Regulators at the California Public Utilities Commission at a June 27 meeting approved the “stress test”—a mechanism governing how utilities can recover costs from 2017 wildfires—but opted to prevent Pacific Gas & Electric from applying for it [R19-01-006, D19-06-027]

Under the stress test, first outlined in the SB 901 legislation, the commission considers a utility’s financial situation when reviewing applications to recover wildfire-related costs. It caps shareholder exposure to wildfire liability by ensuring that costs allocated to the company—as opposed to ratepayers—would not damage its ability to provide service. The commission’s model would base this calculation on the utility’s ability to take on excess debt while still retaining investment-grade credit ratings, factoring in excess cash, tax benefits and regulatory adjustments.

However, under the CPUC rule as drafted, the test will not be available to PG&E, which is currently navigating a Chapter 11 bankruptcy proceeding. The reorganization process would make it difficult for regulators to assess the utility’s financial scenario, according to the decision.

“There are still many questions related to the 2017 wildfires. Some of the questions will be answered in our proceeding, but in the case of PG&E, many of those will be addressed in the bankruptcy court,” CPUC President Michael Picker said.

PG&E attorneys in June 13 comments had criticized the commission’s decision to exclude the utility from the stress test, noting that the mechanism could help it resolve its liabilities from the 2017 North Bay wildfires and emerge from bankruptcy (see CEM No. 1544 [9]).

While commissioners voted unanimously in favor of the stress-test proposal, some voiced sharp criticism of the legislative mandate behind it. Commission member Clifford Rechtschaffen called it an “extraordinary remedy” and “sharp departure” from the agency’s normal practices, which could potentially saddle ratepayers with unreasonable utility costs.

“This is cognitive dissonance for a regulator whose job is to protect ratepayers,” he said.

Commissioner Martha Guzman Aceves said it was difficult for her to support the legislative mandate, since it inherently shifts costs to ratepayers that she does not believe they should bear.

“We are asking a tremendous amount from the ratepayers… just imagine if utilities extended that same rule, that same type of contribution, to a struggling ratepayer who cannot pay their bills before disconnecting them. The patience should go both ways,” she added.

Guzman Aceves, who is overseeing a commission proceeding to regulate utilities’ authority to disconnect customers for not paying their bills on time, said she intends to be similarly considerate to customers in that context.

At the meeting, the CPUC also launched an investigation into Southern California Gas Company and parent entity Sempra Energy’s safety culture, citing numerous incidents that warrant concern.

The proceeding is roughly modeled after an investigation the CPUC conducted of PG&E in the wake of the San Bruno natural gas pipeline explosion in 2010. In its first phase, the commission’s Safety and Enforcement Division will evaluate the SoCal Gas organization, governance, policies and accountability metrics, after which the agency could impose new orders and conditions on the utility [I19-06-014 ].

Among the incidents that prompted the CPUC to open the investigation was the natural gas leak at the Aliso Canyon storage facility in 2015 and 2016.

Last month, independent consultant Blade Energy Partners submitted a root cause analysis which “raises concerns about whether SoCalGas’ policies and practices ensure that it maintains and operates its gas facilities in a safe manner,” according to the order instituting investigation. The analysis, which was initially due on March 31, was delayed after a late-stage data dump from SoCalGas (see CEM No. 1533 [10])

The commission also voiced concerns about an explosion on SoCalGas Line 235-2, which took it out of service along with the adjacent Line 4000.

Jackson Stoddard, an attorney representing SoCalGas, approached commissioners during the meeting’s public comment period and urged them to remove any reference to the root-cause analysis from their investigation due to alleged concerns about its credibility.

According to Stoddard, SoCalGas learned on June 4 that a CPUC program manager and lead investigator of the Aliso Canyon leak is filing a personal injury lawsuit against the utility, claiming damages for health issues stemming from his investigation. The program manager was in “regular” contact with personnel from Blade Energy, he added.

“SoCalGas has serious concerns about whether and to what degree the investigator, due to his conflict of interest and bias, may have improperly influences Blade’s investigation,” he said, urging the commission to investigate the matter. “Until this is done, the credibility of the RCA report and of Blade’s investigation overall is in serious question.”

The commission approved the investigation despite Stoddard’s concerns. Commissioner Rechtschaffen said a robust safety culture requires continuous improvement and goes beyond mere compliance.

“If SoCalGas had had a robust safety culture in place, there would have been a much better chance that it would have taken measures to avoid these incidents from occurring,” he said.

Commissioners also addressed the following issues at the June 27 meeting:

  • Implemented SB 100 procurement quantity requirements for the state’s renewables portfolio standard program beginning in 2021 [R18-07-003, D19-06-023].
  • Adopted local capacity requirements of 23,643 MW for 2020, 23,625 MW for 2021 and 22,598 MW for 2022 [R17-09-020, D19-06-026]
  • Adopted portions of San Diego Gas & Electric, Pacific Gas & Electric and Southern California Edison applications implementing AB 2868, a 2016 distributed energy storage law [A.18-02-016 et al, D19-06-032].

Kavya Balaraman covers the California Public Utilities Commission and PG&E Corp. for California Energy Markets. She has reported on climate policy and science in Washington, D.C. and graduated from Columbia University's Graduate School of Journalism.