PG&E says it’s feasible to break up the embattled and insolvent utility into separate electricity and gas systems — but also has sketched a forbidding picture of higher monthly utility bills should the restructuring materialize.
San Francisco-based PG&E issued the warning of rising rates as part of a wide-ranging examination by the state Public Utilities Commission of the company’s safety culture. Failures in PG&E’s safety efforts caused a fatal gas explosion that killed eight people and destroyed a San Bruno neighborhood in 2010. The utility’s electrical equipment has been involved in starting 17 recent wildfires that killed 22 people. Cal Fire is also investigating whether PG&E electrical equipment is to blame for last November’s deadly Camp Fire in Butte County, which killed 85 people.
“Separation of PG&E’s gas and electric operations appears feasible from a technical and operational perspective,” PG&E stated in a filing connected to the PUC investigation. “The gas system and electric system are functionally independent from one another and each has its own operational control center.”
But an actual breakup of the utility into its two most substantial pieces bears plenty of risks, in PG&E’s view. Ratepayers may be saddled with those risks, the utility said in a Feb. 13 filing with the state PUC. Public responses to the utility’s dire assessment are due by Feb. 28 to the PUC.
“Separating PG&E’s gas and electric operations could increase rates,” PG&E warned.
Why? PG&E offered a number of reasons, both long-term and on a one-time basis, that could fuel higher monthly bills.
“Increased head counts in operations and asset management functions, as well as the duplication of corporate services across separated entities, that is, human resources, fleet, finance, insurance, real estate, safety, environmental, health, legal, regulatory, etc.” would be among the long-term higher costs, according to the PG&E filing.
Other one-time or incremental cost increases could include those related to functions shared by the gas and electric operations, “such as technology infrastructure, service centers, equipment storage, and billing and customer support,” PG&E stated in the filing.
But some critics of PG&E expressed skepticism that rates actually would have to be increased for those reasons.
“Nothing has stopped PG&E from raising rates on a regular basis, historically,” said state Sen. Jerry Hill, whose district includes parts of Santa Clara and San Mateo counties.
One solution floated by PG&E to curb duplicate bureaucracies is to create a holding company that would own the separated gas and electricity operations. However, at present, PG&E Corp. is a holding company that owns the current Pacific Gas and Electric Co. utility, leading Hill to question whether such an approach would really change anything.
“The only way things can truly change is for the existing PG&E to no longer have control over both the gas and electricity operations,” Hill said. “Having a new owner for gas or electricity or both is a situation that could only be better for ratepayers.”
The safety review comes as PG&E faces a forbidding panorama of liabilities and debts, some associated with the company’s role in the lethal Northern California wildfires of 2017 and 2018, and the mounting woes have overshadowed the utility’s shattered finances.
“We are pleased to see broad alignment among parties on a number of proposals for changes to PG&E’s governance that could improve its safety performance, as well as broad consensus that inverse condemnation reform is needed,” PG&E spokesman John Kaufman said.
The California doctrine of inverse condemnation allows PG&E and other major power companies in the state to be strictly liable if their equipment was a substantial cause of a fire, even if the utility followed established inspection and safety rules.
“PG&E looks forward to further development of these proposals as this proceeding unfolds,” Kaufman said.
On Jan. 29, PG&E toppled into a Chapter 11 bankruptcy in a quest to reorganize its finances, listing $51.69 billion in debts and $71.39 billion in assets, according to papers on file with the U.S. Bankruptcy Court in Northern California.
Adding to PG&E’s difficulties is a separate U.S. District Court proceeding by a federal judge who is supervising the utility’s probation stemming from its criminal conviction related to the San Bruno explosion. In 2016, a federal jury convicted PG&E of six felonies committed before and after that deadly disaster. A PG&E probation violation could be an outcome of this proceeding.
Beyond that legal disgrace for PG&E looms the specter that federal Judge William Alsup might order PG&E to undertake a wide-ranging wildfire prevention program and electricity system maintenance effort before this year’s fire season begins.
The real problem with PG&E, in the view of Mindy Spatt, a spokeswoman for The Utility Reform Network, a consumer group, is that the utility, despite years of criticism after the San Bruno explosion, still isn’t taking safety seriously.
“PG&E puts profits before people,” Spatt said. “The company is unable to trim trees, maintain its gas system, maintain its electric system and it has an abysmal safety record.”
Correction: February 25, 2019
Due to an editing error, an earlier version of this article incorrectly reported that there have been 86 deaths from the Camp Fire. The fire caused 85 deaths.