PG&E in the crosshairs of bankruptcy, fires, regulation

Things are not going well for PG&E.

Amid massive blackouts that PG&E has put in place to avoid liability in the event of a wildfire, millions of Californians were left without power — for days at a time in some cases.

San Jose Mayor Sam Liccardo has called for transforming PG&E into a customer-owned utility — a move backed by at least two dozen cities — that would reclassify the company as a nonprofit electric and gas cooperative instead of an investor-owned company.

The Senate energy committee, a standing committee with broad authority over utilities, examined PG&E’s woes and related issues.

Meanwhile, the multibillion-dollar corporation, drained by liabilities and settlements stemming from the wildfires, is caught in a Chapter 11 bankruptcy.  Gov. Newsom told utility executives last week that if PG&E is unable to find a way to resolve its bankruptcy and other problems on its own, then “the state will prepare itself as a backup for a scenario where we do that job for them.”

And it may not get better this week: PG&E, citing forecasts of high winds and dry conditions, said it may be forced to cut power off to thousands of  customers in the Sierra foothills, the northern Sacramento Valley and some areas north of San Francisco. Blackouts may continue today, potentially affecting more than 150,000 customers in northern California.

The Senate energy committee, a standing committee with broad authority over utilities, convened Monday to examine PG&E’s woes and related issues.

Sen. Scott Wiener (D – San Francisco), a major critic of PG&E who intends to author legislation authorizing a public takeover of the giant utility, told the committee that “we are in a state of emergency right now.”

The utility, he said, “likes to keep talking about accounts… we need to be talking about people.” He added that “we thought PG&E would use a scalpel… instead they have chosen to use a sledgehammer and then turn around and essentially tell the public ‘suck it up and deal with it, we’ll fix it in 10 years.’”

Caroline Winn, the chief operating officer of San Diego Gas & Electric, whose comments received support from the committee, offered suggestions about how the major investor-owned utilities, or IOUs, should conduct themselves when it comes to wildfires and public safety.

PG&E says it has invested $30 billion dollars in its grid and equipment over the course of the last 10 years.

The Cedar and Witch Creek fires of 2003 and 2007, respectively, across the San Diego area “became personal to all of us” Winn said. “Post 2007, the culture of the company changed.  It changed from keeping the lights on to keeping our community safe.  That was the fire that absolutely changed the DNA of our company.”

Winn said moving infrastructure underground was the most effective way of limiting fire-induced power shutoffs, but she noted other strategies, as well.

Those included switching out wooden poles for steel ones, using thicker covered wiring in hazard prone areas and employing failing conductor shutoff technology, which automatically identifies damaged equipment and cuts power to it before it can reach the ground and spark fires.

This along with greater grid sectionalization and investments in weather monitoring stations have allowed to SDG&E to have no “catastrophic fires” since 2007, she said.

PG&E has already reached an agreement with some wildfire insurance providers in which the utility will pay $11 billion.

PG&E CEO Bill Johnson said, “We weren’t as well prepared as we thought” for the use of blackouts in preventing wildfires. He told the committee that PG&E has invested $30 billion dollars into its grid and equipment over the course of the last 10 years, although he was unable to identify how that money had been used.

A number of plans to resolve PG&E’s bankruptcy have been proposed, but so far none of them have received widespread support. All of the plans deal in tens of billions of dollars directed to wildfire victims, insurance providers and a state fund to compensate stakeholders in the event of future fires.

One plan, proposed by a group of PG&E creditors, was criticized for giving more money to insurers ($7.8 billion) than to individual victims ($6 billion).

Currently, PG&E is offering $13.5 billion to victims of fires caused by its infrastructure but this is in conflict with a rival plan from a group of anonymous creditors.

In September, Johnson said PG&E “will meet our commitments to fairly compensate wildfire victims, and we will emerge from Chapter 11 financially sound and able to continue meeting California’s clean energy goals.”

The rival plan disagrees with the company’s plan on the issues of structure and payout.

PG&E has already reached an agreement with some wildfire insurance providers in which the utility will pay $11 billion.  Some, however, disapprove of this move, arguing that the victims should be compensated before the insurers.

The municipal electricity provider for Yolo County put in a $300 million bid to buy PG&E’s poles and wires.

If both the governor and a number of local governments are on board with major changes to PG&E, the utility could face a rough time ahead.

Backers of Liccardo’s proposal — including Oakland and Sacramento — call for the formation of a public cooperative.

In addition, some movement to take operational control away from the company and put into the hands of local jurisdictions has already been made.

The city of San Francisco, where PG&E is headquartered, offered to buy the utility’s infrastructure within the city for $2.5 billion.  The company quickly rejected the offer, calling it inadequate and saying that the bid had significantly undervalued its assets.

This development dissuaded the city of Rocklin, a Sacramento suburb, from pursuing a plan to replace PG&E as their gas and electric provider with neighboring municipal utilities.  The price of acquiring the existing PG&E infrastructure proved to be too much of a deterrent for the city council.

The municipal electricity provider for Yolo County, however, put in a $300 million bid to buy PG&E’s poles and wires in the area, while  the  South San Joaquin Irrigation District earlier this year offered $116 million for PG&E’s assets in its area of operation.

“We are looking at legislation to force PG&E to become a public utility…” — state Sen. Scott Wiener.

PG&E has rejected offers like this in the past, but with the ongoing bankruptcy proceedings, payments to victims of fires attributed to PG&E, blackout reimbursements, among other issues, PG&E may be more willing to part with these regions than they would with densely populated areas like San Francisco.

It is simply cheaper and easier to provide electricity to customers who live close to one another.  In more rural and suburban areas like Yolo County, where customers live farther apart, providing services is more expensive and requires greater maintenance across fire-prone, sparsely populated stretches of land.

Back in San Francisco, Wiener is considering introducing legislation to force PG&E to become a pubic utility.

“We are looking at legislation to force PG&E to become a public utility,” Sen. Wiener said, “but that’s still in the early planning stages and we haven’t settled on the exact details yet.”

Earlier this year, Wiener proposed Senate Bill 378, which would have required large investor-owned utilities to fairly compensate customers after public-safety power-outages — a policy backed by Gov. Newsom. The bill, however, got tangled up in committee in the Legislature.

PG&E itself identified multiple areas where it failed to meet the requirements placed on it by the PUC.

Of course, the transfer of a utility from an investor-owned corporation to a customer-owned entity likely would have an impact on the state’s oversight of the utilities.

The California Public Utilities Commission, which regulates investor-owned utilities, has launched an investigation into the use of wildfire-preventative blackouts with the goal of examining “actions that utilities can take in the next six months to minimize impacts of future (Public Safety Power Shutoffs)”.

PUC President Maribel Batjer, in a written statement, said the state “cannot continue to experience PSPS events on the scope and scale Californians have experienced this month, nor should Californians be subject to the poor execution that PG&E in particular has exhibited.”

After the first series of blackouts at the beginning of October, the PUC called PG&E to an emergency meeting where “PG&E executives admitted to significant shortcomings in the company’s execution of the October 9-12, 2019 PSPS event,” the PUC said.

PG&E itself “identified multiple areas where it failed to meet the requirements” placed on it by the PUC.  Some of these failures include the unavailability of PG&E’s website during most of the PSPS event, and the failure to notify 23,000 customer accounts out of the 729,000 accounts that experienced power shutoffs, including 500 “medical baseline” accounts.

The meeting was held before the second series of blackouts that PG&E had in place between Oct. 23 and Nov 1.

The PUC has so far made no comment as to whether PG&E made improvements in its use of the second set of blackouts.

But regulators described PG&E’s use of blackouts as “ill-conceived, poorly-planned, uncoordinated … and ineffectively communicated,” and ordered PG&E to explain why the company should not be sanctioned by the PUC at a prehearing conference scheduled for Dec. 4.

In response to the coalition of cities and counties supporting Mayor Liccardo’s proposed formation of a customer-owned cooperative, President Batjer sent a letter in which she describes PG&E’s safety performance as “unequivocally unacceptable,” despite the “historically challenging and dynamic climate change conditions” that the company has been faced with.”

Batjer, however, stopped short of supporting the proposed co-op.
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Ed’s Note: Corrects 3rd paragraph to describe change to customer-owned instead of public takeover, tightens and edits throughout to conform. Bryndon Madison is a Capitol Weekly intern from UC Santa Barbara.