Tag Archives: sdge

More people, more fire hazards, more damage costs for utilities, at least for now CPUC says

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

San Diego Gas and Electric’s shareholders will have to pick up the tab for $379 million of the $2.4 billion worth of damage (and legal fees) caused by a series of wildfires in 2007. Yesterday, the California Public Utilities Commission unanimously approved a draft decision by an administrative law judge that assigned the blame to SDG&E because, as commissioner Carla Peterman put it, SDG&E “failed to meet its burden to prove it was a prudent manager”.

That means SDG&E can’t pass the cost on to ratepayers, via a proposed $1.67 per month add on to bills for six years.

There was some discomfort with the decision, though. Some commissioners believed they were put in a straightjacket by California law and court decisions, and suggested the legislature could, or should, act to give them more discretion. Commission president Michael Picker said that while yesterday’s decision was about a particular set of circumstances, the real problem is much larger…

The number of people who are choosing to live in areas that we now know to be elevated fire hazard or extreme fire hazard is growing. That area is actually growing as we get more information about the impact of climate change. The fuel area has grown from about 31 thousand square miles of California to 77 thousand square miles of California. That’s almost 42% of the state’s landmass. Add to that the fact that as people move into these areas which are growing in terms of the severity of the hazard and we see more and more severe wind storms and lightning storms, happening more frequently here in California, we also know that those people demand and have a right to have both electric and telecommunications as they move into those fire hazard areas. So this is becoming an increasingly complex area for us.

Here, the decision that we have to make is about whether the utility or the ratepayers should be responsible for the financial cost associated with these very specific fires. What we talk about here may or may not have any precedence on any future fire issues that come before us.

This fall’s wildfires were even more destructive and, particularly, have put PG&E in the crosshairs. No causes have been established or blame assigned yet, but there’s a clear possibility that PG&E will take the hit for billions of dollars in damages. Particularly if the same law, logic and court decisions that drove yesterday’s decision are applied.

California wildfires are everyone’s problem, regardless of who’s at fault

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

The recent wildfires that struck seemingly everywhere all at once, but particularly hard in the northern California wine country, might have been caused, in part, by wind whipped electric lines surrounded by a canopy of dense, dry trees. If that’s what happened, then electric companies, and particularly PG&E, could be liable for billions of dollars worth of damage.

It poses a difficult public policy question: who pays? Ratepayers, shareholders or taxpayers?

Coincidentally, the California Public Utilities Commission is due to decide that question at this week’s meeting, at least in regards to a series of wildfires in San Diego County in 2007. San Diego Gas and Electric, Cox Communications and contractors who worked on utility pole routes had to pick up a $2.4 billion tab for damages and legal fees. SDG&E is asking the CPUC for permission to pass $379 million in costs on to ratepayers, at the rate of $1.67 per month for six years.

As written, the draft decision on the table for the CPUC would deny the request, because “the costs of the 2007 Wildfires were incurred due to unreasonable management by SDG&E”.

If commissioners go along with it, SG&E shareholders will absorb the immediate cost, in the form of lower dividends or a depressed share price.

The immediate cost.

Long term, it’s a more complicated question. If more money has to be spent on tree trimming, wind loading mitigation and similar measures, it’ll change the maintenance cost calculation that determine how much telecoms companies have to pay for the right to attach their fiber and copper to utility poles that are primarily designed to support electric service.

Going forward, someone will have to pay. Whatever the immediate decision, that someone will be the people who live in SDG&E service area, directly via higher electric rates, indirectly to meet return on investment goals necessary to attract investment or via higher broadband rates driven by the cost of maintaining joint pole routes.

With the cost of rebuilding after the recent wildfires not even calculated, and a future with even bigger disasters looming as a real possibility, the CPUC has hard choices to make. Simply kicking the cost of the San Diego fire back to current investors is tempting, but a nuanced solution with a statewide mandate – including electric and broadband customers as well as investors – is needed.

Clearing the way for better infrastructure in California

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

It costs more here.

California’s infrastructure was “designed for 25 million people”, state treasurer Bill Lockyer told an opening breakout session at the California Economic Summit in Los Angeles. The problem, he said, is that California will have 50 millon people before there’s a fix in place.

The focus was on roads and water – publicly funded projects – but it’s equally true for infrastructure that’s supported by private capital, such as telecommunications and energy.

That conversation was mostly about ways to funnel more tax dollars towards road maintenance and construction but as the conference moved on, the cost side of the equation took center stage.

The president of San Diego Gas and Electric, Mike Niggli, told how his company spent $100 million and five uncertain years working through regulatory obstacles, particularly environmental clearances, to get permission to build new transmission lines. The irony was that the lines were needed to connect San Diego’s electric grid to renewable energy sources advocated by environmentalists.

It’s a problem shared by broadband projects. The 500-mile Digital 395 middle mile fiber build down the eastern edge of California saw costs jump by $25 million due to the complexity of satisfying the requirements of four dozen different federal, state, local and tribal agencies.

Many ideas for fixing problems were put on the table, and the legislators and other elected officials, who came and went during the two days of the meeting, politely nodded their heads. The question is whether that’s enough to drive change in Sacramento.

“We have requirements that are overly burdensome, overly difficult and a barrier to investment in our state”, said Kish Rajan, the head of governor Brown’s business and economic development office. “This has to get translated into concrete action”.