Thanks to the refusal of Sacramento and Washington allowing the clearing of brush and dead trees, we have had historically large forest fires. Most of them could have been avoided if proper forest management, not ideological rantings were done. Now, to make matters worse whether you live in Lassen County or South Central Los Angeles, your electricity bill is going up with a “surcharge”.
“Beginning last October the state’s three largest investor-owned utilities – Pacific Gas & Electric (PG&E), Southern California Edison (SCE) and San Diego Gas & Electric (SDGE) began collecting a surcharge on monthly electric bills to help finance the California Wildfire Fund.
These surcharges will augment the $7.8 billion already contributed by the three utility companies. At first surcharge revenues will be used to repay a $2 billion state loan that financed the ratepayers’ initial contribution to the Fund. Ultimately they will be combined with annual contributions from the utilities to fill a $21 billion pool of money available to help pay damage claims for wildfires caused by the electric companies in 2019 and future years.
Bad policy caused the fires and now the new TAX on electricity. Any wonder folks are fleeing California, they cannot afford the mistakes and corruption of government.
New Surcharge On Most CA Bills: Giving Electric Utilities A Hand
Customer surcharge will help pay for future wildfire damage claims
Bob Porterfield, Patch Staff. 1/4/21
CALIFORNIA — Wildfires have become a way of life in California, relentlessly ravaging lives and communities. But millions of electric utility customers will continue to be reminded of their potential for more destruction – every month for at least the next 15 years.
Beginning last October the state’s three largest investor-owned utilities – Pacific Gas & Electric (PG&E), Southern California Edison (SCE) and San Diego Gas & Electric (SDGE) began collecting a surcharge on monthly electric bills to help finance the California Wildfire Fund.
These surcharges will augment the $7.8 billion already contributed by the three utility companies. At first surcharge revenues will be used to repay a $2 billion state loan that financed the ratepayers’ initial contribution to the Fund. Ultimately they will be combined with annual contributions from the utilities to fill a $21 billion pool of money available to help pay damage claims for wildfires caused by the electric companies in 2019 and future years.
Currently the surcharge is slightly more than one-half-of-one-cent per kilowatt hour of electricity usage. A residential customer using 400 kilowatt hours of electricity per month, for example, would pay $2.32. The exact amount will be identified as a line item on every customer’s bill and the rate can be adjusted annually by the California Public Utilities Commission.
Residential customers participating in low income programs or those who depend upon electricity for medical needs are exempt from the surcharge.
The Wildfire Fund is separate and distinct from the PG&E Fire Victim Trust created as part of utility’s 2019 bankruptcy. A $13.5 billion pot of money funded with cash and PG&E stock, the Trust will be used solely to settle claims by thousands of victims of the catastrophic 2015 Butte Fire in Amador County, the 2017 North Bay-Wine Country Fires and the 2018 Camp Fire that incinerated the Town of Paradise in Butte County. Although the Victim Trust opened for business and began processing claims last July 1, reports filed with the bankruptcy court indicated it took three months to establish operational procedures at a cost of $12.4 million in professional fees and expenses.
How it Works
Created by the legislature in 2019, the Wildfire Fund is designed to pay for a portion of the damage claims arising from wildfires determined to have been caused by faulty utility equipment, lack of powerline maintenance or other negligent acts by the state’s three largest electric companies.
The surcharge will be collected by the utilities as agents for the Department of Water Resources (DWR) which operates the State Water Project and is the largest consumer of electricity in California – power needed to operate pumping plants that distribute water throughout the state – and itself a major producer of electricity.
In the wake of California’s disastrous experiment with energy deregulation 20 years ago, in 2001 DWR was ordered to begin buying electricity for PG&E, SCE and SDGE using revenue bonds to pay for the purchases. At the time, all three utilities were on the verge of bankruptcy – with PG&E Corp.’s utility subsidiary, Pacific Gas & Electric Co., actually filing bankruptcy in April.
In establishing the Fund lawmakers authorized DWR to issue a maximum of $10.5 billion in revenue bonds to guarantee the Fund’s viability.
Along with the utilities’ initial Wildfire Fund contribution customers were expected to pony up an additional $2 billion as their share – money provided by the state with a loan from the Surplus Money Investment Fund (SMIF), an account holding money in the state treasury not necessary for immediate use. This loan is being repaid with customer surcharge revenue.
Surcharge revenues will take a circuitous path from customer pocketbooks to ultimate distribution in paying damage claims from future wildfire victims. Once collected from customers the revenue will be paid into a special DWR fund and then transferred to the actual Wildfire Fund administered by the California Earthquake Authority (CEA).
Under terms of individual servicing agreements with DWR, the utilities will be reimbursed for the cost of modifying their billing systems to accommodate surcharge collection and receive annual fees ranging from $50,000 to $250,000, possibly more, for providing the service.
On December 31 the Wildfire Fund contained $10 billion in cash — $8 billion contributed by the utilities and $2 billion from the surplus money fund loan. Continuing revenues will be generated from combined annual payments of $300 million by the utility companies for 10 years and customer surcharge payments totaling $902.4 million each year for the next 15 years.
Sarah Sol, a CEA spokesperson, told Patch the Authority’s role as administrator of the Fund was not to directly pay or otherwise interact with future wildfire claimants.
“Wildfire claimants will continue to work directly with their insurance companies and/or the [utility] that was found to be the cause of the wildfire to settle claims,” she said. “The role of the Fund is to reimburse [utilities] for payments they make to wildfire claimants that meet specified criteria.”
Under these guidelines a covered wildfire is one that occurs after July 12, 2019 where a government agency has found a utility’s equipment or service to be the cause. In any single year the utility itself will be responsible for paying claims up to $1 billion, or the limits of its own insurance coverage if greater. Once claim payments have exceeded a utility’s insurance coverage, verified eligible claims will be paid by the Fund.
If necessary, CEA will decide whether to have DWR issue bonds based upon claims obligations and other factors.
According to CEA, wildfires that occurred during the 2019 wildfire season, and so far during the 2020 wildfire season, have not yet resulted in a level of claims sufficient for payment from the fund.
“However, CEA will not be able to make a final determination of whether there will be claims on the Fund until well after the end of this wildfire season,” Sol said. CEA is currently in the process of establishing policies for administering claims.
Keeping Utilities Healthy
The legislative philosophy in providing this partial utility bailout for future wildfire liability was simple: Financially healthy investor-owned utilities are necessary to provide a critical public service. Utilities strapped with billions in damage claims aren’t attractive investments, especially when their ability to pay stock dividends is impaired or eliminated altogether.
Where all three utilities are concerned these dividends have been substantial and highly attractive to investors.
Since 2015 SDG&E, a wholly-owned subsidiary of Sempra Energy, has paid its parent company $1.4 billion in stock dividends and Sempra, which also owns Southern California Gas Company, has in turn paid $3.9 billion in dividends to its common stockholders. During the same period, SCE, a wholly-owned subsidiary of Edison International, paid its parent company $4.2 billion in dividends with the parent company passing along $3.95 billion to its own shareholders.
By comparison, from 2015 through September 2017 when payments were suspended, Pacific Gas & Electric passed along dividends of $2.4 billion to its holding company, PG&E Corp. The parent company then paid its stockholders $2.7 billion with $1 billion of that being distributed during the first nine months of 2017 before dividends stopped when the magnitude of wildfire damage claims became apparent and ultimately sent both the utility and its parent to bankruptcy court.
Over the course of 14 years since the utility emerged from its first bankruptcy in 2004, the holding company has paid $8.9 billion in dividends. According to projections submitted during bankruptcy proceedings, PG&E Corp. indicated it expected to resume paying dividends in 2022.
Advantageous Timing
The Wildfire Fund couldn’t have been created at a more opportune time, especially for PG&E, a convicted corporate felon and serial firebug who pled guilty last year to 84 counts of manslaughter in state court resulting from the 2018 Camp Fire and in 2016 was convicted in federal court on six felony counts in connection with a 2010 gas pipeline explosion in San Bruno that killed eight people.
Back in 1997 the utility was convicted in Nevada County on 739 counts of criminal negligence in connection with a 1994 fire caused by the lack of proper tree-trimming around powerlines.
And it appears PG&E’s recidivism hasn’t abated.
Already the utility was found to have caused the 2019 Kincade wildfire that burned nearly 78,000 acres in Sonoma County and preliminary evidence suggests at least three other wildfires during the 2020 season may have been caused by faulty PG&E and SCE equipment. If the two utilities are ultimately determined to be responsible, part of those damage claims could potentially be paid from the Fund. However, because PG&E was still in bankruptcy at the time of the 2019 Kincade fire, the Wildfire Fund’s obligation is limited to 40% of any eligible damage claims.
Still on probation for felony convictions related to the San Bruno gas pipeline explosion, last week Federal Judge William Alsup ordered PG&E to appear in his court February 3 to argue why additional probation conditions shouldn’t be imposed for the utility’s continuing failure to perform acceptable vegetation management that contributes to the controversial Public Safety Power Shutoffs (PSPS).
Alsup’s order said he recognized PSPS events were “necessary because PG&E has failed to clear hazardous trees and limbs” but “caused huge disruptions for the public” because businesses suffer and residents who use medical devices go without electricity.
“It’s most confounding that PG&E, in deciding which distribution lines to de-energize in a PSPS, ignored (and still ignores) the number-one cause of wildfires ignited by PG&E: hazardous trees and limbs that should have, by law, been removed but which still loom as threats in windstorms,” Alsup said. “There can be no debate about the dangers of dead, dying, and untrimmed trees near live distribution lines.”
Stable Finances
In assessing the utilities’ all-important credit ratings – the benchmark for Wall Street investors – Moody’s, a major rating agency, focused much attention on wildfire liability, giving San Diego Gas & Electric a ‘positive’ rating in part because the utility served a smaller area and had implemented effective wildfire prevention programs. Wildfire liabilities also played a part in Moody’s attaching a lower “stable” rating to SoCal Edison, noting the utility would likely have to borrow $4 billion to help pay existing damage claims in the neighborhood of $6 billion.
A question mark was PG&E. In assigning the utility a stable rating Moody’s cautioned: “Only time will tell. PG&E continues to invest significantly on wildfire mitigation, including system hardening, enhanced inspections and vegetation management, and has a plan to regionalize its operations to increase its focus on local communities. The company is endeavoring to develop an effective wildfire mitigation program through the establishment of a fire hardened electric system that is rigorously inspected and maintained.”
For PG&E customers, however, the monthly Wildfire Fund assessment won’t be the only price they pay for years of the utility’s lackadaisical approach to equipment and powerline maintenance.
Last month the California Public Utilities Commission approved a PG&E rate hike effective March 1 that will increase residential electric bills by 8% — money the utility says it needs to upgrade and maintain aging equipment that’s been blamed for causing many major wildfires during the past five years. The increased rates, specifically earmarked for that purpose, will add between $13 and $14 to monthly bills in addition to the Wildfire Fund surcharge.
In a statement PG&E said revenue generated from the increased rates will help fund a series of important improvements that include adding “new and enhanced safety measures, increase vegetation management and harden our electric system to increase resilience and help further reduce wildfire risk.”
