State seeks role in PG&E repairs
PUC sees lack of oversight in big project spending
Pacific Gas and Electric Co. spends hundreds of millions of dollars each year repairing and upgrading its electricity transmission system without any government agency screening the projects in advance to see if they’re needed.
Now, California utility regulators want to change that.
The California Public Utilities Commission, joined by San Francisco city officials, filed a complaint with the federal government in February arguing that such projects should face some form of statelevel review, particularly considering the amount of money involved.
By the commission’s estimate, PG&E will spend $1.5 billion from the start of 2016 through the end of this year on transmission projects selected solely by the utility’s own executives, without outside approval. That’s equivalent to about $139 per year per PG&E customer, including both businesses and homeowners, though the amount on actual bills would vary.
“We’ve got to look at all of this and be more involved,” said Traci Bone, an attorney for the utilities commission. “Are they gold-plating the system? Are they doing the right things at the right time?”
Friday’s blackout in San Francisco, with 88,000 PG&E customers losing power after a substation fire, focused attention yet again on the company’s maintenance of its vast networks that deliver electricity and natural gas. The utility, California’s largest, was in the midst of upgrading that substation’s aging equipment.
The complaint filed by the
commission, however, focuses on repairs and upgrades to PG&E’s high-voltage transmission network, not on the work at the Larkin substation at the heart of Friday’s outage. Transmission lines and related infrastructure — think of the tall metal towers paralleling Interstate 5 through the Central Valley — have a different system of government approval than neighborhood lines and stations.
PG&E argues that transmission repair, replacement and upgrade projects don’t need more oversight. According to the company, utilities should have the ability to plan and prioritize projects that maintain the grid but don’t expand it, as a new transmission line would.
“The complaint is about replacing aging infrastructure at the end of its life cycle or replacing equipment damaged in storms or other emergencies,” said PG&E spokeswoman Nicole Liebelt. “We believe the current regulations enable PG&E and other energy companies to have the flexibility needed to provide safe and reliable transmission service.”
In general, California’s investor-owned utilities need PUC approval to build anything expensive and pass those costs on to their customers. The commission then bakes those expenses into the electricity and natural gas rates that customers pay.
Electricity transmission projects, however, work differently.
The California Independent System Operator, which manages most of the state’s electrical grid, determines whether or not new transmission lines and stations are needed to meet the grid’s future demands. Utilities and other companies can then pitch projects that will meet the needs spelled out by the ISO. The utilities commission will also get involved with some of the more controversial projects.
The Federal Energy Regulatory Commission, meanwhile, sets the transmission rates that utility companies charge their customers.
Upgrades to transmission infrastructure fall into a hole, however — they don’t need to have the utilities commission and the ISO sign off on them, and FERC will look at them, after the fact.
Bone said her agency doesn’t know how much PG&E’s transmission repair and upgrade work adds to a typical customer’s monthly bill. (Customers of public power programs like CleanPowerSF and Marin Clean Energy, which buy electricity on behalf of residents of a particular area, also pay a transmission charge to PG&E.) But her office has noticed that PG&E has been steadily seeking more money when it asks FERC to set transmission rates.
In 2016, the utility wanted to collect $1.5 billion from its customers to cover its transmission costs, for projects planned with the Independent System Operator as well as those that don’t receive outside review. That’s up from the $1.2 billion federal regulators approved for the previous year, according to the California commission. Instead, FERC approved collecting $1.3 billion for 2016. (PG&E in 2016 collected $17.7 billion from all of its operations and made a $1.4 billion profit.)
“We were seeing PG&E spending a billion dollars a year on capital investment, but they’re not building any big transmission lines,” Bone said. “We were wondering what was going on.”
PG&E’s transmission rates have risen more than 9 percent on average over the company’s last 11 rate requests, according to the February complaint. And yet, according to the commission, PG&E documents show that only 40 percent of the utility’s capital expenditures on transmission in 2016 and 2017 will go to projects planned with the California Independent System Operator.
The rest of the capital expenditures — 60 percent — goes to projects approved internally by PG&E.
FERC does play an oversight role on all transmission spending. But for these projects, it comes after the fact.
PG&E must detail its repair, replacement or upgrade projects when it requests a new transmission rate for its customers. Even outside of formal rate requests, the federal regulators also will subject transmission projects to periodic audits, said FERC spokesman Craig Cano.
“The short answer is no: on a day-to-day basis, the commission would not vet repair, upgrade, replacement-type projects,” he said. “Were they to come in for a rate update, that would be subject to a deeper drill-down.”
The California PUC argues that federal regulations already require transmission planning to include stakeholder input. The commission wants FERC to order that PG&E open up its transmission planning process to state-level review, perhaps through the Independent System Operator.
PG&E maintains that it follows all applicable regulations.
“It’s a lot of ratepayer dollars without any engagement, without any discussion with the ratepayers,” said Charles Sheehan, spokesman for the San Francisco Public Utilities Commission, which joined the state commission’s complaint to FERC. His commission runs San Francisco’s CleanPowerSF program.