| Independently Powered Energy News

Updated Oct. 1

Pay attention to Southern California Edison’s request to quickly shift wildfire costs to customers. It plans to do this through a financing mechanism it hasn’t used in 23 years: issuance of less costly bonds paid back fully by ratepayers. Pay attention because a lot more requests for approval of bonds like these will line up at the California Public Utilities Commission. And they won’t all be about climate exacerbated fires.

Ratepayer-backed bonds also are expected to be issued to cover utilities’ decreased income from the drop in commercial and industrial demand and rise in unpaid utility bills. The full cost of this pandemic fallout is not yet known, but SCE estimated it may have lost up to $1 billion in the first seven months of this year.

AB 913 by Assemblymember Ian Calderon (D-Whittier), signed into law Sept. 29, allows the utilities to recover their shortfall over several years. It includes paying for electricity not consumed by businesses as projected. The bill was proposed by Edison.

The legislation expands AB 1054 by Assembly Utilities & Energy Committee Chair Chris Holden, passed last year. It requires utilities to issue securitized bonds to cover up to $5 billion they collectively spend to make their systems less fire prone. Central to approval of these ratepayer recovery bonds under both AB 913 and AB 1054 is that they be found just and reasonable, be in the public interest, and produce the maximum customer savings possible in an expedited proceeding.

Spreading out the pandemic-driven undercollection tab through securitized bonds, in place of a lump sum next year, keeps utility bills from rising even higher in the short term. These bonds include interest payments and other charges, but cost ratepayers less than traditional utility financing. With the latter though, the CPUC maintains its authority, including to prohibit the recovery of certain costs.

Holden recently voiced concern about large charges hitting ratepayers during this time of high unemployment and economic instability. Earlier this month, he warned of out of control utility bills, including because $15 billion is being added into rates over the next three years from wildfire costs. That does not include Pacific Gas & Electric's upcoming $7.5 billion in securitized bonds to cover part of its huge bankruptcy bill.

AB 913 is groundbreaking

AB 913 is the first legislation in the United States to allow utilities to issue ratepayer-repaid bonds to recover Covid-19 related losses, according to J. Paul Forrester, Mayer Brown law firm partner. Neither he nor his firm is currently involved in the current financing proposals, he said.

U.S. utility customers racked up $24.3 billion in unpaid bills during the pandemic, the National Energy Assistance Directors’ Association stated Oct. 1. On top of that, electricity demand in many states fell between 9% and 13% in March and April 2020, relative to those months in 2019, the Congressional Research Office reported in May.

Electricity consumption in the California Independent System Operator market in April was 9% below levels in 2019. Demand has inched up since then, with demand 5% lower than the previous year, the California Energy Commission reported Aug. 19.

Edison brought in $600 million to $1 billion less than expected through July, according to an Aug. 28 analysis by the Senate Energy Utilities & Communications Committee. If the utility were to put all those costs in utility bills next year, they would spike by up to 7%.

Unpaid Pacific Gas & Electric residential and small business bills more than 30 days late reached $491 million this June, compared to $148 million the same month in 2019. Its second quarter filing also noted that the utility does not know how much of the rise in unpaid bills is caused by the pandemic. Between mid-March and mid-July, electric demand fell 3% and natural gas use 4%, resulting in a drop in $200 million in income as of June 30.

The California Energy Commission reported that PG&E’s industrial gas demand in mid-July had dropped 6%, compared to a 14% fall in mid-May.

San Diego Gas & Electric told Current that the amount of its pandemic-related lost revenue is confidential at this time

The utilities are tracking their Covid-19 related losses in special accounts, as directed by the regulators.

Recoverable losses

Approval of regulated utilities’ billing is based on projections of power and gas they will sell. Under AB 913, when sales fall more than 5% below projections, the utilities can bill the public for that lost revenue after passing regulatory muster.

“AB 913 will avoid the painful inquiry of figuring out what was or was not a Covid-related cost,” Forrester said. For example, there won’t be debates over whether it covers all or part of the costs of utility employees setting up home offices because of the shelter-in-place orders.