The California Public Utilities Commission's Public Advocates Office and the Sierra Club filed briefs asking the CPUC to impose $255.3 million in fines against Southern California Gas Co. and other sanctions related to an alleged misuse of ratepayer funds.
The fines are warranted for years of violating commission decisions in ways that served to benefit SoCal Gas' bottom line and not its ratepayers, whose fees ultimately funded the natural gas utility's opposition to building codes, appliance standards and reach codes supporting state energy-efficiency and environmental programs, such as those targeting greenhouse gas reductions, the parties said.
Both Nov. 5 filings are part of an order to show cause directing SoCal Gas to address "shareholder incentives for codes and standards advocacy expenditures" [R13-11-005].
The two groups allege that SoCal Gas used ratepayer funds to oppose codes, standards and reach codes, contrary to various CPUC decisions forbidding such activities. The PAO said SoCal Gas used ratepayer fees to actively lobby against codes and standards between 2014 and 2017, which included the California Energy Commission's instantaneous water-heater standard and proposed U.S. Department of Energy efficiency standards, as well as proposed municipal reach codes in the cities of San Luis Obispo, Santa Monica and Culver City.
Ratepayer funds are designed to support utilities in advocating for the agencies' adoption of more stringent codes and standards; however, the advocates office said "evidence shows SoCalGas' pattern and practice of advocating against stricter codes and standards in violation of D.18-05-041 and its predecessors," adding that since roughly 2014 it had made "a concerted effort to undermine the state's energy efficiency goals related to new codes and standards, which in turn undermines the state's climate goals."
SoCal Gas allegedly collaborated with trade organizations on its opposition, which was part of "a business strategy in order to preserve its business model and to generate shareholder profits—regardless of the impacts on its customers and contrary to the state's energy efficiency and GHG reduction goals," PAO said in its filing. The advocates office said these were "calculated business decisions" that "SoCalGas is willing to make . . . because it views the benefits of preserving its profitability as outweighing the risks of possible repercussions imposed by the Commission and adverse consequences to the environment and public health."
In its filing, the advocates office asks the commission to order SoCal Gas to refund shareholder incentive awards and program expenditures related to its 2014-2017 building codes and appliance standards programs as well as its 2018-2020 reach codes program. The total refund would be roughly $1.9 million.
PAO also asks the CPUC to prohibit SoCal Gas from planning, administering and implementing any codes and standards programs for at least seven years and to be removed as the statewide lead for the Emerging Technologies program "as soon as practical"—no later than Jan. 1, 2022.
The office also asks the commission to impose $255.3 million in "necessary and appropriate" fines for using ratepayer funds to oppose building codes, appliance standards and reach codes, based on behavior that was "egregious, ongoing, and reflected profit-motivated business decisions at the costs to ratepayers, public health, and the environment."
The proposed fines were calculated based on physical and economic harms as well as harm caused to the regulatory process. Even so, the maximum fines were reduced by 25 percent because the office found "no direct physical and immediate harm."
Earthjustice, in a filing on behalf of the Sierra Club, said it agreed with the fine calculations and remedies, which it says should "ensure that SoCalGas does not continue to conduct its business based on opportunity costs between profits and the state's energy, environmental, and public health goals and policies."
The fines were calculated based on the number of days SoCal Gas employees, whose positions are ratepayer-funded, engaged in activities in violation of the CPUC policies. They were calculated at $37,500 per day for the DOE-related opposing activities and $75,000 per day for work opposing municipal reach codes.
Earthjustice said the actions represent "six years of SoCalGas efforts to weaken federal, state, and city climate regulations" and a "long campaign to sabotage clean energy progress in California," adding, "A reckoning for SoCalGas' years of duplicitous and self-serving tactics is long overdue."
The group said the fines should be "invested in California's building electrification programs"—the Building Initiative for Low-Emissions Development program; the Technology and Equipment for Clean Heating program; and the Self-Generation Incentive Program—"to remedy the harms caused by SoCalGas' conduct." Earthjustice also seeks similar fines and customer fee repayments, but goes further, asking for "the permanent removal of SoCalGas from an active role in California's statewide codes and standards advocacy program" as "[r]atepayers would see no conceivable benefit from the Commission inviting SoCalGas back into an active role in statewide [codes and standards], whereas the threat to the integrity of the program is obvious."
The Sierra Club also asked the CPUC to order SoCal Gas to refrain from seeking remuneration from ratepayers for any of its future work on energy-efficiency codes and standards advocacy at any level, including participation in industry groups. It also asks the commission to "explicitly prohibit" SoCal Gas from using ratepayer fees for any participation in energy-efficiency advocacy projects through its trade associations.
But SoCal Gas says it has been advocating for its customers.
"Sierra Club's and CalPA's claims are demonstrably wrong and their request for penalties does not have merit," SoCal Gas said in an email to California Energy Markets. "SoCalGas should not be discouraged from raising concerns about the affordability of proposed rules that would disproportionately drive up costs for our customers."
It is unclear when the CPUC might take up the matter. Its next voting meeting is scheduled for Nov. 19.