The 16 million people served by Pacific Gas and Electric Co. will not pay more money as a direct result of the utility’s plan to resolve its bankruptcy case, company leaders say.
But residents’ monthly bills could still go up — a lot — if other PG&E proposals come to fruition.
One big reason is the wildfire problem that led to the company’s bankruptcy. PG&E plans to spend a lot to prevent more disasters linked to its power lines and has already asked state regulators to approve higher rates to fund the work.
PG&E also wants the state to allow higher shareholder profits, a step the company says is needed to continue attracting investors despite worsening wildfire risks. Separately, the company wants rate increases related to its gas transmission and storage facilities, its federally regulated electric transmission system and the planned closure of the Diablo Canyon nuclear power plant in San Luis Obispo County.
Altogether, the PG&E rate requests could gradually add about $30 to the average resident’s monthly electric and gas bill, which is currently about $173, over the next several years. But the real impact should be lower because the company is unlikely to get each of its requests approved in full.
“These funding proposals cover an array of projects — including safety work to reduce the risk of wildfires in our service area,” PG&E spokeswoman Kristi Jourdan said in an email. “As always, our commitment is to keep customer costs as low as possible while meeting our responsibilities to safely serve our customers, even as our changing climate presents significant new challenges and risks.”
Mark Toney, executive director of The Utility Reform Network consumer group, said it’s common for PG&E and other investor-owned utilities to have multiple rate increase requests pending in any given year. But recent utility-caused wildfires make this round of requests distinct, he said.
“A lot of it we consider to be catch-up work,” he said. “It’s not clear that PG&E has a strategy other than to try to do everything at once in a scatterbrained approach, as opposed to a coherent program.”
Californians pay the nation’s seventh-highest electricity prices, according to the U.S. Energy Information Administration. As of 2017, however, the average monthly electric bills for the state’s residents were lower than those in 36 other states, data from the energy administration show.
That’s partly because many California residents live in temperate climates and do not use air conditioning in their homes. Still, UC Berkeley energy economist Severin Borenstein said he worried that raising the cost of electricity — as PG&E is seeking to do — could frustrate efforts to wean the state off fossil fuels.
“People make decisions around how much is it going to cost to heat the house with electricity instead of natural gas or heat the water or charge” the electric vehicle, Borenstein said.
State lawmakers focused on PG&E rates last month when they passed a bill that creates a new fund to protect utilities from future wildfire costs.
To access the fund, PG&E has to resolve its bankruptcy case by June 30. Also, the California Public Utilities Commission must determine that the company’s reorganization plan — which will determine how PG&E pays victims of past wildfires — will have a neutral effect on customer rates.
Lawmakers are not done grappling with PG&E rates. The company returned to the Legislature this month seeking authorization to take on as much as $20 billion in tax-exempt debt to help compensate fire victims and exit bankruptcy.
Shareholders, not ratepayers, will pay for the bonds because the company will divert some of their profits, PG&E says. The company insists that its request for regulators to approve higher profits for shareholders — which would raise the average residential bill by $4.12 per month — is unrelated to the bond proposal. Southern California Edison and San Diego Gas & Electric have made similar requests to raise shareholder profits.
Still, opponents of PG&E’s bond plan quickly latched onto the company’s plan to increase its shareholder rate of return. A group representing farming and food-processing utility customers sent out a message last week saying that “ratepayers, not shareholders, will end up footing the bill for the mountains of debt PG&E’s shareholders want to add to their balance sheet.”
Debating between what counts as shareholder money and what counts as ratepayer money is “really kind of an academic exercise,” said Steven Weissman, a former administrative law judge for the state utilities commission.
That’s because of how utility rates are typically set: Companies ask for permission to collect a certain amount of money based on what they anticipate their expenses will be in the future, he said. Utilities have to justify the amount of money they’re asking for, but once regulators sign off, the dollars become difficult to track, said Weissman, who is now a lecturer at UC Berkeley’s public policy school.
He acknowledged that PG&E’s turbulent record and current shareholder profit request put regulators in a tough spot.
“The commission has a hard assessment it needs to make, which is to recognize any legitimate increased risk the company faces and reflect that in the allowed return on equity — but at the same time not reward the utility for bad behavior,” he said.
PG&E wants its largest increase through its latest three-year general rate case, a routine proceeding through which regulators decide how much money utilities can collect from their customers to fund the cost of running and maintaining their systems.
PG&E’s current request would add $10.57 to the average resident’s monthly bill. It would add an additional $4.70 a month in the second year and $5.04 in the third year, according to the company.
Utilities “almost never” get everything they ask for, though, Weissman said.
“Think about the dynamic: The commission looks bad if it gives the utility everything it asks for,” Weissman said. “The utility knows that. So it’s likely to ask for more money than it really needs, so the commission has some latitude to reject some of their request and still give them enough to operate. That’s human behavior.”
PG&E is required to file a separate rate application linked to its gas transmission and storage facilities. The commission could vote as soon as Sept. 12 on a proposal from the company that would raise typical residential rates by $2.30 a month.
The closure of PG&E’s Diablo Canyon nuclear plant is the subject of another rate case that would add $1.98 to the monthly bill of the average residential customer for six years.
Also, PG&E has a rate increase regarding its electric transmission line system before the Federal Energy Regulatory Commission. PG&E already added $1.50 to the average residential bill as part of that proceeding, but will refund customers if the federal commission approves a lower rate in its final decision, which has yet to be issued, according to Jourdan, the PG&E spokeswoman.
Rate increases stemming from the cases will be phased in over time, but customer bills are expected to be affected from 2020 through 2025, she said.