the costs would be passed on to customers anyway. SB 901 would keep the utility solvent while holding it responsible for a portion of the damages, with the rest passed to ratepayers.
Under SB 901, PG&E can issue state-authorized bonds to pay off claims, with the costs—about $5 per ratepayer per year per $1 billion in bond debt—ultimately transformed into higher rates. The additional charges will also include interest on the billions of dollars in bonds, as well. Rate increases are set to begin in January.
Ratepayers should not have to pay for the failures of a company that committed safety violations. And whatever the financial penalties to the utility, those at the top who diverted funds from safety to profit have not paid a personal price for their actions.
Community Choice for Energy Programs
Before the fires, the counties of Sonoma and Mendocino had replaced PG&E’s electricity generation operations with Sonoma Clean Energy. PG&E, however, still owns the grid that distributes the power. If customers in other counties no longer want to get their power from investor owned utilities, they may wish to switch to a local energy program. That choice may come with its own cost, though, as consumers can be charged by utility companies if they switch to another energy program while energy contracts are still in effect.
Plans for a Regional Grid Operator Go Down
In a somewhat related story, AB 813, which would have created a regional grid operator and was criticized by some environmental, labor, and consumer groups, including us, failed to pass.
As Do Plans for Tax Relief for Victims of Disasters
In Congress, Rep. Mike Thompson (CA-5) tried to add an amendment to H.R. 6760 (the tax cut bill), that would have provided targeted tax relief for victims of natural disasters, but Republicans on the House Committee on Ways and Means rejected it. In his statement about the process, Thompson noted that Republican Committee Chairman Brady had offered a bill that provided tax relief for disaster victims in his community, but refused the same type of relief to all survivors of natural disasters.
The Utility Reform Network
Anyone interested in consumer advocacy as it relates to energy and phone companies should visit the website of The Utility Reform Network, “the only independent statewide utility consumer advocacy organization in California.”
|
