The last week of California’s legislative session is yielding progress on a number of key energy bills, including a target of 100 percent renewables by 2045 set out in SB 100.
But two more contentious bills — a comprehensive utility wildfire protection package and a bill that would allow the state to take the first steps toward expanding its grid across the Western U.S. — are still coming into final form.
A wildfire bill emerges, but changes are still in the works
Late Monday night, California lawmakers finally put forward a legislative package (PDF) aimed at helping utilities cover the costs of wildfires — an important step ahead of an August 31 deadline for passing legislation.
But key conflicts over how to share wildfire lawsuit damages between utilities and their customers were still being worked out on Tuesday, prior to an evening committee vote that could see important amendments added to the draft bill before it goes to the legislature as a whole.
The wildfire bill, AB 901, contains most of the less controversial proposals that have emerged in the months since Gov. Jerry Brown declared it a priority for this legislative session. Those include funding for utility wildfire prevention plans, clearing brush and trees from around utility power lines, improving communications between utilities and firefighters, and allowing greenhouse gas reduction funds to be spent on forest management.
The draft bill would also allow utilities to pass some of the costs of paying for wildfire lawsuit damages onto ratepayers, by allowing them to issue bonds that would be paid back over time in customer bills. That’s similar to AB 33, a bill that was specifically aimed at Pacific Gas & Electric, which is facing the possibility of tens of billions of dollars in wildfire lawsuit damages from last year’s Tubbs Fire and other major fires, and has warned it could be forced into bankruptcy as a result.
But this portion of the bill is seeing pushback from some members of the wildfire committee, according to Rob Rains, energy analyst at Washington Analysis. “Several lawmakers, including Assembly minority leader Brian Dahle (R), indicated an interest in making the utility firms cover ‘as much as possible’ of a wildfire’s costs before providing the firms with the opportunity to pass those costs onto ratepayers,” he wrote in a Tuesday note.
The draft bill released Monday would adopt a “reasonableness” review that considers a number of factors, including the financial health of the firm seeking to recover its wildfire costs through rates, Rains wrote. Specifically, it would allow the California Public Utilities Commission to “consider the electrical corporation’s financial status and determine the maximum amount the corporation can pay without harming ratepayers or materially impacting its ability to provide adequate and safe service.”
That’s important, because California law now applies a “strict liability” legal standard to determining a utility’s responsibility for covering wildfire damages, which limits the ability of state regulators to allow for factors like the utility’s role in causing the damages — or whether it may face bankruptcy as a result.
One of the big questions for PG&E is whether or not the new legislation should apply only to future fires, or to last year's fires as well, Rains noted. However, "we expect the new reasonableness standard of review and 'stress test' language for determining cost recovery will ultimately apply to the 2017 wildfires," he wrote.
Almost all of the lawmakers involved in the wildfire legislation have stated their support for some kind of financial relief for PG&E in particular, saying that bankruptcy will do more damage than the alternatives.
The San Francisco Chronicle also reported on Tuesday that utility insurance costs are almost certain to increase drastically if they aren’t allowed to charge their customers for recovering from wildfire damages, meaning that customers are likely to see bills rise even if none of the bills now under consideration are passed.
Rains also wrote that the draft bill “also appears to offer utility firms the flexibility to seek to securitize these costs on a long-term basis via a proceeding before the utility commission,” although additional details on this portion of the draft had yet to be released Tuesday morning.
But a proposal from Assemblymember Chad Mayes to create a wildfire insurance fund "is not likely to be adopted," and will likely be passed on to Gov. Brown's proposed Blue Ribbon Fire Commission to study further in January 2019.
"Ultimately, I believe the fear among legislators of doing nothing far outweighs the fear of passing something that's imperfect, with elements of interpretation left to the CPUC," Rains said in a Tuesday interview. But the final form that legislation would take is still "unsettled," he said.
Grid regionalization amendment seeks protection from political attacks
Amidst the mad dash to complete utility wildfire legislation, another longer-range (but no less controversial) proposal to expand California’s grid authority across the Western U.S. added an amendment on Tuesday, aimed at answering critics who say it could expose the state to interference by the Trump administration or other federal agencies.
Supporters of AB 813, which would authorize California utilities to be part of the California Independent System Operator (CAISO) as it expands beyond its current borders, say it will save California consumers about $1.5 billion per year by 2030 in reduced energy costs due to increased competition, economies of scale, and cheap regional wind and solar power.
Opponents have said it will reduce in-state solar and wind investment and job growth, and could provide new markets for Rocky Mountain region coal-fired power plants that might otherwise be forced to close. But an independent report from the Next 10 Foundation last month found that the benefits of grid regionalization largely outweighed the potential negative impacts.
In the past two weeks, AB 813 opponent the Sierra Club has focused on the threat of an expanded grid coming under the influence of federal policies that could undermine the state’s clean energy and carbon reduction efforts — like the Trump administration’s efforts to force the Federal Energy Regulatory Commission to secure out-of-market payments.
But according to AB 813 supporters such as the Natural Resources Defense Council, the threat of Trump administration interference is a red herring. First, CAISO is already regulated by FERC, and the bill under question wouldn’t change that fact, noted Carl Zichella, NRDC Western transmission director. Second, the bill would not move ahead with grid regionalization until 2021, providing time for the state to withdraw from expanding if federal agencies or policies are still seen as threats at that time.
Friday’s amendment would add a 270-day pause before any new CAISO governance structure becomes effective, giving the state legislature and the next governor the equivalent of a full legislative session to review and evaluate the new governance system before it launches, according to pro-AB 831 group Fix the Grid. “The amended bill includes safeguards that ensure California maintains control over its electricity future, creating a cleaner grid regionally, while not making the state more susceptible to hostile federal regulators.”