USA TODAY International Edition
Utilities overspend by billions, upping bills
$8 billion in savings in five years could be achieved if transmission projects opened to competition
Electric utilities across the USA are overspending by billions as they’ve ramped up spending on aging transmission lines and other equipment, recent reviews show, with no competition and no upfront scrutiny in many cases.
That means higher electric bills for customers forced to pay off the costs, critics charge.
And lives could be saved, as well as dollars, experts add, if rather than merely replacing hulking, out-of-date equipment, innovative technology was installed in wildfire-prone areas, for instance.
“Big picture: You can save lots of money potentially by having these technologies included,” said Jon Wellinghoff, former chairman of the Federal Energy Regulatory Commission. “And potentially yes ... you could save lives.”
About $8 billion in savings in five years could be achieved if just a third of all major transmission projects across the nation were opened up to competition, according to a report by the Brattle Group, a global consulting firm that analyzed FERC and regional data from 2013 through 2017.
Just two percent of all projects went through a competitive process, they found.
Projects handled by the large utilities escalated costs by 34 percent on average over original estimates.
Winning bids by independent companies, when allowed, averaged 40 percent below estimates.
Nearly half of the projects did not undergo public review or planning approvals.
In an interview with USA TODAY, current FERC chairman Neil Chatterjee acknowledged the problem and said fixing it was “a priority” for his agency, among others.
“Competition brings more cost discipline,” said Chatterjee. “It can also lead to more creative financing, promote more technologically advanced solutions and lead to new participants.”
But he added, “It’s a complex system and we don’t want to throw out the baby with the bathwater.
“We owe it to consumers to think creatively and get it right.”
The report found U.S. transmission investments have stabilized at about $20 billion per year for the last five years, after rising steadily from $2 billion a year in the 1990s.
The growth largely occurred not because of the need for vast, new capacity, but to replace aging infrastructure.
That issue has dogged the northern California utility, Pacific Gas and Electric Co., in particular.
It faces criminal investigations and lawsuits following a string of wildfires sparked by its equipment. PG&E, California’s largest power provider, has filed for bankruptcy protection in the face of billions in potential insurance claims.
The utility already spent more than $5 billion on “self-approved” capital additions from 2007 to 2017, according to a presentation by a California Public Utilities Commission attorney at a U.S. Department of Energy workshop on transmission issues in November.
It is projected to spend $3.2 billion in the next five years on the projects.
“PG&E is spending over $2 million/ day on these projects,” according to a slide from the presentation.
“As the Brattle Study shows, it’s a national problem.”
A PG&E spokesperson declined to comment on the reports.
A coalition of northern California nonprofit power providers last week told state regulators that in light of PG&E’s “deplorable safety record,” the utility should get out of the business of providing electricity at the retail level, and focus on the “wires” side, fixing its transmission lines and poles that have sparked blazes.
PG&E said in its own brief that it “supports consideration” of the idea, though it would be challenging.
Company attorneys noted that unlike municipal utilities, PG&E and other investor-owned utilities are allowed to make a “return on equity” profit, which they claim is a strong incentive to boost safety.