Senator Jerry Hill Introduces Bills to Protect PG&E Ratepayers, Give the Legislature a Voice in the Utility’s Reorganization, and Ensure Greater Safety Results If a State-Regulated Electric or Gas Company Changes Hands

February 23, 2019 - SACRAMENTO - Senator Jerry Hill introduced legislation on Friday to better protect PG&E customers by requiring state lawmakers to authorize any rate change resulting from the utility’s bankruptcy, thereby giving the Legislature a voice in PG&E’s reorganization.

The measure, Senate Bill 549, is one component of the three-bill package the senator introduced this morning to address gaps in representation and safety that have emerged in the aftermath of two consecutive years of deadly wildfires and the bankruptcy filing by PG&E.

“It is essential that ratepayers are protected financially and are provided safe service even during the utility’s bankruptcy,” Senator Hill, D-San Mateo and Santa Clara Counties, said of SB 549. “My legislation addresses that need by prohibiting state regulators from changing PG&E rates without authorization from the Legislature. In effect, this requirement gives the Legislature a say in how the reorganization impacts PG&E customers -- who otherwise would have no representation in any consideration of rate changes.”

Existing law authorizes the California Public Utilities Commission to set rates for public utilities. Amid concerns over PG&E’s bankruptcy and its potential effect on customers’ rates, SB 549 adds legislative oversight to the existing process for ratemaking and for making changes in capital structure, the means by which a firm finances operations, including its debt.

“SB 549 ensures that any impact affecting customers’ pockets in this extraordinary situation is also weighed by their elected representatives in the Legislature,” said Senator Hill. “The reason for any such change in these unusual circumstances requires a higher degree of scrutiny. PG&E’s bankruptcy in 2001 weighed heavily on ratepayers. Enormous costs were passed along to customers, but no commensurate increase in safety resulted. Instead, a string of disasters occurred. SB 549 brings greater transparency to the ratemaking process in an effort to guarantee that safe utility service is provided without excessive burdens on customers.”

SB 548 requires the CPUC to set a timeframe for regulated electric utilities to inspect their transmission lines. The commission sets such parameters for inspection of distribution lines, which carry electricity to consumers, and other distribution equipment. But the regulators leave it up to utilities to determine how often they inspect their transmission lines, which are higher voltage lines that carry power from a plant or power station to various substations.

In court documents filed following the 2018 Camp Fire, the largest and deadliest wildfire in state history, PG&E said it typically inspected the 115,000-volt transmission line implicated in the fire once every five years. In contrast, Southern California Edison says it conducts detailed inspections of its transmission lines every three years.

“Leaving it up to utilities to set their own inspection timetables isn’t regulation,” said Senator Hill. “At best, it’s wishful thinking.”

SB 550, the final bill in the legislative package, requires the CPUC to ensure that a merger, acquisition or change of control of a state-regulated gas or electric corporation improves safety and that measures are in place for the successor to foster safe utility service.

Existing law sets the criteria the CPUC must consider before approving the restructuring of a commission-regulated utility. Safety is not included in the current criteria.

SB 550 adds safety to the criteria and requires the CPUC to ensure that specific elements are in place in any proposal for a gas or electric utility to change hands. The required elements include:

• A safety management system;
• A comprehensive, system-wide safety plan;
• Plans to maintain or improve equipment records;
• Metrics to measure and active audits to ensure safety performance;
• Evaluation of safety expertise in qualifications used to select corporate leadership; and
• A system for reporting actual and potential safety incidents to the CPUC.

In addition, SB 550 requires the CPUC to find that a proposed a merger, acquisition or change of control “would improve the safety of utility service” before authorizing the restructuring.

Here are the text of the bills, as introduced, and their fact sheets: