Calif. regulators approve $13.5B PG&E revenue increase to fund undergrounding transmission

Published on November 17, 2023 by Iulia Gheorghiu

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The California Public Utilities Commission unanimously approved a rate increase requested by Pacific Gas & Electric (PG&E), as the utility intends to harden its system and underground 1,230 miles of transmission lines to reduce the risk of electrical wires sparking a wildfire.

PG&E asked regulators in 2021 to increase its 2023 revenue by more than $15 billion. The decision made by commissioners on Thursday reduced the increase to $13.5 billion and will impact customer rates starting in 2024. This is the first rate increase that PG&E is seeking after emerging from its bankruptcy proceedings in July 2020.

“This decision is more than a revenue increase from PG&E. It is a decision that demands more from PG&E as a company,” Commissioner John Reynolds said during the CPUC’s voting meeting, recognizing a number of improvements by the company.

“We need to see PG&E deliver operational excellence on a continuous basis going forward,” like meeting or exceeding its cost reduction goals, Reynolds said.

Undergrounding transmission lines takes longer than overhead hardening, PG&E has acknowledged, but the company says it will be cheaper than annual powerline maintenance and tree trimming in its service territory. 

“Undergrounding is the best tool in the highest fire-risk areas to protect our customers and hometowns and improve reliability year-round at the lowest cost to our customers,” PG&E CEO Patti Poppe said in a statement, thanking commissioners for the approval.

“We as a commission have struggled mightily with the additional hardship these increases will create for families,” Commissioner John Reynolds said during the meeting, noting that many ratepayers are struggling with high energy bills.

The alternate proposal approved by the CPUC would still increase revenue by just over 11 percent, slightly lower than a 15 percent increase. The plans were substantially the same, differing on their approach to wildfire hardening. The alternate proposal included a mix of cheaper hardening techniques: PG&E will install 778 miles of insulated overhead power lines, meant to mitigate wildfire ignition risk.

The utility originally requested a $15.4 billion revenue requirement for the year 2023, more than $4 billion from its 2022 revenue. PG&E had requested approval to underground 3,000 miles of transmission lines, which Poppe defended in an op-ed as necessary for hardening efforts. The CPUC had pushed back on the ambitious goals, leading to the pared down proposals that would have PG&E prioritize high-risk transmission lines, as the company “has not shown that it can successfully meet the ambitious cost targets it set forth there,” Reynolds said.

CPUC staff has noted that undergrounding electrical lines could bring up additional efforts to the physical work: managing shifting rights of way, evaluating soil conditions and other potential environmental impact complications or land rights issues.

California’s regulatory approval comes on the heels of Florida, Virginia and the District of Columbia beginning similar measures, as state regulators eye the importance of grid hardening where extreme weather conditions are expected

The 1,230 miles approved by the commission for undergrounding can be the beginning for PG&E, Chair Alice Reynolds said, noting a California bill that would allow PG&E to submit a 10-year plan for burying more electrical wiring.

“I can say that I’m confident that you’re getting something out of this investment,” Reynolds said to the PG&E customers that opposed the rate increase. The CPUC “made real revenue reductions where we could, and yet we approved programs that will make energy service safer and make it work better for you,” he said.

The four-year plan impacts PG&E’s customers for both gas and electric service, and it is the first time the commission considered a single rate case for electric and gas distribution and storage.

“This may be the largest utility rate case that any commission has ever faced,” Reynolds said. 

The company will also increase its electric distribution capacity to meet increasing demand from new businesses and new electric vehicle charging stations in its area. The Alternative Energy Program would also allow PG&E to use gas program funds on its electrification initiatives.