Community Corner
PG&E Says They Took No Sides - SB549 KILLED
Bill to allow CA state legislature to have a hand in overseeing possible PG&E rate increases KILLED
Article Source: California State Legislature
Sacramento Bee newspaper reports this bill was killed.
SENATE COMMITTEE ON APPROPRIATIONS
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Senator Anthony Portantino, Chair
2019 - 2020 Regular Session
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SB 549 (Hill) - Public Utilities Commission: rates: capital structure changes
Version: April 3, 2019 Policy Vote: E., U., & C. 11 - 1
Urgency: No Mandate: No
Hearing Date: May 13, 2019 Consultant: Paul Jacobs
Bill Summary: This bill requires the Legislature to approve a capital change structure or increase in rates for the energy utility, Pacific Gas and Electric (PG&E) Company.
Fiscal Impact: Ongoing special fund costs (PUC Utilities Reimbursement Account) in the low hundreds of thousands of dollars annually for the California Public Utilities Commission (CPUC) to provide reports to the Legislature detailing any changes to PG&E’s capital structure or rate increases.
Background: The CPUC attempts to set a utility’s rate of return at a level that is adequate to enable the utility to attract investors to finance the replacement and expansion of its facilities so it can fulfill its public utility service obligation. In practice, this level is determined by comparing market returns on investments for other companies with similar levels of risk. The debt and equity percentages determined by CPUC during this process are also referred to as the authorized capital structure.
On January 29, 2019, PG&E voluntarily filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. PG&E’s decision to seek relief under Chapter 11 “were necessitated by a confluence of factors resulting from the catastrophic and tragic wildfires that occurred in Northern California in 2017 and 2018, and PG&E’s potential
liabilities arising therefrom.” PG&E’s decision to voluntarily file for bankruptcy protection has raised numerous questions about the process entailed under a Chapter 11 reorganization and the potential implications for the numerous stakeholders that could be affected, including wildfire victims, ratepayers, the utility workforce, energy and other suppliers, local governments, and many others.
Proposed Law: This bill would authorize CPUC to approve a capital structure change or increase in rates for PG&E only upon the Legislature approving the capital structure change or increase in rates.
Staff Comments: According to the author, “SB 549 ensures Legislators have more oversight of PG&E ratemaking, ensuring PG&E ratepayers are protected – both financially and with safe service.” However, the bill raises concerns about the appropriateness of regulating a complex rate structure for utilities at the Legislature. CPUC has been established by the Legislature specifically to conduct these types of extensive technical analyses.
The bill is unclear about what role, if any, the CPUC will have in reporting to and advising the Legislature when deliberating a capital structure change or increase in rates for PG&E. CPUC’s Energy Division foresees the necessity of hiring analysts and managers to act as liaisons with the Legislature to pass PG&E rate increase statutes in a timely manner. Although this level of involvement by CPUC is not clear in the bill, at the very least, CPUC would likely need to provide reports to the Legislature regarding any changes to PG&E’s capital structure or rate increases in such a format that can be readily understood by members and staff. CPUC states rate changes for PG&E could happen as often as three times a year for proceedings such as PG&E’s cost of capital proceedings, which determine the rate of return for ratemaking purposes. Staff estimates that CPUC will require some permanent additional resources to provide regular reports to the Legislature.
Recommended Amendments: Staff recommends amending this bill to clarify what role CPUC should have in informing, reporting, and advising the Legislature when determining whether to approve a change in PG&E’s capital structure or rate increases.
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Photo Credit: San Bruno CA Patch Archives
Source Credit: CA State Legislature
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