Customers Keep Paying For Utility Blunders
Posted Oct. 27, 2012, 11:00 pm
Tom Elias / Mirror Columnist
When a car company blunders by installing, say, a power window switch that might catch fire, it issues a recall and fixes – for free – as many as 2.5 million cars. Toyota issued precisely such a recall notice this fall, the company paying heavily for its mistake.
But when a utility company sees one of its gas pipelines blow up, killing eight and putting many more residents in a dense San Francisco suburb out of their homes, it seeks to have its customers pay for most of the fix that must follow. Pacific Gas & Electric Co. is trying that right now.
Similarly, when other utilities see their nuclear power plant shuttered for most of a year because of a flawed part and a small radiation leak, with little chance of restarting anytime soon, they expect customers to keep right on paying as if nothing happened.
That’s what Southern California Edison Co. and San Diego Gas & Electric Co. have done since their San Onofre generating station shut down last Jan. 31, with customers paying $54 million a month, or $28 so far per person their vast service areas. That’s $28 per person, not per customer household.
The good news is that besides federal authorities that supposedly assure utility safety, a state commission regulates rates. The Public Utilities Commission (PUC) can quickly halt any plans big California utilities have to keep soaking their customers, to keep profiting from their own dangerous, sometimes disastrous mistakes. Now, after Edison and SDG&E kept soaking the customers for the more than nine months since the San Onofre shut down, the PUC at last will take a look. It will soon “investigate,” with customers continuing to pay while that probe goes on.
Butthe PUC has been anything but a consumer watchdog under its current president, Michael Peevey – first appointed by ex-Gov. Gray Davis, reappointed by ex-Gov. Arnold Schwarzenegger and kept on as president by current Gov. Jerry Brown. Peevey is a former president of SoCal Edison. You’re dreaming if you expect him to recuse himself from cases involving his old firm.
Under Peevey, the PUC has been a steadfast lapdog for utilities. This involves not only rates, but also approvals for huge solar thermal power plants now under construction in California deserts that require massive investments in hundreds of miles of new power transmission lines. Those billions will be added to the “rate base” of each utility company, meaning they not only get repaid by customers for their investments, but are assured of a “reasonable rate of return” on those investments for the next 20 years.
That means billions in guaranteed profits even if the solar plants don’t produce nearly what’s planned. Billions that would not accrue to them if the PUC instead encouraged putting solar photovoltaic panels on most buildings in the cities they serve. The electric output would likely be the same, but the cost for transmission lines would be next to nothing.
Is it any wonder the big utilities love big solar plants, even when they don’t own them?
Similarly, PG&E wants to profit from whatever it spends on fixing its hundreds of miles of gas transmission pipelines. Never mind that consumers made payments monthly for decades earmarked to assure safety and reliability of gas pipelines all over California. The National Transportation Safety Board concluded last year that – at least for PG&E – inspections and repairs have long been inadequate. So the money collected all those years plainly wasn’t used as it should have been.
Now the utility wants customers to pay 84 percent of the $2.2 billion it says it will spend to fix its pipelines. A PUC administrative law judge proposed instead that customers pay 55 percent. Chances are, the PUC will split the difference, with customers paying about 70 percent. And PG&E would likely get to put the full amount into its rate base, ensuring a $300 million profit over 20 years from its deadly negligence.
At the same time, the federal Nuclear Regulatory Commission probably won’t let even one of San Onofre’s two generators back online for many months, but it’s no sure thing the PUC will stop the consumer ripoff (as the majority owner, Edison operates the plant).
What’s more, even if Edison and SDG&E were suddenly told to stop collecting for operating the inoperative San Onofre (don’t bet on any such order coming soon), they’d keep the hundreds of millions they’ve already collected.
If all this seems absurd and wrong – giant companies profiting from their own dereliction – it is. But it's not likely to change as long as there is no mechanism for shortening the five-year terms of utility commissioners and getting rid of those who act as tools of the companies they are supposed to regulate.