San Diego Union Tribune
June 16, 2018
By: Rob Nikolewski
As the director of the Climate and Energy Policy Program at the Woods Institute for the Environment at Stanford, Michael Wara wants to see the transportation system in California shift to electric vehicles (EVs) as quickly as possible.
But he thinks the California Public Utilities Commission (CPUC) made a mistake when it directed the state’s big three investor-owned utilities to develop and construct EV infrastructure projects to the tune of more than $775 million.
That the commitment comes when there is still uncertainty about how much financial responsibility utilities bear in the aftermath of deadly wildfires, such as the blazes that ripped through large areas of Northern and Southern California last fall, and what that could mean for ratepayers’ monthly power bills.
“I think we’re looking at really punishing rate increases for customers, associated with paying for that liability” that could run into the billions, Wara said.
A spokeswoman for the CPUC defended the unanimous vote cast May 31, saying the five commissioners cut the original EV proposals by $200 million and eliminated the ability of utilities to make a profit on some of the infrastructure investments.
“While there is clear risk of liability to utilities from wildfires, the scope of that liability and the impact to the companies is still uncertain,” the CPUC’s Director of News and Outreach, Terrie Prosper, said in an email to the Union-Tribune.
“The CPUC cannot stop moving forward with clean energy policy while we wait what could be multiple years before we know the range of financial impacts from the wildfires. Instead we need to move forward with sound clean energy policy and readjust those decisions if needed later based on future facts.”
Wara acknowledged the CPUC held dozens of hearings and public meetings in the run-up to its ruling but said it may have been prudent to hold off on all or some of the aspects of the EV projects for perhaps a year “until we’re much more clear about what’s going to happen, until there’s a plan.
“You don’t buy a house when there might be some other financial disaster coming your way,” Wara said.
What the CPUC passed
Considered the largest single investment by any state to promote electric vehicles, the CPUC-approved EV projects will be paid by ratepayers of San Diego Gas & Electric, Southern California Edison and PG&E.
- SDG&E’s portion — $137 million — will fund a program that will provide rebates for residential customers to install up to 60,00 charging stations at home.
- PG&E is allotted $258 million to install 234 fast-charging stations and support 6,500 medium- or heavy-duty EVs.
- Southern California Edison will install infrastructure to at least 870 sites for medium- or heavy-duty EVs for $343 million.
- Throw in $29.5 million to fund an evaluation of the programs’ progress and the entire package comes to $776.5 million.
According to CPUC estimates, the projects will add about $10 a year through 2023 to ratepayer bills. The commission said increases will be “very small” in the first few years.
The EV projects were created due to 2015’s Senate Bill 350 that calls for 50 percent of electricity in the state to come from renewable energy sources and a 40 percent reduction in greenhouse gas emissions by 2030.
“It’s really important to move forward as soon as possible and really start achieving some of the air quality and climate benefits I think that can occur from those (EV) programs,” said Larissa Koehler, senior attorney for the California Clean Energy team at the Environmental Defense Fund.
SB 350 called for the CPUC and utilities to accelerate “widespread transportation electrification” and is one of a host of measures, mandates and targets California policymakers have adopted in recent years to promote EVs and the attendant infrastructure projects — such as charging stations — associated with them.
The transportation sector accounts for the largest single source of greenhouse gas emissions in the state — about 35 to 40 percent.
Just over 410,000 EVs are on California’s roads, by far the largest number of any state but still a small portion of the 31 million cars and pickup trucks in California. Earlier this year, Gov. Jerry Brown issued an executive order calling on the state to increase the number of zero-emission vehicles to 5 million by 2030.
What do wildfires have to with all this?
Utilities across the country can be held liable for the costs of deadly wildfires — or other disasters — if it’s determined they have acted negligently or unreasonably.
But in California, utilities can also be liable if their equipment or facilities contributed to a wildfire, even if the companies followed accepted safety procedures.
That has called into question the long-term financial health of California utilities, as well as the prospect of much higher monthly bills as utilities pass on the associated costs to ratepayers.
Earlier this month, Cal Fire concluded that wind-driven wildfires in Northern California last fall that killed 46 people were sparked by power lines owned by Pacific Gas & Electric.
“If PG&E were liable for the insured losses associated with the Napa-Sonoma firestorm and you put that in rates over a three-year period, you’re looking at an increase of $40 a month,” Wara said. “If you do it over 10 (years) and finance it, it’s more like $15 a month. These are the kinds of rate increases that no one has really experienced in recent memory — and that’s just from last year.”
PG&E stock has taken a huge hit. Before the Northern California wildfires last fall, it was trading at $70 a share. In February it dropped to $38. On Friday, the stock closed at $40.20.
Wara’s concerns are hardly isolated.
Ralph Cavanagh, co-director of the Energy Program at the environmental group Natural Resources Defense Council, said clean energy programs California utilities are putting in place will be in jeopardy if power companies go broke.
Cavanagh’s solution? Get rid of the existing liability doctrine and adopt a “reasonableness” rule that would align California with other states.
Last month, Cavanagh was one of six people with environmental, energy and business backgrounds who sent a letter to Brown and leaders in the Legislature urging them to “re-examine and reform our unique and unworkable wildfire liability doctrines” before the legislative session wraps up at the end of August.
“If we fix it, I’m confident that California’s utilities will be able to continue to be the critical clean energy partners that they’ve always been,” Cavanagh said in a telephone interview.
But power companies are hardly an object of pity in the eyes of many customers.
PG&E, for example, operated a natural gas pipeline in San Bruno that exploded in 2010 that killed eight people.
SDG&E lost in a unanimous vote before the CPUC last year when it requested ratepayers pick up the tab for $379 million in costs associated with deadly wildfires that scorched the area in 2007.
Southern California Edison operates the San Onofre Nuclear Generating Station, which shut down prematurely in 2012 following a leak in a steam generator tube.
“The investor-owned utilities are responsible, as far as they’re concerned, only to their shareholders and are driven by the bottom line,” said April Maurath Sommer, executive director of the Protect Our Communities Foundation, an environmental group based in San Diego County. “They’ve made really poor, negligent business decisions to not maintain the safety of their systems. That’s something they need to deal with as private companies.”
Maurath Sommer said a legislative fix is not needed because the CPUC already has the ability to conduct reviews determining if utilities acted reasonably during wildfires. She pointed to the commission’s investigation of the 2007 San Diego wildfires that included reports from Cal Fire, the California Department of Forestry and others.
A legislative change, Maurath Sommer said, “completely de-incentivizes the utilities to take all the measures necessary and to be innovative and pro-active public safety.”
”This is not letting utilities off the hook,” Wara said. “It’s saying, if they’re negligent they should pay. But if they weren’t, then they shouldn’t.”
But while Cavanagh agrees with Wara that changes need to be made, he disagrees with the Stanford researcher’s critique that the CPUC should have put the $776.5 million EV projects on hold.
“By that logic,” Cavanagh said, “you would suspend all of the critical functions that utilities undertake.”
Jimmy O’Dea, vehicles analyst for the Union of Concerned Scientists, said the CPUC made the right call.
“Utilities are facing challenges from many angles and the question of liability is an important one,” O’Dea said. “But we can’t afford to put these investments on hold … Delaying the start of those (EV) infrastructure deployments only makes the challenge of the 2030 (climate) goals more difficult to reach.”
Wara said finding a solution is complicated. He’d also like to see changes in insurance for homes in high-risk fire zones and find better ways to prod homeowners to clear brush and create defensive spaces.
“Right now, climate policy is a luxury good; energy access is a necessity. And we have had the benefit of being able to purchase a lot of that luxury good over the past 10 years,” by the state passing and implementing clean-energy legislation and mandates, Wara said. “But this is a crisis that fundamentally threatens that model.”
There are more EV projects coming.
The three investor-owned utilities are currently working on another round of proposals. SDG&E officials say their next request will focus on building charging infrastructure for about 3,000 medium/heavy-duty vehicles.
The CPUC is also reviewing applications for nine other EV investment projects that smaller, multi-jurisdictional utilities have proposed under SB 350.