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After outages, PG&E faces cloudy future in Sacramento

Michael Ngangula

Oct. 13, 2019

SACRAMENTO — When Pacific Gas and Electric Co. tries to fix its many problems, it sometimes creates new ones.
Misstep after misstep have piled up into a staggering obstacle: a loss of clout in the state capital that complicates its effort to reform its operations and extricate itself from bankruptcy.
PG&E executives poured money into lobbying efforts in Sacramento, attempting to shape policies that directly affect its operations and liability for disasters. But that spending came as the company’s power lines started a series of devastating wildfires in recent years. And its most aggressive measure to prevent more sparks required subjecting about 2 million people across the state to prolonged blackouts last week, which deepened customer resentment.
The gas division, responsible for a deadly explosion in San Bruno nine years ago, continues to generate disturbing news. A recent regulatory investigation found that employees repeatedly falsified thousands of internal safety records. PG&E has agreed to a $65 million settlement in the case.
PG&E also found itself apologizing for gas division executives’ tone-deaf behavior last week. The CEO admitted to The Chronicle that employees partied in Wine Country shortly before the mass outages and on the anniversary of 2017’s deadly fires in the region that were started by the company’s equipment.
Since 2009, PG&E has spent nearly $26 million to lobby state legislators and utility regulators, public filings show. Its spending soared during a legislative battle after the October 2017 Wine Country wildfires, many of which the state determined were caused by PG&E. The company says it uses shareholder funds, not ratepayer money, for lobbying expenses.
But the efforts have in many ways fallen short at the Capitol. Lawmakers from both political parties say that’s partly because PG&E’s poor credibility and haphazard approach makes its proposals suspect.
“They can apologize all they want,” said state Sen. Jerry Hill, D-San Mateo, a chief critic of the utility. “I’ve heard it. It always happens, again and again and again, with PG&E.”
CEO Bill Johnson told reporters on Friday that he has “heard directly from a number of elected officials” and others about “a lack of trust” in PG&E. “There’s a good reason for that,” he said, acknowledging that the company needs to perform better.
“If you’re going to be successful in this business, you have to have customers that are satisfied and pleased with their service, happy with the price, and that’s where we need to get to,” he said.
Several of PG&E’s key policy goals have proved elusive.
Most significantly, the company has tried to free itself from a California legal doctrine called inverse condemnation, which holds utilities strictly liable for damage caused by their equipment even if they were not negligent. But PG&E’s attempts to reform the doctrine have failed.
Some state lawmakers felt the utility went overboard with last week’s shut-offs in more than 30 counties. PG&E forcefully denies any ulterior motive for putting so many people in the dark, describing it as a difficult but necessary step to keep its customers safe after a troubling wind forecast raised the risk that its power lines could start fires.
“We faced a choice between hardship or safety, and we chose safety,” said Michael Lewis, the company’s senior vice president of electric operations, in a statement last week. “We deeply apologize for the inconvenience and the hardship, but we stand by the decision because the safety of our customers and communities must come first.”
Assemblyman Mark Levine, D-San Rafael, said he suspects the utility could be extending shut-offs unnecessarily.
“This is a pressure point that they will continue to apply pain to until they get their holy grail” of inverse condemnation reform, Levine said. “They’ve tried it every legislative session, and they’ve failed.”
Also, PG&E tried this year to get legislative approval for $20 billion in tax-free bonds to help pay victims of wildfires it caused. But lawmakers had little appetite for the measure and it did not move forward in the last legislative session. It’s unclear whether PG&E will revisit the subject next year.
Assemblyman James Gallagher, whose district includes the town of Paradise that was destroyed in the 2018 Camp Fire that PG&E’s lines sparked, said the request for tax-free lending came as another example of tone-deafness.
“My very first question is, ‘What are you doing to help the recovery of Paradise?’” Gallagher, R-Nicolaus (Sutter County), said of his meeting with PG&E lobbyists about the bond request.
The company could benefit from a new law that creates a $21 billion fund to protect PG&E and other utilities from future wildfire costs. To be eligible for the money, however, PG&E must resolve its highly complex bankruptcy case by June 30.
Gov. Gavin Newsom, who amplified his criticism of the utility last week, said the bankruptcy process could be an opportunity to force the company to change. He blasted PG&E on Thursday, saying its electrical grid is outdated because it has made payouts to shareholders a priority.
“This is not, from my perspective, a climate change story as much as a story about greed and mismanagement over the course of decades,” Newsom said.
Distrust of PG&E could lead lawmakers to put the company under additional state oversight. Some lawmakers have even suggested that it should be broken up to ensure public safety.
Several said the state should begin charging PG&E and other utilities a fee for shut-offs, to discourage unnecessary blackouts that harm the economy and medically fragile people.
“Right now, PG&E has a strong financial incentive to go broad with planned blackouts because of financial liability,” said state Sen. Scott Wiener, D-San Francisco, who introduced a bill to regulate planned shut-offs.
Lawmakers are also considering measures that would require the company to spend more of its profits to upgrade its transmission lines or increase tree and vegetation removal.
PG&E has undergone leadership changes, most notably with the appointment of Johnson in April. But lawmakers said they doubt that much has changed — especially given PG&E executives’ Wine Country soiree before widespread blackouts.
State Sen. Bill Dodd, D-Napa, said that while he’s found Johnson a “straight shooter” who’s been willing to admit mistakes, the company’s political clout is nonexistent. As a result, it could lose its discretion to call for shut-offs.
“They have little chance of getting anything done in Sacramento,” unless it’s cost-neutral or cuts bills for ratepayers, Dodd said. “They put themselves in that position.”
On Tuesday, the day before implementing the shut-offs, PG&E attorneys appeared before U.S. District Judge William Alsup in an unrelated hearing. Alsup has expanded the terms of PG&E’s probation arising from the San Bruno blast to include compliance with a state-mandated fire-prevention plan.
When attorneys told Alsup about the shut-off plans at the hearing on Tuesday, he agreed that such a move was necessary — for now.
“The day should come when PG&E has a system that is safe enough to operate 100% of the time,” he said. “But because of the problems we know about, PG&E is not there yet.”
Power shut-offs, Alsup said, are “more prudent, in at least some cases, than leaving the power on and burning down an entire county,” he said.
“I thank you for the attention that PG&E is paying to this important issue,” Alsup said.
J.D. Morris reported from San Francisco and Dustin Gardiner from Sacramento. Chronicle staff writer Rachel Swan contributed to this report.
J.D. Morris and Dustin Gardiner are San Francisco Chronicle staff writers. Email: jd.morris@sfchronicle.com , dustin.gardiner@sfchronicle.com Twitter: @thejdmorris , @dustingardiner
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