SAN FRANCISCO – Pacific Gas & Electric, or PG&E, is asking California regulators to give it $201 million in extra profit at ratepayers’ expense. This would ease the reviled utility’s $13.5 billion debt to wildfire victims. Meanwhile, the Dixie Fire that PG&E admits it might have caused still rages across a large swath of the state and grows bigger by the day.
“PG&E apparently stands for profit, greed and effrontery, because it’s asking California to put ratepayers on the hook for clearing the debt that the company earned through its own egregious mismanagement,” said EWG President and Bay Area resident Ken Cook.
“This is a cynical ploy by PG&E, which is seeking a blank check to write off its own wrongdoing,” Cook added.
The monopoly utility on August 23 petitioned the California Public Utilities Commission, or PUC, to grant it the right to increase its return on equity, or ROE, to 11 percent, which would guarantee the company and its shareholders precisely $201.3 million in extra profit.
An 11 percent ROE is virtually unheard of among investor-owned electric utilities in the U.S. According to S&P Global Market Intelligence, the average ROE is 9.55 percent. The current ROE for PG&E is 10.25 percent. If the PUC approves the utility’s exorbitant request, it would be one of the most, if not the most, inflated ROEs in the country.
California Gov. Gavin Newsom bailed the utility out of its 2019 bankruptcy, which was caused by its mounting liability for a series of wildfires. As part of the deal, PG&E agreed to stop paying dividends to shareholders until the company achieves $6.2 billion in earnings. The proposal before the PUC would help the company meet its earnings requirements under the deal and allow dividends to once again flow to its investors.
The investor-owned utility blames the Covid-19 pandemic in part for its stock performance, which compares unfavorably to companies that have seen their share prices surge over the past year. But California ratepayers shouldn’t be the ones responsible for saving the stock.
“Most of us would need a winning lottery ticket to even dream of getting $200 million. Apparently, all PG&E needs to do is write a letter to the PUC,” said Cook.
If the PUC agrees to inflate PG&E’s earnings at ratepayers’ expense, the increased stock price and revived dividends could help the company meet its legal obligation to pay $13.5 billion to victims of the devastating Camp Fire that killed 84 people in 2018. The victim’s compensation fund will pay out with company stock if its price rises. Most victims have not yet been paid.
PG&E’s latest outrageous request to the PUC for extra profit follows its July request for the PUC to approve a $3.6 billion rate increase to cover the costs of wildfire safety measures. Less than two weeks after the utility made that request, the Dixie Fire ignited. That fire may have started with a damaged power line owned and operated by PG&E.
“Leave it to PG&E to figure out ways to monetize and profit from the wildfires it’s responsible for starting. It’s beyond outrageous – but hardly a surprise – for a company so utterly fueled by financial reward, courtesy of its ratepayers,” said Cook.
According to the Department of Forestry and Fire Protection, the Dixie Fire, which started more than 45 days ago, was only 52 percent contained as of September 1. It has raged across more than 844,000 acres covering five California counties.
A few days after the fire had already burned tens of thousands of acres, PG&E said it will spend $20 billion to bury roughly 10,000 miles of above-ground powerlines. The utility has not detailed how it plans to pay for the costs of this unprecedented operation. A portion would likely come from an increase in the monthly electricity bills for its millions of customers – already some of the highest in the nation.
The only way to end PG&E’s long record of putting profits above fairness for captive ratepayers is for Newsom and California lawmakers to move forward with legislation that would allow the state to acquire PG&E and operate it as a publicly run utility.
Cook added, “What California needs now is a utility grounded in the public interest to reverse the trend toward mismanagement and excessive utility bills, profits and executive pay – and to meet the growing challenges of climate change in an equitable and least-cost fashion.”
The Environmental Working Group is a nonprofit, non-partisan organization that empowers people to live healthier lives in a healthier environment. Through research, advocacy and unique education tools, EWG drives consumer choice and civic action. Visit www.ewg.org for more information.