Gas companies’ turn at PUC’s rate increase charade in California
Some have called the California Public Utilities Commission’s highly predictable rate increase procedures a “kabuki dance,” naming it for a Japanese form of theater involving high drama, but with the audience always knowing how things will turn out.
Others merely call it a charade.
Here’s how it works: Utility companies like Pacific Gas & Electric and Southern California Edison apply every few years for rate hikes. They invariably request far more than they know they can get, and then settle for much less than they requested.
Management then boasts to stockholders about new revenues, while the PUC brags to the public about cutting down the absurd amounts asked by the utilities. Everyone goes home happy except gas and electric customers, who end up with significantly higher monthly bills.
Now it’s the turn of the Southern California Gas Co. and its sister utility, San Diego Gas & Electric (both owned by San Diego-based Sempra Energy) to ask for higher rates, and the oft-repeated kabuki dance is on again.
The two companies are asking about $5 billion in new revenues from their more than 21 million customers over the next four years, an average of about $8 per month per customer.
Eight bucks a month may sound puny these days, after gas customers in areas south of San Luis Obispo saw their monthly bills triple — sometimes quintuple — during the unusual cold and rain of the winter. But that $5 billion figure (sure to be reduced by the PUC) shows how small amounts add up when you’re America’s biggest gas distributor, as SoCalGas has become.
For sure, there’s been plenty of outrage expressed during the PUC’s public hearings on the Sempra companies’ proposal. Consumer advocates and angry customers submitted more than 500 protestations against any rate increase at this time.
Some complained that the two gas giants failed to hedge their wholesale prices via long-term, price stabilizing contracts, instead leaving themselves open to price manipulation by wholesalers in gas producing areas from Wyoming to Texas. Consumers also claimed the gas companies kept stored supplies at lower than usual levels so they were forced onto the spot market just so Californians could keep warm.
Prices, consumer advocates noted, did not rise nearly as much in Northern California over the winter, even though many gas bills there doubled. Most strikingly, some pointed out that prices in the few California areas served by Las Vegas-based Southwest Gas (around Lake Tahoe and in High Desert areas including Victorville and Barstow) stayed near prior levels.
Sempra executives conceded the timing of their rate increase request was “difficult,” but nonetheless insisted they need the extra money for infrastructure improvements.
Here’s a question: Since Sempra profited by more than $2 billion last year, mostly from its two utility companies, why shouldn’t it invest its own money in those same improvements?
Like almost all utilities, the Sempra subsidiaries want customers to pay for their investments in things like storage facilities and pipelines. But they don’t share with those same consumers the approximately 12% profit they are guaranteed for 20 years on each penny they invest in infrastructure, whatever the source of the initial cash.
So here’s a revolutionary idea for the PUC, which generally kowtows to the companies it regulates: Change your habits. Alter the course of the new Kabuki dance. Here’s how:
Tell Sempra to use profits drawn from its existing rates to make whatever investments it wishes in safe storage, new contracts and pipeline maintenance.
Then return and apply for new and higher rates after demonstrating it knows how to build that infrastructure and operate it safely (as compared with the 2015-16 leak from its Aliso Canyon gas storage facility, which sickened thousands in the nearby Porter Ranch area of Los Angeles).
Only then should the PUC consider giving Sempra any kind of rate increase, let alone $5 billion over four years, or more than $1.25 billion in extra revenue each year.
Do that and the PUC would be fulfilling its original purpose of preventing utility companies from running roughshod over their customers, rather than merely bowing to utility desires as usual.
Email Thomas Elias at firstname.lastname@example.org.
This article originally appeared on Ventura County Star: Gas companies’ turn at PUC’s rate increase charade in California