Lax CPUC oversight lets PG&E gouge ratepayer – Pacific Research Institute

Lax CPUC oversight lets PG&E gouge ratepayer

As the price of natural gas has fallen to a decade low, utility ratepayers wouldn’t know it. Utility costs continue to explode.

Given the low cost of natural gas, Pacific Gas & Electric’s latest request to increase utility rates by more than 15 percent by 2016 is causing many to question why. But the California Public Utility Commission isn’t showing any apparent concern.

The CPUC approves all utility company rate increases. Yet it has shown it lacks real oversight, particularly of PG&E in recent years. All rate increase requests are approved whether warranted or not — even as it has been proved that rate increases have not been used for necessary promised upgrades.

The San Bruno gas explosion (shown in the picture above) is a deadly reminder reminder of the failure of PG&E and the CPUC. But it appears to be business as usual.

As I wrote in March, “The California Public Utility Commission has a history of allowing utility companies to increase utility rates without much proof of need, resulting in some of the highest utility rates in the entire country. Despite gross mismanagement and well-documented negligence, the CPUC has allowed Pacific, Gas & Electric Company to continually increase utility rates, passing tremendous costs on to rate payers.”

Latest rate increase request

On July 2, PG&E submitted a draft of its 2014 general rate case application to the CPUC and said it was planning to seek a “base revenue increase” of $1.28 billion in 2014, on top of the currently authorized levels.

Every three years, General Rate Cases provide the CPUC a chance to perform an exhaustive review of utility company revenues, expenses and investments into utility infrastructure.

The CPUC already has approved PG&E rate increases of nearly $500 million per year in 2015 and 2016 for infrastructure improvements and other miscellaneous expenses. PG&E is also asking for a $539.5 million increase in forecast annual energy rate costs for 2013, hoping the PUC will approve the request by Dec. 5.

In PG&E’s 2011 general rate case, the CPUC approved an 8.1 percent annual increase of $454 million, on top of the already authorized level of $5.58 billion. The CPUC also authorized “attrition increases,” totaling $180 million for 2012, and $185 million for 2013. This totaled $1.7 billion in additional revenues over just those three years.

Clean energy cost increases

On Nov. 8, according to a CPUC press release, “[T]he CPUC approved the renewable energy plans of the state’s utilities, paving the way for the utilities to solicit bids for green energy procurement.” The state-mandated Renewable Portfolio Standard passed in 2011. It “requires investor-owned utilities, electric service providers, and community choice aggregators to increase procurement from eligible renewable energy resources to 33 percent of total procurement by 2020.”

PG&E said it plans to carry out home energy reports and offer rebates to manufacturers, distributors, retailers and customers to develop, offer and install green tech equipment, including heating, ventilation and air-conditioning equipment, appliances and electronics. But at what cost to ratepayers?

PG&E also plans to offer financial support to commercial customers, along with products and services, for companies and industries that implement green energy design and technologies. And it is planning on financing third-party contractors to accomplish this. Ratepayers will be footing the bill for green energy upgrades in businesses all over the state.

The revenues for the giant utility next year are expected to be $6.82 billion. If approved, this latest rate increase would be in addition to the $6.82 billion, and is equal to a 18.77 percent rate increase on ratepayers, according to the General Rate Case filing.

But utility ratepayers pay a premium for PG&E electric service. In some areas of the state, PG&E rates are more than 15 percent higher than local utilities.

PG&E also pays its shareholders an 11.45 percent dividend every year, and charges ratepayers more in order to generate that double-digit profit.

Other utilities set rates to benefit ratepayers, and not the shareholders, because utilities are something everyone needs.

Non-profit and smaller utilities can save ratepayers as much as 15 percent over PG&E’s current electric rates—primarily because, unlike PG&E, other utilities don’t operate out of expensive San Francisco offices. PG&E directors travel in corporate jets using ratepayer money, and paid Chairman and CEO Peter Darbee $35 million when he left.

PG&E pays large amounts of money to counties

PG&E announced recently that it has paid franchise fees and property taxes of almost $286 million to the 49 counties and 243 cities in which it operates.

According to recent news stories, CEO Kent Harvey said this is because local governments are now taking on dealing with public safety, environmental protection, health care and education with limited financial resources. It appears that PG&E stepped in to “help” local governments make up in the loss of property taxes to pay for vital resources in communities.

Is this altruism?

The payments are for 2011 franchise fee payments, and total more than $138 million, nearly $41 million for natural gas and more than $97 million for electric service, according to a recent Sacramento Bee article. This amount is $582,308 more than last year’s payments.

While most property taxes went down during the Great Recession because of dramatically decreasing property values, PG&E’s county property tax payments for tax year 2011-12 increased by $14.6 million over the previous year. PG&E said the company received an increase in assessments because of infrastructure investments the company made.

Franchise fees are payments to cities and counties for the right to access the public streets for PG&E’s gas and electric facilities.

PG&E’s property tax payments of $148 million cover the period from Jan. 1 to June 30, 2012. Total payments for the fiscal year 2011-2012, ending June 30, 2012, were $296 million.

But PG&E doesn’t even blink when it receives tax increases because the costs are passed on to the ratepayer.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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