New PG&E Rate Hike Approved — Takes Effect In Less Than 3 Weeks

NORTHERN CALIFORNIA — The California Public Utilities Commission has approved another rate hike requested by the Pacific Gas & Electric Company.

The matter was approved 4-0 Thursday, with CPUC Commissioner Matthew Baker recusing himself from the vote.

By approving, commissioners authorized interim rate recovery of approximately $903 million, plus interest, representing 55 percent of the total amount—roughly $2.1 billion—that PG&E sought the authority to collect from ratepayers over 17 months.

A typical residential customer who uses 500 kWh per month, receives both energy supply and delivery from PG&E and does not receive income-qualified discounts can expect to see their monthly electric bills increase about $6 starting Oct. 1, 2024, according to PG&E.

The interim rates cover activities performed in 2022-2023 and costs related to wildfire mitigation activities and other catastrophic events such as winter storms.

Ruling Paves Way For Interim Rate Recovery

A California Supreme Court ruling confirmed that the CPUC can authorize interim rate recovery before determining the reasonableness of the utility’s costs. The Court found that "the commission’s authority to grant interim rate relief is well established."

In applying the Court’s standards, the Commission weighs several factors when deciding whether to grant or deny a utility’s interim rate request, including the following: promotes fairness to both the utility and the public; reduces the potential for rate shock; preserves the financial integrity of the utility; minimizes costs incurred by ratepayers and ensures rate stability; and smooths rate impacts on customers.

In addition, "intergenerational equity" has been considered so that ratepayers on whose behalf the utility incurred the costs are the ones who pay the expenses. Moreover, the Commission recently confirmed that not all the above factors must be established but “[a]ny one of those factors may be sufficient for the Commission to grant relief.”

In the past several years, the Commission has authorized interim rate recovery more frequently, primarily in proceedings involving energy utilities seeking expeditious recovery of costs related to wildfire mitigation and catastrophic events recorded in memorandum and balancing accounts.

In support of its request for interim rate recovery of 55 percent, PG&E cited direct financial benefits to ratepayers in accrued interest savings of approximately $67 million. PG&E also cited indirect financial benefits for both ratepayers and PG&E.

Further, according to PG&E, ratepayers and the utility will indirectly benefit because interim rates will promote positive perceptions of regulatory risks and PG&E’s related credit metrics. PG&E also states that relief is particularly appropriate now based on PG&E having not recovered approximately $6 billion related to wildfire mitigation activities as of the filing date of its application.

PG&E explained that “[e]xacerbating PG&E’s limitation on new financing is the lack of timely recovery of very substantial costs that have been incurred over the last several years but have yet to be recovered in rates.”

PG&E said "the uncertainty of the timing and outcome of cost recovery reviews" by the Commission for the remaining accounts "continues to negatively impact PG&E’s credit metrics."

For these reasons, PG&E concluded the "lack of timely recovery of very substantial costs" and fairness to both ratepayers and PG&E, together with "the extraordinary financial pressure currently facing PG&E" in the form of regulatory risks and PG&E’s related credit metrics, justified its request.

Group Urges CPUC To TURN Down The Requests

The Utility Reform Network — TURN — did not think so. It stated that any interim rate relief would impose an undue burden on ratepayers, pointing to the cumulative impact on ratepayers of granting three requests for "interim" rate increases "within this past year" related to wildfire mitigation and disaster response costs plus the significant rate increase for future operations costs, which PG&E implemented Jan. 1, 2024, based on PG&E’s general rate case.

The three interim rate increases related to wildfire and disaster response costs referred to by TURN are the following recent PG&E proceedings:

• An application to authorize interim rate recovery of $1.104 billion (85 percent of the total amount requested)
• An application to authorize interim rate recovery of $516 million (75 percent of the total amount); and
• This proceeding, with PG&E requesting interim rate recovery of $943.9, million and up to $1.45 billion (55 percent and up to 85 percent of the total amount requested).

TURN pointed out that these interim rate increases were in addition to PG&E’s recent general rate case increase for 2023 of approximately 10.7 percent (over PG&E’s 2022 authorized revenue requirement) and the additional rate increases for 2024, 2025 and 2026.

According to TURN, and based on this context of these rate increases, "there may never be a worse time for PG&E to propose interim rate recovery, given the cumulative impact such a request would have with the recently authorized GRC [general rate case] revenue requirement and the continuing effects of the Commission having granted a previous PG&E interim rate request."

TURN urged the Commission to consider "the impacts not just of PG&E’s current request, but the cumulative impact in light of the recent GRC [general rate case] decision and the continuing effects of the interim rate recovery already reflected in PG&E rates."

TURN also suggested the Commission refrain from regularly using interim rate relief, which it characterizes as an "extraordinary" rate-making remedy.

"TURN submits that it is time for the Commission to approach PG&E’s latest request for interim rate relief with fresh eyes, rather than simply applying the logic it has used in recent decisions granting such relief."

In TURN’s assessment, "The recent track record with regard to what had been an extraordinary rate making device used very sparingly for decades makes clear that the agency [the Commission] is at risk of making it more of a standard practice without directly addressing whether such a development is permissible or reasonable."

Subject To Refund

The CPUC stated that the authorized amount was subject to refund if found unreasonable. The Commission also stated that TURN’s argument that the five rate increases may negatively impact ratepayers had merit. It also acknowledged that interim rate relief should remain an "extraordinary ratemaking device used very sparingly."

In evaluating the impact of this interim rate increase on ratepayers, the Commission agreed that spreading it out over 17 months would allow PG&E to avoid certain negative financial consequences and, thereby, promote fairness to both the ratepayers and the utility.

The Commission stated that $67 million in accrued interest was a significant amount of savings, and weighted in favor of granting the interim rate recovery — especially in the context of adding this interest payment to already increasing energy rates.

For this reason, the Commission found that PG&E’s projected savings of approximately $67 million promotes fairness to the public. Further, the Commission found that the interim rate relief supports PG&E’s financial integrity, promotes fairness to the utility and is in the public interest. The CPUC also agreed it would help the company avoid negative impacts on its credit.

The CPUC stated that if the authorized interim rates provide a lower level of cost recovery than the roughly $943.9 million plus interest, Pacific Gas and Electric Company shall return the difference to ratepayers, with interest, as soon as possible.

PG&E 'Working To Stabilize Bills'

PG&E provided the following statement to Patch:

"The 2023 Wildfire Mitigation and Catastrophic Events (WMCE) application was submitted to recover a portion of the costs associated with wildfire safety work and response to the historic storms of the winter 2022-2023. PG&E restored power to more than 7 million customers during a record 15 major storms that winter — mobilizing over 7,200 personnel to replace or repair more than 4,500 poles and 850 miles of wire. Timely recovery of these expenses helps to lower costs for customers in the long term.

"At PG&E, our goal is to build a safe, reliable, sustainable and climate-resilient system at the lowest possible cost for customers. Our investments are delivering results. Our layers of protection have reduced wildfire risk across our service area, and we have enhanced our ability to respond to storms, wildfires and other natural disaster emergencies.

"PG&E is working to stabilize bills and limit average annual combined gas and electric bill increases to no more than 3 percent through 2026. We’re being good stewards of our customers’ money by working to maximize every dollar, including adopting company-wide savings initiatives to reduce our operating costs and limit unnecessary expenses.

"A typical residential customer who uses 500 kWh per month, receives both energy supply and delivery from PG&E, and does not receive income-qualified discounts can expect to see their monthly electric bills increase about $6 starting Oct. 1, 2024. For a typical residential customer who receives the CARE discount and uses 500 kWh a month, the bill increase is about $4. These changes result from a 2.9 percent rate change. Actual impacts of rate increases vary depending on usage.

"The rate change follows a 9 percent residential electric decrease in July and a 0.5 percent increase in September, resulting in a net decrease for customers, compared to June 2024 rates. Residential electric customers also will receive a $55 California Climate Credit in their October bills. The California Climate Credit is part of the state’s efforts to fight climate change and is distributed by PG&E to customers as directed by the CPUC."