California Focus: Is Newsom plan a utility bailout?

There’s one word Gov. Gavin Newsom has assiduously avoided in the days since he proposed a new $30.5 billion Wildfire Fund that would help the state’s big privately-owned utilities pay off damage claims from forest and brush fires their lines have sparked or helped to cause: Bailout.

This fund would shore up utility finances as they face tens of billions of dollars in potential judgments from lawsuits that followed fires they admittedly helped cause via negligence during 2017 and 2018.

Under pressure from Wall Street investment firms, Newsom proposed that utility customers (often euphemistically called “ratepayers”) and utility shareholders share the costs. The legislative form of Newsom’s plan makes it clear customers would be stuck with at least half the costs of utility negligence.

This bill, AB 1054, co-sponsored by Democratic Assembly members Chris Holden of Pasadena, Autumn Burke of Inglewood and Republican Chad Mayes of Yucca Valley, places the burden of proving utilities acted imprudently on the consumers, reversing many decades of precedent.

There’s an unasked, unanswered question here, ignored largely because of the sheer power of the utility lobby and its financial allies, all of whom could lose big bucks if other utilities follow Pacific Gas & Electric Co. into bankruptcy: Why should customers/ratepayers foot any bills when they did nothing to cause these fires?

It’s a fact that customers’ monthly bills for decades included money earmarked for utility maintenance. That tab came to more than $6 billion over almost 50 years before the latest spate of big blazes.

State and federal regulators never tracked what the companies did with most of that money. As a result, California saw the fatal San Bruno natural gas line explosion in 2010 and huge amounts of vegetation sitting on or near power lines before the start of the state’s largest and most costly fires ever during 2017-18.

If much of the maintenance money went to executive bonuses and other optional items, another question arises: Do these irresponsible monopoly companies deserve to survive?

For sure, there are other ways PG&E, for example, could raise whatever money it needs to pay off upcoming negligence judgments. Here’s one: sell off its natural gas division and some of its electric assets.

This could produce many billions of dollars, exact amounts depending on how many assets are sold.

AB 1054 contemplates none of that. It would keep the same companies that damaged thousands of lives in business. And Newsom asked that his Wildfire Fund plan be rushed through in a matter of a few weeks, urging passage by July 12.

“It’s a massive hijacking of the state of California,” said Michael Aguirre, former city attorney of San Diego.

Newsom’s rationale: “Financially unstable electrical utilities will put wildfire victims in jeopardy and cause California families to see their electrical bills skyrocket,” he said, parroting the utility line. No wonder PG&E stock rose sharply after release of his plan.

But would there be so much as a glitch if Warren Buffett’s Oregon-based Portland General Electric took over gas operations in Northern California? Even the company initials would be the same. And what if the state’s publicly-owned Community Choice Aggregation electric outfits bought up PG&E dams and power lines? Why would that cause service problems?

Meanwhile, Newsom cleverly devised his plan so customers rescuing the undeserving utilities would barely notice their new payments. He would continue a current $30-per-year fee that was about to expire. Bills wouldn’t change until after the next huge fire piles on even more claims. Business as usual would continue at companies that spent many years mismanaging safety operations.

The governor also wants utilities to develop safety plans to be OK’d by the state Public Utilities Commission. Never mind the PUC’s long history of kowtowing to utilities, favoring them over their customers/ratepayers.

How could consumers be sure the new safety plans would be worth the paper they’re printed on? This is the same PUC that has long ducked its own safety responsibilities by hiring far too few inspectors to check all power and gas lines.

So Newsom’s fund can only be described with the one word he badly wants to avoid: bailout.

Email Thomas Elias at tdelias@aol.com.