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Looking ahead at key energy concerns this year, Current predicts soaring utility bills in an economy battered by Covid-19 will be a major issue. Others will include the fate of the vast majority of San Diego Gas & Electric’s customer base and expected devastation and outages in the upcoming fire season. Also, center stage in 2021 is whether the grid will be able to weather heat storms, and whether the California Energy Commission limits or bans gas use in new construction and utility regulators approve the biggest ever ratepayer-backed utility bond.

Rising Covid and utility bills

Pacific Gas & Electric, Southern California Edison and SDG&E customers will see around $15 billion added to their rates over the next three years, Assembly Utilities & Energy Committee Chair Chris Holden warned . That is despite the pandemic continuing to rage while the vaccine is rolled out. Businesses and jobs have gone under and overall energy use in the state has fallen with a decrease in commercial and industrial energy use. At the same time, residential energy bills have risen due to online work and school, and more time spent at home.

In March, PG&E will raise average home utility bills by $13.44 a month, or $161 a year, following the California Public Utilities Commission’s mid-December approval of the rate increase in the utility’s 2020 general rate case. Southern California Edison was given the green light to increase its utility bills by an average 10%, a $143 annual increase. SDG&E utility bills will not rise nearly as much: a 3% average residential increase, or about $40 a year.

Regulators’ upcoming votes on who shoulders utilities’ skyrocketing wildfire and other costs will raise the tab even further. That includes the cost of uncollected utility bills. Because of the economic downturn, the utilities last year were required to suspend power disconnections for customers behind in their payments.

SDG&E and the City of San Diego power franchise

SDG&E’s main customer base is San Diegans but its 50-year exclusive deal with the City of San Diego expires Jan. 17. Council members of the state’s second most populous city voted July 16 to allow competitors to bid for the right to deliver electricity along city-owned right of ways, setting a floor price of $54 million per year. Bidding also was open to deliver gas with a minimum bid of $8 million. SDG&E ended up being the sole bidder for the franchise it held for 100 years. At the end of 2020, San Diego Mayor Todd Gloria rejected SDG&E’s proposal to continue providing power to San Diegans long term. He also cancelled the city’s request for offers and temporarily extended the utility’s franchise.

“This is a once-in-a-generation opportunity and I remain committed to achieving the best deal possible for San Diego's households and workers,” and to helping meet the city's climate goals, he told the new city council in a Dec. 18 memorandum.

San Diego’s Climate Action Plan calls for a 100% renewable energy supply to San Diegans by 2035. It is supported by an alternative generation supplier San Diego Community Power that will fully launch this year, emphasizing local distributed renewables.

Who ends up taking over the lucrative city electricity and gas franchise, and for how long, remains to be seen. But another 50-year franchise is not on the table.

Berkshire Hathaway and Indian Energy initially expressed interest in the city proposal but dropped out of the running with no explanation.

Fires, air pollution and shutoffs

California, like much of the West, will continue to be plagued by climate-worsened wildfires, smoke-filled air, and likely utility safety shutoffs. The most recent safety shutoffs were just over the Christmas holiday. SCE and SDG&E cut off power to thousands of customers because of strong winds and dry conditions.

Unhealthy air quality from fires will again be worsened by diesel units powered up to keep electricity flowing during shutoffs. PG&E, data centers and other businesses and households have and continue to install many megawatts of polluting diesel generation. The Air Resources Board has warned of the health impacts of the contaminants spewed by these backup systems. “We never expected them to be used as widely and frequently,” Mary Nichols, former ARB Chair, said during a late August joint agency workshop.

There is the related question of whether the grid operator can keep supply and demand balanced and avoid power outages like the ones occurring last August, when intense heat struck the region.

The California Independent System Operator, CPUC and California Energy Commission will soon release their final analysis of the root cause of the summer blackouts and have been taking steps to improve grid reliability. That includes beefing up resource adequacy in time for next summer. Besides gubernatorial waivers of air quality limits to allow diesel generators to run unimpeded, will reliability strategies also include giving community choice agencies sufficient access to granular data produced by smart meters to improve day-ahead forecasting in the CAISO market? Providing this customer data that private utilities routinely use for their own load forecasting is not technically challenging and a no brainer, Samuel Golding , Community Choice Partners president, noted.

Natural gas and new construction

More than 40 cities in California have banned or limited natural gas use in new construction—residential and commercial—to help decarbonize the built environment and reduce indoor pollution caused by gas appliances. The Energy Commission is in the midst of updating the state building energy efficiency code and has faced considerable pressure to halt gas use in new construction. The 2022 Title 24 building code update is expected to be adopted in July.

The Commission will surely be sued if it crimps gas use in new large and small buildings. But with or without a state ban or restrictions, more cities will continue jumping on the electric building bandwagon to reduce climate impacts and other harmful pollutants.

“Advancing the electrification of new homes using grid-responsive electric technology will turn two of the largest energy uses in homes, space and water heating, into grid assets that help balance the grid and avoid power outages,” according to NRDC Scientist Pierre Delforge .

$7.5 B PG&E ratepayer-backed bond

As part of its massive bankruptcy debt repayment plan, PG&E seeks CPUC permission to issue $7.5 billion in ratepayer bonds to replace $6 billion of its short-term debt. If allowed, it would be the biggest utility bond issuance backed 100% by ratepayer money in the history of the United States. The utility says it’s the least costly financing option for covering wildfire expenses. PG&E also says it will repay customers from cash on hand and savings reaped by lower costs of 30-year securitized bonds.

Consumer advocates warn that PG&E ratepayers, who already face steep utility increases, may not be fully reimbursed for this massive recovery bond issuance. They point out that utility shareholders would reap all the benefits of the arrangement, including collecting 75% of any savings surplus, while taking on none of the risks. Meanwhile, PG&E ratepayers will be paying bondholders for the loans for 30 years.

Last fall, SCE won approval to issue a far smaller ratepayer bond for $337 million . Terms of the deal were hard fought because it was the first proposal of many, interpreting a new law allowing utilities to use ratepayer dollars to pay their wildfire costs but at the lowest possible cost. Ratepayer advocates successfully pushed for protections, including an independent finance team to ensure the lowest possible bond rates.