Tag Archives: utility regulation

California is losing its grip on utility service and infrastructure

by Steve Blum • , , , ,

Harold lloyd safety last

The future of northern California’s energy supply, and the utility pole routes that support it, will be largely in the hands of federal judges. Pacific Gas and Electric gave notice yesterday that it will, in all likelihood, file for bankruptcy protection in two weeks. The company said that it may have to pay as much as $30 billion in damages stemming from catastrophic wildfires it apparently played a role in starting in 2017 and 2018. That’s about three times more than the company was worth before its stock price nosedived on the news. A federal bankruptcy court will have to decide how to carve up whatever is available, and who gets control of the carcass.

Another federal judge is assuming an oversight role that, in theory, the California Public Utilities Commission is supposed to fill. Last week, judge William Alsup gave PG&E until the end of the month to come up with a plan for inspecting the more than 100,000 miles of electric lines it operates in California before the next fire season begins in June. He’s essentially PG&E’s probation officer, following the corporation’s of criminal conviction related to a natural gas line explosion in San Bruno in 2010.

So far, the CPUC hasn’t made any comment about PG&E bankruptcy plans or Alsup’s encroachment on its turf. Last month, CPUC president Michael Picker launched an investigation that could result in PG&E break up, or a takeover by the state, or any number of other fates. Or could have, before financial markets, trial lawyers and the federal judiciary got tired of waiting. At the time, Picker stated in a press release that “this process will be like repairing a jetliner while it’s in flight. Crashing a plane to make it safer isn’t good for the passengers”.

Yesterday, PG&E said the plane is going down. All we passengers can do is assume the position, and hope for the best.

PG&E pulls the plug, filing for bankruptcy

by Steve Blum • , , , ,

Rampart 300

With liabilities from California wildfires amounting to unknown billions of dollars, Pacific Gas and Electric company announced this morning that it plans to file for bankruptcy as soon as it’s legally able to do so. According to a company press release

The Company today provided the 15-day advance notice required by recently enacted California law that it and its wholly owned subsidiary Pacific Gas and Electric Company (the “Utility”) currently intend to file petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code on or about January 29, 2019.

Governor Gavin Newsom released a statement saying he’s been engaged with the problem over the weekend…

The company should continue to honor promises made to energy suppliers and to our community. Throughout the months ahead, I will be working with the Legislature and all stakeholders on a solution that ensures consumers have access to safe, affordable and reliable service, fire victims are treated fairly, and California can continue to make progress toward our climate goals.

No reaction yet from the California Public Utilities Commission.

PG&E faces possible breakup, government takeover

by Steve Blum • , , , ,

Pacific Gas and Electric could be broken up, reorganised or brought under closer control by the California Public Utilities Commission. The decision to launch a broad investigation into PG&E’s future, including the possibility of a public takeover, was made by commission president Michael Picker and released late on Friday, after financial markets had closed and the holiday exodus had begun.

Radical action of this sort, taken against a major utility, is cause for concern by telecoms companies too. Generally, it signals a change to much more aggressive utility regulatory regime in California. Specifically, it increases the threat of future criminal and civil liability, affects management of and access to utility poles and conduit, and puts a major source of independent dark fiber in jeopardy.

PG&E is implicated in the ignition of the Camp Fire, which killed at least 85 people in Butte County, and destroyed entire towns. A federal judge overseeing PG&E’s probation for a past corporate criminal conviction, stemming from a gas line explosion in San Bruno that killed eight people (pictured above), is demanding answers about possible new crimes committed by the company. The CPUC opened a separate investigation into whether PG&E broke state laws regarding gas line protection, and expanded its review of electric utility wildfire prevention practices.

All that, just within the past two months. In his decision, Picker said standard remedies aren’t working…

This Commission was, and remains, concerned that the safety problems being experienced by PG&E were not just one-off situations or bad luck, but indicated a deeper and more systemic problem. The fact that imposing penalties on PG&E (the Commission’s standard tool for addressing safety problems) did not seem to change the situation reinforced this concern…

The next phase of this proceeding will consider a broad range of alternatives to current management and operational structures for providing electric and natural gas in Northern California.

Options under consideration include various methods of bringing PG&E’s executives and board of directors under tighter CPUC control, or replacing them altogether, breaking the company up into smaller pieces, on a business line and/or regional basis, and taking over the company and turning it into a publicly owned utility of one kind or another.

Picker’s decision – technically, a “scoping memo and ruling” – comes in an investigation that began in 2015. It’s just another step, albeit in a new direction, in a process that will grind on for many more years.

CPUC opens investigation into consumer broadband prices and other utility rates

by Steve Blum • , , , ,

The cost burden of consumer broadband service will be evaluated by the California Public Utilities Commission, as part of a larger inquiry into the affordability of all types of utility services. A “scoping memo”, released by commissioner Clifford Rechtschaffen on Monday, outlines the issues on the table as the CPUC tries to develop common metrics and methods for evaluating the affordability of all utility services under its jurisdiction.

The idea was floated in July, and utilities had a chance to offer their opinions on what should be considered and how it should be done. Not surprisingly, big telecommunications companies wanted to be left alone completely, because the CPUC does not directly regulate the prices they charge, unlike water, electric and gas rates (for privately owned utilities) and for small, rural telephone companies.

Rechtschaffen rejected their recommendations…

Affordability issues across Commission-jurisdictional utility services, including water, energy, and telecommunications services, will be considered. The stated intent of the [investigation] is to develop affordability metrics across utility industries to reflect the cumulative bill impacts since a customer often pays for electricity, gas, water, and telecommunications services under a single household budget. Although the Commission does not regulate rates for all telecommunications services, the Commission oversees a number of low-income and universal access programs for telecommunications services and also imposes surcharges for these programs…

The affordability considerations for telecommunications services may be different than for energy or water services but it is worth considering whether common definitions and metrics can be developed and it is within the Commission’s jurisdiction to consider these affordability issues.

Broadband isn’t specifically mentioned in the scoping memo, but the initial notice published in July points the investigation directly at telephone, cable and mobile companies “providing voice over Internet protocol (VoIP), wireless, or broadband internet access service in California”. The CPUC doesn’t regulate prices for any of those services, but Rechtschaffen clearly considers them to be within its jurisdiction. The low-income and universal access programs run by the CPUC include several – e.g. the California Advanced Services Fund, the High Cost fund and the California Teleconnect Fund – that subsidise broadband service and infrastructure.

No date was set for finishing the inquiry, except a vague reference to a statutory 18 month limit for such things. It’s a deadline that the commission routinely misses and extends for itself.

California lawmakers give cable utility perks, without utility obligations

by Steve Blum • , , ,

Quirky economics.

Cable companies want the benefits of being a legally recognised public utility, but not the responsibilities. One of those benefits is to be compensated when a public works project requires the relocation of lines, either on poles or underground. The California assembly’s communications and conveyance committee thought that cable companies deserve it too, and unanimously endorsed a bill yesterday that would reimburse them for relocation work when a project is being paid for out of bond money that’s been approved by voters.

Assembly bill 1145 is sponsored by the California Cable and Telecommunications Association, the cable industry’s Sacramento lobbying front. That means CCTA wrote it and then found a legislator to carry it. “Author” it, as the term of art goes. That friendly fellow turned out to be assemblyman Bill Quirk (D – Hayward). He presented the bill, and launched into what sounded like the beginning of a history lecture before being cut off by an affable “move the bill” from a sufficiently educated committee member.

Quirk did have enough time to descend into complete nonsense. He tried to draw a false distinction between “regulated monopoly utility companies” and cable companies. The only good thing that can be said is that it turned into bipartisan nonsense, when the ranking republican on the committee, Jay Obernolte (R – Big Bear) agreed, saying cable companies are not a “natural monopoly”.

Historically, there was a difference between telephone companies, which have been state regulated utilities for more than a century, and cable companies, which were originally franchised by local governments but managed to escape that oversight ten years ago. At least in California. Today, the differences are diminishingly small, particularly in urban and suburban markets where cable and telephone companies sell the same services and enjoy a comfortable, unregulated duopoly.

The distinguishing characteristics of a natural monopoly are high initial capital costs, usually related to infrastructure construction, and powerful economies of scale, both of which give the first mover in the market insurmountable advantages over would be competitors. In the old analog world, telephone and television service were completely different businesses, linked only by a common dependence on wireline networks. Now, both offer voice and video, and face competition in those segments from wireless providers. But they are also almost always the only wireline broadband option and wireless service is not a credible substitute, in either practical or microeconomic terms.

So yes, if phone companies are reimbursed for moving their lines then cable companies should be too. They should be treated the same. In every way. Bringing cable operators and telcos under the same regulatory umbrella is the only rational approach in today’s digital world. The way to do it is not to continually give cable (or telephone) companies special carve outs in state law, as AB 1145 does. The way to do it is to recognise and regulate them for what they are: two formerly natural monopolies who have merged into an interchangeable duopoly.

Telecoms lobby pushes California lawmakers to muzzle local government

by Steve Blum • , , , ,

Watchdog?

City councils and county boards of supervisors in California have an annoying habit of listening to residents and questioning the broadband marketing hype spun in out-of-state corporate headquarters and spread in Sacramento, where perks and campaign cash buy an attentive audience. Keeping local government out of any meaningful oversight role is a high priority for cable and telco lobbyists, and their successful efforts are evident as the final texts of key legislation begin to take shape.

Senate bill 512 by senator Jerry Hill (D – San Bruno) began as a response to the natural gas explosion that devastated his constituency, and the ensuing backchannel finagling between PG&E and CPUC commissioners. It’s still part of a package of California Public Utilities Commission reforms pending at the capitol, but provisions that would have given local governments more clout, and the money to wield it, were severely pruned back in the face of fierce – sometimes bitter – opposition, particularly from AT&T and the cable industry’s lobbying front.

Those lobbyists can also take comfort in the elimination of new rules for CPUC proceedings, that would have allowed local governments to enter “reports and analyses” into evidence. And a top level review of the CPUC’s role in regulating the telecoms industry no longer specifically includes an assessment of local agencies “that provide consumer protection and ensure the safety of telecommunication services”.

Local governments have virtually no regulatory authority over telecoms. The last meaningful remnant – cable franchises – was eliminated ten years ago. What’s left is a truth telling role. Incumbents defend their service monopolies by maintaining a information monopoly and using it to drive a narrative that suits their interests. Cities and counties are often the only source of credible facts and independent broadband advocacy. The California legislature should expand that role, not work to fence it in.

Detailed review of Californian telecoms policy slashed from bill

by Steve Blum • , , ,

I’ll show you gut and amend.

An examination of telecommunications responsibilities at the California Public Utilities Commission has gone from being a specific study of agency duties, technological issues and, critically, broadband’s place in the regulatory mix, to being the sort of high level gloss that will gather dust on a shelf. The threat of a useful result no longer looms over cable and telephone incumbents.

As it was proposed last week, assembly bill 2903 had a long check list of broadband and other telecoms issues that the California research bureau was supposed to investigate by the end of next year, including…

  • What gaps, if any, exist in the state’s regulatory authority that are not otherwise addressed by federal law or regulation over telecommunications services, including, but not limited to, consumer protection and safety.
  • The state and local agencies in addition to the Public Utilities Commission that provide consumer protection and ensure the safety of telecommunication services.
  • The extent to which it is necessary for utility pole safety regulation to be governed by one regulatory structure regardless of the type of utility attachment.
  • How to ensure the effective administration of the Digital Infrastructure and Video Competition Act of 2006 [DIVCA].
  • The extent to which competitive telecommunications services are available in California and to what extent there are regions within California that lack competitive alternatives.
  • The role of the Public Utilities Commission in regulating the wholesale telecommunications market.

A bill that began as a classic gut and amend maneuver has instead been gutted itself.

The deletions are sure to please the incumbents. There will be no specific examination of the self-serving fiction woven by cable lobbyists that broadband, voice and video services delivered by cable companies are so radically different from the broadband, voice and video services offered by telcos that they need a completely separate – and toothless – regulatory regime of their own. That’s why the bits about unified utility pole regulations and DIVCA were taken out.

Eliminating requirements to look at competition in California’s telecoms industry is another gift to the telco and cable lobbies. They’re well on their way towards converting government granted monopolies on analog services into comprehensive control of the digital realm, and an independent investigation would be oh so inconvenient.

AB 2903’s author, assemblyman Mike Gatto (D – Los Angeles), has built an impressive record this term as an advocate for monopoly telecoms interests. These latest amendments will maintain that legacy as the legislative term – and Gatto’s career as a lawmaker – enters its final days.

This week’s version of assembly bill 2309
Last week’s version of assembly bill 2309

Green light for telecoms policy bills in Sacramento

by Steve Blum • , ,

Telecoms legislation is popular in Sacramento this summer. Legislative leaders allowed several important bills to move ahead yesterday, albeit without finalising all of the language. Negotiations and amendments will continue behind closed doors as the full assembly and senate get ready to vote.

The four bills that make up the grand package of California Public Utilities Commission reforms agreed to by the governor and three key lawmakers are moving ahead. Senate bill 215, by senator Mark Leno (D – San Francisco), tightens rules on who can speak with CPUC decision makers and when. It moved ahead on a unanimous vote.

Senator Jerry Hill (D – San Bruno) is carrying two of the bills – SB 512 and SB 1017 – and both are headed to the assembly floor, albeit with amendments yet to written. SB 1017 is bitterly opposed by telecoms companies – lobbyists from AT&T and Frontier, as well as smaller telephone companies, mobile carriers and the cable industry spoke against new rules that would give the public greater access to the information they file with the CPUC. SB 512 would open up CPUC proceedings to greater public scrutiny. Industry lobbyists successfully pushed back on provisions that would have allowed local governments to claim reimbursement for the cost of bringing actions at the CPUC, under some circumstances. That final language hasn’t been published, though. Both bills moved ahead without any republican support.

Assembly bill 2903 fills out the foursome. It sets the stage for a major reorganisation of the CPUC over the next few years – I wrote more about it yesterday. It has the distinction of never even being discussed or debated in a public hearing. Its author, assemblyman Mike Gatto (D – Los Angeles) took an unrelated bill that was already pending on the senate floor, deleted everything except the number and inserted a completely new bill using a time honored maneuver known as gut-and-amend.

Dig once requirements for Caltrans are moving ahead too. AB 1549 by assemblyman Jim Wood (D – Healdsburg) won unanimous support from both republicans and democrats on the senate appropriations committee. They also approved AB 2570 by assemblyman Bill Quirk (D – Hayward) with six ayes and one republican abstention. It makes the state telephone lifeline subsidy program more telco-friendly by making it much harder for recipients to change carriers. Another provision in the bill that would have required the CPUC to pay out the subsidies to telcos within 90 days was apparently removed, though, during closed door negotiations.

An extension of a program that subsidises broadband facilities in public housing also moved ahead. SB 745, by senator Ben Hueso, cruised through the assembly appropriations committee on a party line vote: democrats aye, republicans no.

The legislature has until the end of the month to make final decisions.

I’ve advocated for and helped to draft AB 1549, and I consulted on SB 745. I’m not a disinterested commentator. Take it for what it’s worth.

CPUC gut-and-amend reform bill published

by Steve Blum • , , ,

No surprise, really.

A draft of a bill to overhaul the California Public Utilities Commission is up on the state legislature’s website. It’s a gut-and-amend job by assemblyman Mike Gatto (D – Los Angeles) on an assembly bill – AB 2903 – that originally concerned damages resulting from the state’s energy crisis in 2000.

It appears to be in line with the grand compromise reached with governor Brown in June. The California Research Bureau, a division of the state library, would get the job of evaluating the CPUC’s future role in telecoms regulation. It would be given until the end of next year to…

Conduct a study of telecommunications service governance to determine what regulatory structure would provide the appropriate regulatory oversight of telecommunications services. The study shall assess the overarching goals of the various programs carried out by the Public Utilities Commission and include a discussion of whether the commission, as a whole, is strategically aligned towards a clearly articulated public goal. This portion of the study shall take into account the history of telecommunications service regulation in the state and changes in technology to make recommendations for guiding principles to clearly define California’s goals for the regulation of the telecommunications industry.

There’s a long check list of items that the study has to cover, including the evolving mix of telecoms regulatory responsibilities at federal, state and local government levels, and how the CPUC’s historical role meshes with rapidly changing technology.

The bill hits on the other points in the grand compromise, including moving some transportation oversight duties to the state transportation department, recasting CPUC management roles, procedures and ethics rules, and generally asking the question what should the CPUC be doing in the 21st century?

And that’s the overall thrust of the bill: ask a lot of questions, but leave the answers to be worked out later, by the legislature, state agencies under the governor’s direct supervision and the CPUC itself.

I don’t expect this version to be the final-final, but given the extensive backroom discussions that have been going on over the past few weeks between lawmakers, the governor’s office and industry lobbyists, it’s probably pretty close.

Read the full version of the bill here:

Assembly bill 2903, an act relating to the California Public Utilities Commission

Small group of Californian lawmakers make big broadband policy

by Steve Blum • , ,

Gut and amend.

Major broadband-related legislation is on the horizon this week in Sacramento, although how it will ultimately read is completely unknown right now. The way things are lining up, we probably won’t know until the end of the month, when the legislature goes into its final, end-of-the-session whirlwind.

Action on a thoroughly innocuous bill involving the California Public Utilities Commission – AB 2902 – by a telecoms industry ally, assemblyman Mike Gatto (D – Los Angeles), has been pushed back a couple of times and is sitting on hold. It’s a perfect candidate for gut and amend, which is the tenderly named legislative practice of writing a completely new bill, usually secretly, and wrapping it with the skinned out remains of an old bill at the last minute. AB 2902 is just an example, though – any bill will do.

Then, the assembly appropriations committee is scheduled to consider three, considerably less industry-friendly CPUC reform bills – SB 215, SB 512 and SB 1017 – on Wednesday. Along with Gatto, the authors of those bills – senators Jerry Hill (D – San Bruno) and Mark Leno (D – San Francisco) – form the troika that negotiated the outline of a CPUC overhaul package with governor Brown in June, with the intention of working out the details in August.

Well, it’s August. New versions of Hill’s and Leno’s bills have been posted with amendments reflecting points that were openly debated at a public committee hearing in June, but apparently not yet including the grand deal reached with the governor. There will be more changes to come.

My bet is that all four bills will land in the legislative limbo known as the suspense file and disappear while legislators, lobbyists and other interested and well connected parties work things out behind closed doors. In the final days of the session, expect to see those bills, and possibly one or two others, emerge ready for fast track approval and in a radically different form. It is likely to mean major changes to broadband and other utility regulation in California.

Unfortunately, the public won’t have much to say about it, or even know what it is until it lands on the governor’s desk.