California groups challenge Sempra rate decisions allowing recovery of ‘charitable contributions’

Dive Brief:

  • The Utility Reform Network (TURN), along with the Sierra Club and Union of Concerned Scientists, asked California regulators to reconsider an October rate decision they say broke with decades of precedent and allowed Sempra utilities to recover about $1 million in “charitable contributions” in its rates.
  • The California Public Utilities Commission’s decision allowed Southern California Gas to recover contributions to undisclosed groups, and San Diego Gas & Electric was allowed to recover membership dues for the Edison Electric Institute, which represents investor-owned utilities.
  • According to TURN attorneys, the decision violates U.S. Supreme Court precedent; if regulators decline to reconsider the October decision, the group will consider a challenge in the California Court of Appeals.

    Dive Insight:

    The actual dollar amounts, while significant, are modest in terms of utility expenses and revenues. But according to TURN attorneys, the case has First Amendment implications for ratepayers who may be forced to support lobbying efforts counter to their own best interests.

    “This sets a really dangerous precedent for utilities,” Sara Gersen, staff attorney for Earthjustice, told Utility Dive. The group is representing the Sierra Club and Union of Concerned Scientists in the proceeding.

    According to the three groups, the commission’s decision means ratepayers are being forced to pay for what amounts to political campaigning against climate change efforts. TURN pointed to previous reporting by the Los Angeles Times that it says shows how SoCalGas “has leveraged its charitable giving to pressure community groups to participate in their anti-climate agenda, including fighting building electrification.”

    “We know SoCalGas has a history of using contributions to gin up support for their agenda. They have the right to do that with shareholder money,” said Gersen. But to use ratepayer funds “is outrageous.”

    The contributions from Southern California Gas to unnamed groups totaled $183,000, said Gersen, with additional money categorized as chamber of commerce dues. SDG&E’s EEI membership was $800,000, which TURN challenged because the utility did not disaggregate membership costs associated with activities such as lobbying, legislative advocacy, regulatory advocacy, marketing, public relations, advertising, donations and club dues.

    “We have a concern with utilities using ratepayer funding to fund industry groups in general,” said Gersen. “These are categories of expenses that promote shareholder interest and we know industry groups have a track record of fighting climate action.”

    The legal arguments in each utility’s case are slightly different, Gersen said. But what the commission did was “totally wrong.”

    Sempra, in a Nov. 15 filing with the CPUC, responded to TURN and said the groups’ “attempts to relitigate arguments already considered and rejected by the Commission do not meet the standard of review for rehearing.”

    The company also noted that the commission found value for ratepayers in SDG&E’s EEI membership.

    The membership “provides benefits to ratepayers because of the industry-specific information, training, and database that may be obtained as well as the sharing of best practices and information about research and studies made by experts and consultants,” regulators wrote in their October decision.

    SDG&E says the EEI membership benefits ratepayers through a collaborative approach to research and funding studies, consultants and experts, database development and maintenance, publication development, and specialized training.

    “TURN did not adequately refute those ratepayer benefits and no other party disputed these costs,” the utility told regulators.