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PG&E electricity rates could double after more wildfires, report says

By: J.D. Morris |

If California wildfires continue to be as devastating as they have been the past two years, millions of customers’ electric rates could skyrocket 50% and threaten the state’s ability to execute some of its top clean energy initiatives, according to a new analysis prepared for Gov. Gavin Newsom.

The sharp rate rise would be worse for Pacific Gas and Electric Co. customers, whose bills could double in just one year, said Steven Weissman, an emeritus lecturer at UC Berkeley’s Goldman School of Public Policy, in a Wednesday memo to a Newsom administration official.

Weissman, who previously worked for decades at the California Public Utilities Commission, said the massive rate increases would inhibit the state’s ability to get more electric cars on the road and phase out natural gas use in buildings. Both efforts are central to California’s broader ambitions to fight climate change.

“I’m not saying that anything is impossible,” Weissman told The Chronicle. “What I’m saying is that, if the expectation is that, on an ongoing basis, ratepayers are going to be covering the costs of these wildfires if they’re triggered by utilities, that is going to make it far more challenging to try to accomplish a significant conversion from using fossil fuels to using electricity.”

The analysis in Weissman’s memo, sent to Newsom’s Cabinet Secretary Ana Matosantos, marks one of the most specific and alarming estimates yet of how the state’s worsening wildfire crisis could impact the wallets of millions of utility customers. It also shows how the impacts of successive massive infernos linked to power lines extend into other areas, slowing public policy progress and threatening the viability of job centers such as Silicon Valley.

In response to the analysis, PG&E spokeswoman Lynsey Paulo said the company remains committed to supporting people in its service area affected by recent disasters.

“It is clear that more needs to be done to adapt and address the threat of extreme weather and wildfires,” she said. “We welcome this constructive dialogue and are open to a range of solutions that will make the energy system safer and safeguard California’s clean energy future.”

Mark Toney, the executive director of The Utility Reform Network, said Weissman’s analysis further shows the need for a new statewide wildfire insurance fund that would effectively make liability costs a kind of premium.

“Ratepayer money really needs to go into preventing wildfires, not paying for them after the fact,” Toney said.

In its own recent letter to the governor, TURN estimated that PG&E’s residential utility bills could rise by an average of $300 annually if the utility’s estimated $30 billion liability for the past two years of wildfires pans out and is imposed on customers.

State regulators are currently working on the process PG&E will follow to eventually pass 2017 wildfire costs on to customers. State investigators found PG&E sparked a series of 2017 fires but have yet to announce the cause of the 2018 Camp Fire, the deadliest and most destructive in state history, though the utility has admitted its equipment will likely be held responsible for that one, too.

California wants to dramatically curb its greenhouse gases across the board, an endeavor that would require a major expansion of electricity use in the two largest sources of planet-warming emissions: cars and buildings.

While electric car costs are currently declining as the market for them grows, a spike in electricity costs would hamper the cost savings drivers could achieve by quitting gas, Weissman’s memo said.

The growing support in California for transitioning buildings off natural gas in water and space heaters would be similarly threatened, the analysis said. Electric heaters are becoming more affordable and offering “significant performance benefits for consumers” — but those benefits would be negated if electricity gets too expensive, according to Weissman.

Businesses could also leave the state, he warned.

Silicon Valley needs “power for headquarter operations, call centers and server farms,” Weissman’s memo said. “If California cannot offer reliable and affordable power, we risk losing our innovation economy to other states.”

No matter how electricity rates change, residents will probably experience more frequent planned power outages during dangerous fire weather, he said, and customer protests of higher rates could pressure utilities to cut costs elsewhere. That, in turn, could make the outages worse, according to Weissman.

The memo also looked at how a regulated California utility might try to finance successive multibillion-dollar wildfire liabilities on its own and concluded that, while a utility can use rates to pay off bonds, “it can stretch this option only so far.”

“Continuing to borrow large sums of money for this purpose is not sustainable,” Weissman determined.

Weissman said he prepared the memo at the request of Newsom’s office.

Newsom gave a “strike team” of advisers two months from his Feb. 12 State of the State address to give him a report in response to the wildfire-driven bankruptcy of PG&E and the recent credit rating downgrades of the other two major investor-owned utilities, Southern California Edison and San Diego Gas & Electric.

Weissman is not part of the strike team but was one of the experts consulted as part of its work, according to the governor’s office.