CPUC's Peevey Blows Smog at Hearing

MARCH 16, 2011


In it’s annual update to the Legislature, the California Public Utilities Commission offered plenty of good news and optimism. But what CPUC President Michael Peevey left out could have been held at another two-hour hearing. And the questions that legislators did not ask Peevey hung in the air like Los Angeles smog.

On Monday, Peevey gave the legislature-mandated annual review of the CPUC to the Assembly Committee on Utilities and Commerce. Despite what might have been a very important review and update to legislators, as well as a golden opportunity to ask some very specific questions about a difficult year, only two legislators were present for the entire presentation: Assemblyman Jeff Gorell, R-Camarillo, and Committee Chairman Steven Bradford, D-Inglewood. Most of the other 13 committee members gave the hearing a cursory glance and a brief stay.

Peevey painted a picture for legislators of a regulatory agency which cares deeply about low-income utility customers and diversity, is committed to the advancement of the smart grid in California, and said that California’s utility companies have spent more than $1 billion on energy efficiency, and $750 million for low-income retrofits.

Peevey insisted that the California Solar Initiative is “doing great, remarkable, and going ahead very, very well.” And, he did credit the federal government with providing a “big federal tax credit” to help the initiative along.

When the presentation came to the PG&E explosion in San Bruno last fall, Peevey said, “While the explosion has gotten a tremendous amount of attention, we’ve all followed pipeline safety practice. Nonetheless, it had very severe consequences. The whole nation is watching.”

Peevey added, “Shortly after the accident, tragedy forced us to take a look at how we regulate pipeline safety.” This led to the formation of an independent review panel made up of energy experts from academia, utility companies and union representation.

Annual Review

In anticipation of Monday’s hearing, last week Peevey provided committee members a PowerPoint handout of the CPUC annual review. The handout contained much more information about the San Bruno PG&E gas line explosion than was discussed in the hearing, including a timeline of important events “and CPUC actions.”

“If anything positive at all came out of the San Bruno explosion, it’s how we look at safety,” Peevey told legislators.

Although the timeline accounts for new rules for pipeline operations, there was no discussion or specific information about how the CPUC plans to hold PG&E accountable in the future, specifically, so that another San Bruno never happens again.

Paul Clanon, the executive director for the CPUC, told legislators about a project PG&E is working on at the Cow Palace in South San Francisco. When completed, he said, the project “will be a new way of looking at pipeline safety. We will be an industry leader for the U.S., and partner with the National Safety Transportation Board.”

And in December, the CPUC issued an order to PG&E to lower the pressure on all pipelines that were the same age and size as the San Bruno pipeline. “We’re doing that not because we know there is a deficit underground, but because we don’t know there isn’t,” said Clanon.

Still unanswered is whether PG&E will have to pay the entire tab for the San Bruno explosion, or if ratepayers will be forced to pay for it.

Peevey spent a substantial amount of time explaining to legislators about the many diversity policies and practices the CPUC has implemented through the Utility Supplier Diversity Program. “The Commission has had an incredible effort of diversity — minorities, women, and veteran-owned businesses and suppliers,” Peevey said.

“So why is it?” asked Assemblyman Sandre Swanson, D-Oakland. Consider looking at “some of the best practices that many of the companies have used.”

Peevey said that, in 2009, procurement from diverse suppliers increased, surpassing more than $3 billion. Both Verizon and AT&T exceeded 40 percent, PG&E exceeded 30 percent, Southern California Gas reached more than 37 percent and Southern California Edison exceeded nearly 28 percent.

Energy Efficiency Programs

The California Renewable Portfolio Standard, mandated by the Legislature, was established in 2002 under Senate Bill 1078, and accelerated in 2006 under Senate Bill 107. The RPS is one of the most ambitious and aggressive renewable energy standards in the country, according to the CPUC.

The program requires investor-owned utilities, electric service providers, and community choice aggregators to increase procurement from eligible renewable energy resources by at least 1 percent of their retail sales annually, reaching 20 percent by 2010, and aiming for 33 percent by 2020.

Peevey told the committee that the CPUC is continuing to push on the renewable standard, and added, “I think the state can go to 40 percent renewables by 2020.”

Bradford asked Peevey why there hasn’t been an uptick in jobs with the increasing workforce diversification and energy efficiency mandates and subsidies. “Future jobs are on the come,” said Peevey. “There’s obviously been a lot of work created in the state. We have to make sure that benefits are distributed more equitably than has been in the past.”

While Peevey was focused on the Legislature-mandated diversification, low-income programs for bill assistance, and energy efficiency programs, he did not address the expensive “Million Solar Roofs” program, which has fallen very short of its goal.

The California Solar Initiative, often referred to as the “CSI,” is the solar rebate program for customers of the investor-owned utilities: Pacific Gas and Electric, Southern California Edison, San Diego Gas & Electric.

Despite having spent $2.2 billion so far, the utilities are coming up short on the solar roof initiative — and the budget is largely spent.  In a recent legislative informational hearing, the utilities said that the $2.2 billion subsidy program aimed at adding 1,940 megawatts of solar power in investor-owned utility territory by 2016, and 3,000 megawatts by 2018, is falling short of the mark as funds run out.

The utilities have only reached 790 megawatts of new distributed photovoltaic systems, after spending more than $2 billion in subsidies, while maxing out the ratepayer-funded spending caps for the non-residential solar subsidies.

Legislators were quiet about this subject.

In 2010 the CPUC approved eight grants totaling $9.3 million, the first of the solar initiative’s grant solicitations. Peevy said then, “The California Solar Initiative is one of the greatest focused efforts to promote solar photovoltaics ever seen and is designed to help build a sustainable solar industry. Integrating substantial amounts of PV into the grid is part of that vision.”

One energy expert, who asked that his name not be used, said that it was apparent to him that committee members did not read the advance copy of the CPUC presentation. And with only two of the 15 committee members present for the bulk of the hearing, as legislators came and went, few questions were raised on the issues Peevey presented.

CPUC Controversy In Oakley

“What happened?” committee chairman Bradford asked Peevey, referring to the Oakley, Calif. power plant controversy involving the CPUC.

“I was persuaded — that we needed it,” said Peevey.

And again legislators were quiet. No additional questions were asked.

The CPUC’s Division of Ratepayer Advocates, an “independent” division of the California Public Utilities Commission, originally had opposed the Oakley power plant. It previously warned PG&E customers that, as the utility continued to seek approval for the plant (despite original CPUC denial), approval would stick ratepayers with $1.5 billion in costs “for unneeded new electric capacity of 586 megawatts.”

More than once during the hearing when questions came up about his support of controversial projects orissues, Peevey told committee members, “I am only one commission member.”

Tomorrow: The Division of Ratepayer Advocates annual review to the Legislature

Read the entire CPUC update.

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