Proponents say government control will lead to cheaper utility rates and faster adoption of renewable energy.

This month, more than 950,000 homes and businesses in Los Angeles and Ventura will shift to a community-choice program – the Clean Power Alliance. It will be the state’s 20th and largest community-choice provider, which will then provide power to nearly 3.6 million customers in the Golden State.

Those numbers could drastically grow in coming years. Both San Diego Mayor Kevin Faulconer and Dianne Jacob, chair of the San Diego County Board of Supervisors, have endorsed community-choice programs. Many other local governments are watching how the programs work in places that have already adopted them.

SDG&E says it welcomes infrastructure-only role

To the surprise of many industry watchers, one of the state’s three giant investor-owned utilities isn’t fighting this development.

After San Diego began taking steps toward a community-choice program last year, San Diego Gas & Electric made clear its interest in getting out of energy procurement. Earlier this month, Kendall Helm, SDG&E’s vice president of energy supply, told the Los Angeles Times that the decision was straightforward.

“We don’t think we should be signing big, long-term contracts for customers that have made a conscious choice to be served by a different” provider, Helm said. “We think our primary role and our primary value is in the safe and reliable delivery of that power.”

Pacific Gas & Electric and Southern California Edison continue to defend the status quo and to work with the California Public Utilities Commission and SDG&E on “exit fees” assessed to departing customers to make sure they help pay for maintaining energy infrastructure. But PG&E, now in bankruptcy and facing possible dissolution by the CPUC because of repeated scandals, has dropped its once-aggressive opposition to the very idea of community-choice energy, including sponsoring a failed state ballot measure on the issue in 2010.

CPUC president fears programs could fail, cause havoc

But California’s most prominent regulator worries that adoption of community-choice’s programs could have huge unintended consequences.

CPUC President Michael Picker told the San Francisco Chronicle last spring that he worries about things going haywire.

“You’re going to have some failures,” Picker said. “Electric markets can be brutal. So what happens to the customers, midyear, if the company or the program goes away? Where do those customers go?”

In a May op-ed in the Sacramento Bee, Picker urged local officials pursuing community-choice to act with care.

“The last time California deregulated electricity, it did so with a plan, however flawed. Now, electricity is being deregulated de facto, through dozens of decisions and legislative actions, without a clear or coordinated plan,” he wrote. “If California policymakers are not careful, we could drift slowly back into another predicament like the energy crisis of 2001.”

Picker warns that managing California’s power grid requires expertise and will become increasingly difficult as new clean-energy mandates kick in and as new technologies come to the fore.

But these warnings so far don’t seem to resonate with the statewide business community, which so far has not taken a strong, consistent stand on community-choice.

Some local groups have, however. The San Diego Regional Chamber of Commerce, for example, questions the assumptions that community-choice will lead to cheaper utility rates and increased use of clean energy.

How much of wildfire costs not covered by insurance should be paid by California’s giant investor-owner utilities has been a significant issue since at least 2007. That’s when wildfires ravaged northern and eastern San Diego County, killing two people and destroying more than 1,300 homes.

San Diego Gas & Electric argued that it should be allowed to pass on $379 million in related costs. But the California Public Utilities Commission and state courts – noting the evidence that poorly maintained equipment had been blamed for much of the damage in two state investigations – have rebuffed SDG&E. The utility’s most recent setback came just last week when the state 4th District Court of Appeal in San Diego rejected a call to overturn previous rulings.

But during SDG&E’s long fight for a utility-favorable interpretation of liability laws, the debate has become far more high-profile. With six of California’s all-time 10 worst wildfires occurring since September 2015 in areas served by Pacific Gas & Electric and Southern California Edison, the question of what to do to keep the state’s two largest investor-owned utilities in business has emerged as one of the thorniest, most contentious issues in Sacramento.

Now, with Northern California reeling from its deadliest fire ever in Butte County, and with a large area of Ventura County and northwest Los Angeles County ravaged in the past two weeks, PG&E and Edison are confronted with a perverse twist on their successful efforts to get the Legislature to give them relief from huge wildfire costs.

Law protecting utilities doesn’t take effect until Jan. 1

Senate Bill 901 – the main measure passed in late summer to insulate utilities from the extreme costs of fires – doesn’t take effect until Jan. 1. That means its provisions to limit utilities’ liabilities if it could be shown they properly maintained their equipment in fire-prone wilderness areas won’t help PG&E or Edison with this fall’s blazes.

Instead, the old standard that led to negative rulings against SDG&E will be used in assessing damages. Given that utilities’ equipment is blamed for helping start the latest round of wildfires, that could be apocalyptic for the finances of PG&E. As of Monday afternoon, the Camp Fire had killed 77, with nearly 1,000 people unaccounted for, and torched 151,000 acres and nearly 13,000 structures.

In the Woolsey fire northeast of Los Angeles, three people have died, while more than 96,000 acres and 1,400-plus structures have burned.

In coming days, the focus is likely to be on how many of the missing in the Camp Fire are dead. It could end up as one of the five deadliest natural disasters in the United States in this century – nearly as lethal as Hurricane Katrina.

But eventually the focus will return to whether PG&E can survive the latest conflagrations even as it deals with potential losses in the billions from previous fires – and how much more state lawmakers and Gov.-elect Gavin Newsom should do to help the utility survive in its present condition.

Its company valuation plunged by more than one-third after the severity of the Camp fire became evident, only to jump somewhat late last week after the president of the state Public Utilities Commission offered supportive comments.

“It’s not good policy to have utilities unable to finance the services and infrastructure the state of California needs,” Michael Picker told Bloomberg News. “They have to have stability and economic support to get the dollars they need right now.”

PG&E has filed for Chapter 11 bankruptcy before, in April 2001, when the utility was squeezed by sky-high energy costs after the blackouts of winter 2000-2001. It emerged from bankruptcy three years later.

Lawmakers have little goodwill for ‘criminal’ PG&E

But a huge scandal since then has left Northern California lawmakers with less goodwill toward the 113-year-old utility, whatever Picker’s views and whatever their willingness to pass SB901.

In 2010, a PG&E transmission line exploded in the San Francisco suburb of San Bruno, leaving eight dead and destroying 38 homes. In 2017, a federal judge found the utility guilty of five felonies for its failings to safely maintain the gas line, and a sixth felony for obstructing the National Transportation Safety Board’s investigation into the disaster.

Sen. Jerry Hill, D-San Mateo, routinely refers to PG&E as a “criminal” institution. Last week, he renewed his call to break up the utility, saying it could no longer be trusted to act in the interest of public safety.

PG&E shares closed at $23.26 in Monday trading. That was down 58 percent from its 52-week high of $55.66.

California’s three large investor-owned utilities are renewing efforts to allow them to make ratepayers cover the costs of wildfires that authorities blame on utilities’ mistakes or poor maintenance.

Pacific Gas & Electric officials made this clear last week when they announced they expected to have at least $2.5 billion in liabilities from the wildfires that scarred the wine country of Northern California last October. That sum is only for 12 relatively small blazes that the state blames on PG&E’s failure to maintain equipment and clear brush near power lines. Authorities are still looking at what caused the biggest blaze – the Tubbs fire – which torched more than 3,000 homes in Sonoma County and is blamed in the deaths of 22 people.

PG&E CEO-President Geisha Williams used a conference call with analysts to make the case for state legislation to protect electricity utilities from bankruptcy in an era in which huge wildfires – blamed on hotter, drier weather – are more common than ever. PG&E only has an estimated $840 million in insurance coverage to deal with the 200 and counting lawsuits from the wine country conflagrations.

Williams said “flawed” state laws made utilities responsible for fire risks that were beyond their control. But in a decision-making process that began last summer – before the wine country blazes – and ended after they were finally put out, the California Public Utilities Commission rejected a similar argument put forward by San Diego Gas & Electric. In August, CPUC staff recommended that commissioners reject an SDG&E request to pass along to ratepayers $379 million in unrecovered costs from 2007 wildfires that ravaged San Diego County. After three months of wavering, the CPUC board voted unanimously in late November to deny the request.

Williams said negative media coverage of the October fires complicated utilities’ efforts to get help from the California Legislature. But some utility watchdogs are still wary of state lawmakers, whom they see as sending out mixed signals on wildfire liabilities.

On the one hand, the state Senate voted 39-0 in May and an Assembly committee voted 15-0 last week for Senate Bill 819. It would ban the CPUC from allowing utilities to pass along to ratepayers the costs of fines or penalties as well as the cost of damages that were “caused” by a utility’s infrastructure. Only costs the CPUC deems “just and reasonable” can be shifted from shareholders to ratepayers under the legislation. PG&E and Southern California Edison expressed “concerns” about the bill without formally opposing it, according to a legislative analysis.

Benign bill pushing responsibility – or stealth bailout?

But another bill that had similarly lopsided support in the Senate is drawing a very mixed response. Senate Bill 1088 passed the Senate 34-2 in late May and survived an Assembly committee vote last week with eight lawmakers in support, two in opposition and five declining to vote.

It would require utilities “to submit a safety, reliability and resiliency plan to the California Public Utilities Commission every two years.” It would also require the state Office of Emergency Services “to adopt standards for reducing risks from a major event and requires the office to update the standards at least once every two years.”

Supporters – including PG&E, SDG&E, labor unions and some counties hit hard by last year’s blazes – depict the measure as a benign attempt to make sure utilities are prepared to handle their responsibilities.

But critics see the language requiring the state to regularly “update” how it evaluates risks posed by the biggest blazes as potentially giving legal ammunition to the utilities – specifically, to their arguments that emerging, more dangerous conditions should change what costs can be shifted on a “fair and reasonable” basis to ratepayers.

Formal opponents of SB1088 include groups which have standing to challenge utilities’ proposed rate hikes (The Utility Reform Network and the Office of Ratepayer Advocates); business interests (the California Manufacturers and Technology Association, the Western States Petroleum Association and farm groups); and green activists (most notably the California Environmental Justice Alliance).

California’s three giant investor-owned utilities haven’t given up on hopes that state leaders and regulators may give their shareholders the financial protection they want in an era of frequent massive wildfires linked to climate change – and their hopes don’t seem as dim as they used to be.

In late November, the California Public Utilities Commission issued what syndicated columnist Thomas Elias called “perhaps its most consumer-friendly decision in several decades.” Affirming staff recommendations made in August, the CPUC board unanimously rejected a bid by San Diego Gas & Electric to pass along $379 million in unrecovered costs stemming from three blazes in 2007 that ravaged San Diego’s northeast suburbs, the city of Poway and unincorporated county areas, torching over 1,300 homes. The CPUC board noted that two independent investigations had concluded the fires were SDG&E’s fault because of poor maintenance practices in high-risk fire areas, and that utility shareholders – not ratepayers – should pay the bill.

But as the bureaucratic decision-making process played out in the San Diego case, the CPUC’s decision in the matter came to have immense importance to Pacific Gas & Electric because of what happened in its own back yard – the brutal October 2017 Wine Country wildfires (pictured). The cost of those Northern California blazes – about $10 billion – dwarfs the cost of San Diego County’s 2007 fires. PG&E’s liability exposure is also expected to be much higher than SDG&E’s – likely in the billions of dollars, according to reports that have regularly blamed PG&E wildfire management practices for the conflagrations, which left more than 40 dead.

PG&E, SDG&E and Southern California Edison officials see the CPUC ruling as a potential existential threat in a hotter, drier era and weren’t ready to let it stand as the final word. This led to what seemed like a long-shot January appeal by the three utilities seeking a new CPUC hearing for SDG&E’s bid for $379 million in relief.

It may not be as long a shot any longer. Gov. Jerry Brown issued a pronouncement March 13 mostly devoted to new efforts to minimize wildfire risk. But its passing reference to the governor’s interest in new legislation that would “update liability rules and regulations for utility services in light of changing climate” conditions caught the eye of Wall Street, at least.

PG&E stock price jumps on report from governor’s office

Barron’s gave PG&E its “hot stock” appellation after the utility’s stock price jumped 6.3 percent on March 13, to $45.10. As of the end of trading Friday, the price was down to $43.08. But that was still up more than 20 percent from its mid-February low.

Ultimately, the question of whether the utilities will get help from the California Legislature and the CPUC seems certain to become a huge political football. The governor has long been seen as close to the three utilities, vetoing reform bills related to recent scandals that have easily passed the Assembly and Senate in recent years.

But Brown is termed out and in his final eight-plus months on the job. With California Democratic politics seeming to have entered an intensely populist phase, leading candidates to replace Brown such as Lt. Gov. Gavin Newsom and former Los Angeles Mayor Antonio Villaraigosa may hesitate to back rule changes that can be depicted as insulating the utilities from the costs of their poor practices in addressing wildfire risks.

Several state legislators are determined to head off any lessening of utilities’ liabilities for their mistakes. In January, Sen. Jerry Hill, D-San Mateo, and seven co-sponsors in the Senate and Assembly introduced Senate Bill 819. Hill called it an “outrage” that state utilities wanted to make their customers pay for damages that “result from negligent practices.”

An April 17 hearing has been scheduled for the legislation.

From pioneering air-pollution control programs in Los Angeles County in

So when Senate President Pro Tem Kevin de León introduced Senate Bill 100 in January, the expectations were high. The measure committed California to generating 50 percent of electricity from renewable sources by 2026 – four years earlier than the present goal – and to 60 percent by 2030 and to 100 percent by 2045. No government remotely as large as California’s had made such a commitment.

In spring interviews with reporters at an energy conference in Orange County, the Los Angeles Democrat depicted his bill as a common-sense measure to goad investor-owned utilities into making long-term shifts in their infrastructure to prepare for an all-renewable future. He said progress had been so quick that he expected the state to meet the 50 percent renewable standard “in the early 2020s without breaking a sweat.” But he also depicted SB100 as setting up “the most ambitious program in the world.”

When it passed the California Senate on a mostly party-line vote in May, the world took notice. The New York Times set the tone: In a 2,100-word analysis headlined “Fighting Trump on Climate, California Becomes a Global Force,” it depicted the bill as a key part of California’s determination to take over the global lead in environmentalism from Washington.

But earlier this month, SB100 failed to even get a floor vote in the Assembly as lawmakers wrapped up business for the year. A Desert Sun report depicted the decision as “unexpected.”

That’s not how it looked to some insiders. Business groups spent months hammering home the argument that it was risky to commit to 100 percent renewable energy use when it was not clear that was either feasible or safe for a modern economy. In a June interview with the San Diego Union-Tribune, Gary Ackerman, executive director of the Western Power Trading Forum, depicted SB100 as “reckless” and with a huge downside. The arguments echoed those made by Pacific Gas & Electric, Edison and San Diego Gas & Electric, the state’s three giant investor-owner utilities, which quietly have established strong ties with Democratic lawmakers in poor districts buffeted by high energy costs.

IBEW adopted, modified utilities’ argument

Meanwhile, de León didn’t enjoy unified support on the Democratic front. An argument the utilities had been making – that SB100 was potentially a hugely disruptive force – was adopted and modified by some labor leaders. They worried what a 100 percent commitment to renewable energy might mean for thousands of union members. According to an NBC News report, the International Brotherhood of Electrical Workers, Local 1245, began opposing the bill in late summer because the local union alleged de León had gone back on his promise to protect union jobs.

But a third factor may also have been at play. De León has never enjoyed the broad goodwill accorded his predecessor, Darrell Steinberg, now the mayor of Sacramento. Soon after taking over as Senate leader in late 2014, de León was the target of a scathing column by then-Sacramento Bee pundit Dan Walters for mistakes, power plays and a lack of humility. He faced similar criticism from the Sacramento Bee’s editorial board.

De León has since emerged as a legislative powerhouse, at least according to the conventional wisdom that holds that the 2017 session was one of the most productive in recent history. But his clout couldn’t overcome the late-emerging opposition to SB100.

The lobbying will begin all over again for the measure in January, the Greentech website reported.

“We’re going to be back next year,” said Peter Miller, Western energy project director at the Natural Resources Defense Council, told the website. “I don’t want to underestimate the challenges to moving to a fully zero-carbon grid, but we can get there, and we will.”

In San Francisco, federal prosecutors are laying the groundwork for a criminal trial of Pacific Gas & Electric that will begin in March. In preliminary filings, prosecutors paint a scathing picture of PG&E negligence leading to the 2010 explosion of natural gas pipelines in San Bruno, which killed eight and wiped out a neighborhood.

How is that bad for the PUC? Because implicit in the federal allegations that 28 felonies were committed by PG&E is that the utility was not facing serious regulation before the catastrophe in San Bruno, a suburb south of San Francisco. Here is part of the San Jose Mercury News’s recent coverage:

“The government intends to offer proof that PG&E’s willful decisions not to maintain records, conduct proper pipeline assessments, and otherwise comply with federal pipeline safety regulations were part of a corporate culture of prioritizing profits over safety,” federal prosecutors wrote in papers filed on Nov. 2 with the U.S. District Court in San Francisco.

 

“The prosecutors in the trial are being very aggressive,” said Peter Henning, a professor of law with Wayne State University in Detroit. …

 

“They are trying to frame this case for a jury, and the government is attempting to frame this around a single word: greed,” Henning said.

 

PG&E faces a fine of up to $1.13 billion if convicted on the federal criminal charges.

‘Edison was driving the bus’

Meanwhile, in Southern California, politicians and consumer advocates have grown increasingly critical of the PUC-orchestrated, already-approved plan to have ratepayers cover 70 percent of the $4.7 billion cost to close the San Onofre nuclear plant and safely shutter its two reactors, whose 2011 malfunctions led to the release of small amounts of radiation.

Since the plan was approved in fall 2014, it’s been revealed that Peevey had never-disclosed meetings with Southern California Edison executives over how to apportion San Onofre closing costs, including a 2013 meeting in a Warsaw hotel room between Peevey and an Edison official. Edison owns 80 percent of San Onofre and San Diego Gas & Electric owns 20 percent.

But other questions have emerged about the PUC’s stewardship that go beyond the propriety of these undisclosed meetings.

The Los Angeles Times delved into the expert testimony that the PUC reviewed before approving the settlement and reported that one expert blamed Edison’s poor management for the problems with leaking steam generators which are used to cool the nuclear reactors and keep them safe to operate. The expert questioned the utility’s insistence on blaming Mitsubishi Heavy Industries, the branch of the Japanese conglomerate that made and installed the generators.

Arnie Gundersen, a nuclear engineer who served as an expert witness regarding the handling of San Onofre’s generators, said at a minimum both Edison and Mitsubishi are at fault.

 

“When I reviewed all the data it was clear to me that Southern California Edison was the one driving the bus,” Gundersen said.

 

“Mitsubishi wanted the contract and agreed to some very onerous terms in order to get it.”

 

Gundersen said the San Onofre case is similar to two incidents in Florida, where an agreement was reached over the closed Crystal River nuclear plant that led to billions in costs to consumers. In addition, he said, the St. Lucie nuclear plant had similar steam generator problems as San Onofre.

A KPBS report also alleged that Edison acted deceptively in its 2006 meeting with the Nuclear Regulatory Commission, never telling NRC officials of concerns about the steam generators that let Edison to complain to Mitsubishi in both 2004 and 2005. It appears the PUC was unaware that the utility’s concerns about steam generator problems dated to 2004.

‘The same people always get paid’ by PUC

A San Diego Union-Tribune analysis also raised questions about the PUC negotiations that led to the agreement assigning most of the shutdown costs to ratepayers.

The biggest beneficiary of a state program aimed at leveling the playing field between utilities and their customers is a Bay Area consumer group that privately negotiated the deal assigning customers 70 percent of the costs for the failure of the San Onofre nuclear plant.

 

The Utility Reform Network, or TURN, collects millions of dollars a year in so-called intervenor compensation – almost half of all the money handed out by the California Public Utilities Commission since 2013. …

 

TURN receives as much as 90 percent of its operating income from commission awards, so it’s highly dependent on regulators for its livelihood. Whether consciously or not, the group might allow that dependency to shape its advocacy, critics say.

 

“The public really doesn’t have anyone at the commission looking out for them,” said San Diego lawyer Michael Aguirre, who is suing to overturn the San Onofre settlement as an undue burden on utility customers. “They are being charged for advocacy that really is not being performed. The same people always get paid.”

Peevey is facing criminal investigations by both the state and federal government. His home in La Cañada Flintridge, a Los Angeles suburb, was searched by investigators in January.

The deal requires 70 percent of shutdown costs to be borne by ratepayers. It has drawn intense questions in the past year as evidence amassed of a you-scratch-my-back-I’ll-scratch-yours relationship between longtime California Public Utilities Commission President Michael Peevey and Edison, SDG&E and the state’s third investor-owned utility, Pacific Gas & Electric. Emails obtained from the PUC show Peevey frequently linking beneficial regulatory actions with the utilities taking actions he approved, including donating money to fight a 2010 initiative that would have scrapped AB32, the state’s landmark 2006 law forcing a shift to cleaner but costlier energy.

Peevey left the PUC board in December but has remained in the news ever since because of federal and state criminal investigations of his actions as the state’s top utility regulator. The most damning revelation came in February, when documents were discovered that showed the framework for the San Onofre bailout was established in an improper, never-disclosed 2013 meeting in a Warsaw, Poland, hotel room between Peevey and an Edison executive.

This meeting and other undisclosed communications between PUC officials and utility executives led Administrative Law Judge Melanie Darling last week to order a $16.7 million fine against Edison. The edict needs to be approved by the PUC — Darling works for the PUC, an example of the tidy way that regulators and utilities operate in California — but that is considered pro forma.

The fine is seen by some observers as a confirmation of the seriousness of the ethical failings on display in the Edison-PUC back-room relationship. It is certain to trigger fresh interest in the Legislature in adopting PUC reforms.

Six were approved in the most recent session, only to be vetoed three weeks ago by Gov. Jerry Brown on the grounds that they were an “unworkable” mish-mash of changes. The vetoes irked Assemblyman Anthony Rendon, the Lakewood Democrat who is slated to become speaker later this year and who has expressed extreme dismay over how the PUC has acted.

But the fine is considered irrelevant by the consumer advocates and trial lawyers who are the PUC’s loudest critics, given how much Edison will save because ratepayers will have to pay $3.3 billion of the $4.7 billion needed to safely shutter San Onofre.

Mike Aguirre, the former San Diego city attorney, suggested the administrative law judge’s recent hearings on Edison’s relationship with Peevey and the PUC were kabuki — a staged show to prop up the status quo.

“With one hand the CPUC is giving Edison $3.3 billion, with the other hand they’re taking back some extra change,” Aguirre told the Los Angeles Times. “This is all cosmetic.”

But the honeymoon could be over for millions of Southern California residents served by municipal utilities. Moody’s Investors Service warns they will be hard-hit by the state’s latest edict on increased use of renewable energy to supply electricity:

On Oct.. 7, Gov. Jerry Brown signed a bill requiring all California utilities to generate 50 percent of the electricity they sell to retail customers from renewable energy by 2030. The legislation will be credit negative for municipal utilities if ratepayers balk at higher prices that come with the transition to renewable energy from coal-fired generation.

 

Municipal electric utilities in Southern California would be particularly affected given their reliance on coal-fired generation. Coal-fired generation has historically supplied cities like Los Angeles and Anaheim with more than 40 percent of their electricity. In contrast, Northern California cities such as San Francisco and Sacramento derive all of their electricity from sources other than coal such as solar, hydroelectricity and natural gas.

 

The Los Angeles Department of Water and Power and other Southern California municipal utilities have thus far managed the shift to other sources from coal without major ratepayer protest, allowing them to increase rates and maintain a sound financial performance. But Los Angeles ratepayers are facing a likely 3.4 percent annual water and power rate increase over the next five years to help support the further transition to cleaner energy.

 

For utilities, the Clean Energy and Pollution Reduction Act of 2015 increases the percentage of electricity coming from renewable energy to 50 percent by 2030 up from the current 33 percent by 2020. We expect the utilities will meet the 33 percent requirement. However, ratepayer affordability and technical challenges will become increasingly difficult as utilities reach towards the more significant 50 percent renewable standard.

Infrastructure costs also likely to buffet ratepayers

Moody’s says another factor could also yield future rate shocks:

[Municipal] utilities will face another major challenge in whether the transmission grid can adequately handle the intermittent renewable resources that will begin to dominate California’s power supply mix. LADWP benefits from owning and operating its transmission system and has variable resources such as a pumped storage facility and gas-fired units to balance the system. The city of Anaheim recently added the Canyon natural gas fired unit and Southern California Public Power Authority financed the Magnolia unit in Burbank to help compensate for shortfalls in solar or wind energy. In the long term, the need to successfully integrate more renewables into the grid will likely require similar additional capital investment.

But while customers of the region’s two giant investor-owned utilities — Southern California Edison and San Diego Gas & Electric — won’t be as hard hit by the latest state edict, they will also pay unique bills in coming years not borne by customers of municipal utilities. Unless a California Public Utilities Commission decision is overturned, customers of the two utilities will pick up 70 percent of the $4.7 billion cost of shuttering the broken San Onofre nuclear power plant. SCE owns 80 percent of the plant, SDG&E 20 percent.

Brown said the six bills had several worthwhile ideas. “Unfortunately, taken together there are various technical and conflicting issues that make the over 50 proposed reforms unworkable. Some prudent prioritization is needed,” he wrote.

Sen. Mark Leno, D-San Francisco, and Sen. Ben Hueso, D-San Diego, who co-sponsored Senate Bill 660, the most sweeping reform measure, expressed disappointment and dismay. So did Assemblyman Anthony Rendon, the Lakewood Democrat who will take over as speaker in coming months.

The measures were intended to limit back-room dealings in which PUC officials and board members met surreptitiously with representatives of the state’s powerful investor-owned utilities. The most notorious example was a 2013 meeting in a Warsaw, Poland, hotel between then-PUC President Michael Peevey and a Southern California Edison executive at which the parameters were set for a later-approved deal in which ratepayers bore 70 percent of the $4.7 billion cost of the shutdown of the San Onofre nuclear plant. Southern California Edison is San Onofre’s majority owner and San Diego Gas & Electric is the minority owner. The meeting and its central role in the bailout approved by the PUC wasn’t disclosed until February of this year.

Ex-PUC president’s home searched by investigators

Peevey is the subject of state and federal criminal investigations over the San Onofre deal and other PUC decisions. He left the PUC under pressure in late 2014. Soon after, his La Canada Flintridge home was searched by investigators looking for evidence of improper relationships with the utilities he used to govern.

Within weeks after the raid, the PUC released emails that raised troubling questions about the cozy ties between Peevey and top officials at Pacific Gas & Electric, the giant Northern California utility. This is from a February CalWatchdog account:

Emails show Peevey pressured PG&E to give money to oppose Proposition 23, the failed 2010 ballot measure opposing AB32; appeared to link his support for rate hikes to PG&E actions on unrelated issues; and was open to PG&E efforts to influence inquiries into a San Pedro pipeline explosion that killed eight people. … He sought to prop up a project by the Hydrogen Energy California (HECA) firm by constantly reminding PG&E how much he had done for it.

The Brown administration promised to work with lawmakers on a more streamlined reform proposal in coming months. But in the meantime, as Hueso told the Union-Tribune, the PUC has “little incentive to work toward a culture of openness and accountability.”

The agency has been accused of being excruciatingly slow in releasing crucial documents, whether to criminal investigators, the Legislature or journalists. It also appears to be shrugging off growing calls to scrap the deal on how to cover the $4.7 billion cost of closing San Onofre.

Michael Aguirre, the San Diego attorney who led testimony against the San Onofre plan last fall, had the sharpest reaction to the governor’s decision. He told the Union-Tribune that “Jerry Brown’s vetoes show he is helping — not stopping– the dishonest practices known to the people of California.”

Brown chose aide to replace Peevey, not outsider

A previous decision by the governor already suggested he doesn’t share the prevailing view in Sacramento that the PUC is badly in need of a culture change. When Peevey was forced out in December of last year, Brown could have appointed an outside energy expert with a history of independence. Instead, he named PUC board member Michael Picker as president. Though Picker has only been on the board since January 2014, he is an energy establishment insider, working for Brown — and with the utilities  — from 2009 as a senior energy adviser until joining PUC management.

Despite continued criticism of PUC secretiveness, Picker’s selection as board president was ratified by the state Senate a month ago.

The Golden State’s struggle to keep the lights on in winter 2000-01 produced a political crisis for Gov. Gray Davis. His response was signing a long-term deal in March 2001 with out-of-state suppliers that committed the state to spend $43 billion for power at the rate of 8 cents per kilowatt hour. Economists instantly criticized the deal as unnecessarily costly and lengthy — an overreaction to unusual circumstances. This ended up proving conventional wisdom and was a contributing factor to the public anger with Davis that led to his October 2003 recall election.

In a few years time, will the conventional wisdom about another bold state energy policy — the huge long-term commitment to massive alternative-energy plants — be similarly negative? Given how rapidly the solar-energy picture is changing, it seems quite possible.

‘Obsolence’ for traditional electric utilities?

The world’s largest solar-power plant, the 550-megawatt Desert Sunlight project, opened in February near Joshua Tree National Park. Three even bigger projects have won approval from state regulators and are progressing toward completion, as well as several smaller plants.

But these industrial solar projects might not even be needed if the “distributed solar” boom, in which homes and businesses generate power with their own panels, continues. As the cost of photovoltaic panels comes down — they’re now 60 percent cheaper than in 2010 — reliance on utilities for electricity keeps dropping. And if Tesla’s promised breakthrough on home batteries to store surplus energy comes to pass, the basics of electricity will change in much of America. Utilities would face enormous problems paying off their long-term sunken costs.

Most of the coverage of utilities’ opposition to distributed solar has focused on their criticism of requirements that they buy surplus power from individual homes or businesses at favorable rates that don’t help utilities pay for the cost of maintaining their energy transmission grids.

But in March, The Washington Post obtained and reported on a private presentation made to the nation’s utility companies in 2012 by an executive for the Edison Electric Institute, the trade association representing all investor-owner electricity generators in the U.S. It depicted the problems posed by the rise of distributed solar power in much starker fashion:

Three years ago, the nation’s top utility executives gathered at a Colorado resort to hear warnings about a grave new threat to operators of America’s electric grid: not superstorms or cyberattacks, but rooftop solar panels.

 

If demand for residential solar continued to soar, traditional utilities could soon face serious problems, from “declining retail sales” and a “loss of customers” to “potential obsolescence,” according to a presentation prepared for the group. “Industry must prepare an action plan to address the challenges,” it said.

 

The warning, delivered to a private meeting of the utility industry’s main trade association, became a call to arms for electricity providers in nearly every corner of the nation. Three years later, the industry and its fossil-fuel supporters are waging a determined campaign to stop a home-solar insurgency that is rattling the boardrooms of the country’s government-regulated electric monopolies.

CA forced utilities to make costly investments

The Post article noted that utilities were making relatively little progress in encouraging state legislatures to obstruct rooftop solar’s rise but some progress in getting utility regulators to accept their agenda of self-preservation.

In California, however, rooftop-solar advocates are so powerful that it seems extremely unlikely that the Public Utilities Commission would impose fees and surtaxes on rooftop solar, as regulators have done in Arizona and Wisconsin.

On the other hand, the PUC has shown deep concern for helping investor-owned utilities keep a healthy bottom line. The shuttering of the San Onofre nuclear power is going to cost $4.7 billion. But PUC officials secretly negotiated a deal in which San Onofre’s majority owner (Edison International) and its minority owner (San Diego Gas & Electric) must only pay $1.4 billion — with the utilities’ ratepayers picking up the remaining $3.3 billion in coming years.

This has rankled ratepayers and watchdogs alike, since a case can be made that better management at San Onofre would have identified the problems with defective Mitsubishi steam generators at the plant that led to its closure.

The PUC could in coming years face similar questions of how to divvy up the multibillion-dollar costs of the construction of giant solar plants in the state’s southeast corner — if they are no longer needed to operate at full capacity, or at all.

That could be a thornier question for the PUC than San Onofre, however. Edison, SDG&E and Pacific Gas & Electric could say they committed to the massive solar plants under legal and political pressure because of laws like AB32 and ardently green governors like Arnold Schwarzenegger and Jerry Brown.

That pressure — and how it was applied with PUC dictates — could end up being another chapter in the yet-to-be-written biography of Michael Peevey, whose 2002-2014 stint as president of the commission ended in a maze of controversies over his close ties to utilities.