PG&E is the largest utility company in the country, serving more than 16 million people in California from Eureka to Bakersfield and the coast to the Sierra.
If you’re a PG&E customer, a decision this week by the California Public Utilities Commission could have an impact on your monthly energy bills and your overall bottom line.
On Thursday, commissioners are expected to vote on a proposal by PG&E that could raise rates in the double digits. The numbers keep fluctuating, but PG&E initially asked for a 25% increase over four years to help pay for wildfire safety improvements that include undergrounding power lines.
But ratepayer advocates argue that’s on top of PG&E increases over the past three years, which outpaced the rate of inflation. State regulators have come back with proposals that are about half of what PG&E is proposing, running from 10-15% in increases.
If approved, the changes will take effect Jan. 1.
Meredith Fowlie, a UC Berkeley professor and economist, spoke with CapRadio Insight Host Vicki Gonzalez about what exactly PG&E is asking for and why the utility keeps coming back to ratepayers.
This interview has been edited for length and clarity.
Interview Highlights
What is expected to happen on Thursday when the CPUC meets?
PG&E rates are high and rising and increasingly out of alignment with the rest of the country. So if you're a PG&E customer like I am, you've seen an increase of about 35-40% over the past three or four years. What we're approaching here is a PUC decision that will determine how much more. The question is not whether rates will continue to rise. It's to what extent they will continue to rise over the next four years.
And so the PUC has a really important job. They have to oversee this regulated utility, look at the cost projections that PG&E is putting in front of them, determine whether they're prudent and reasonable and then approve them. And then if approved, where do those cost increases or revenue increases come from? They come from customers. So customers like me will need to pay higher bills.
As we think about these proposed rate increases, I do think it's important to keep two things in mind. First, power sector investment costs have to go up if we want a safe, reliable, sustainable power system. That's just a fact that we have to sort of make peace with. But second, how we choose to pay for these investments is going to significantly determine how efficiently we decarbonize, adapt to climate change and who's going to pay.
The upshot is, in my view, power sector costs have to rise significantly. We can't do anything about that. But what we can do something about is cost containment, how much they're going to go up, and cost allocation, who pays?
What exactly does that mean to someone who's a PG&E customer and why they potentially may have to shoulder a higher monthly bill?
I think there’s probably three reasons why costs need to go up if we want the power system I think we want. We want to decarbonize. We want to reduce our greenhouse gas emissions and one of the most promising ways to do that is to electrify, to convince Californians to stop heating with natural gas, start heating with electricity, to stop driving cars that need gasoline, switch to electricity. So that means electricity demand is going to rise for good reason.
But that means we need an updated, upgraded, bigger system, right? We need to replace fossil fuel generation with renewable energy generation. And then in addition, we need to expand the capacity: more distribution, more transmission infrastructure, if we want more households and firms to increase their electricity consumption. At the same time, we want a reliable system, right? If I'm going to convince you to buy an electric car, you're going to want to know that the electricity is there when you want to charge it.
Reliability is getting more challenging in the face of climate change. Anyone who lives in California remembers the catastrophic wildfire seasons. If we want a safe, reliable system in the face of escalating wildfire risk, that's going to cost billions of dollars to design a system that can safely and reliably operate. And if those two challenges weren't enough, at the same time, we've got high interest rates and supply chain challenges. So that's driving up the capital cost of new infrastructure. So [there’s] sort of three challenges at once, that means that it's just going to cost more.
What are utilities facing when it comes to wildfire risk?
I think it's important to mention the primary driver of the rate increase we’re deliberating over today is wildfire risk mitigation. So it's a huge part of the projected increases going forward.
I think everyone in California agrees that PG&E should be focused on and invest in reducing wildfire risk. I think where parties disagree is the how and how much. PG&E has put forward one proposal. Then we have two alternative proposals that are coming out of the PUC. In my view, the PUC commissioners are asking really important questions about what's the just and reasonable set of wildfire mitigation activities going forward.
PG&E is really leaning on undergrounding power lines. Its long-term plan is 10,000 miles of undergrounded power lines. And to put that in perspective, this year we've done 197 this calendar year. Those are many miles and it's expensive, right? So the PG&E estimates in terms of costs per mile about $3 million per mile. You do the math and we're talking billions of dollars. I think PUC is arguing that this is the way to eliminate wildfire risk from utility caused ignitions.
And I think other parties are asking, is that the prudent way forward given how much it costs to underground? We have other options on the table, other ways that we can reduce risk, perhaps not eliminate risk. And I understand especially for someone like you, living in a high wildfire area, the inclination is to drive ignition risk to zero, but that costs billions of dollars. And so I think important questions are being asked as to just how far we go to eliminating the risk and what the cost will be.
