Dear CPX E-News Readers,
In this edition of our e-news, you will see a special section dedicated just to the stories that have come out over the past week about the PG&E expected bankruptcy. We did this due to the fact that there is such an enormous flurry of articles on the topic and it is something we have received many inquiries about. It is still very early in the process and much of what is being discussed at this time is speculative. We plan to stay on this topic, particularly as it relates to Community Choice agencies and their customers, and will report on it in coming editions. For now, the following is a brief article summarizing responses to the three main categories of inquiry we have received.
– The CPX Team
PG&E has not yet filed for bankruptcy at the time of this writing, but they did, on Monday, January 14th, alert their employees and the public that they plan to do so on January 29. What does a likely PG&E bankruptcy mean for energy customers, communities, and California doing its part to address the global climate crisis?
The broad outline of the story, as most Center for Climate Protection and Clean Power Exchange e-news readers are probably aware, is that as a result of utility equipment being pinpointed as a cause of many of the wildfires over the past two years, PG&Es’ liabilities outstrip its assets many times over. They have little choice but to declare bankruptcy.
PG&E has gone through a bankruptcy in the past. In the wake of the deregulation debacle in 2000/2001, PG&E filed for bankruptcy and emerged in 2004 largely as it had been prior to the bankruptcy. Although there were electricity service disruptions during the crisis, the bankruptcy itself did not cause any disruptions. Contingencies exist to keep the lights on. It is reasonable to expect that once again, no service disruption will occur as a result of the bankruptcy.
In the 2018 legislative session, SB 901 was enacted that allows PG&E to recover some of the liability from the 2017 fires, as well as liabilities going forward beginning in 2019. That bill however, being passed and signed just prior to the Camp Creek Road Fire in Butte County, did not include wildfires that occurred in 2018. But for the fires that the bill does cover, customers can expect their electricity bills to go up either via regulatory approval of rate increases or via what is called “non-bypassable charges” on all bills. How much is unknown at this time, as is much of what may play out in the bankruptcy and in other arenas such as the legislature, where PG&E’s fate will be determined.
Wildfire victims with claims against PG&E may be at risk of smaller payouts, and those of limited economic means, as always, face the greatest degree of uncertainty and suffering.
For the purposes of this article, I am largely referring to communities in Community Choice Energy service territories. What happens to the customers of these Community Choice agencies (CCAs)? It is hard to say at this time, but at the time of this writing, there is no reason to believe that CCA customers are in any kind of unique or differing situation compared to PG&E bundled customers (customers who have opted out of their CCA or live in PG&E service territory where there is no CCA).
One area where there may be some prospect for a good outcome for CCAs is in regard to the exit fees that they pay to utilities for power purchased in years past for the customers that have now departed in part to the CCA. This fee is also known as the Power Charge Indifference Adjustment, or PCIA. The fee pays for power contracts, mostly renewables, that were struck 5, 10 to 20 years in the past, when renewable energy was much more expensive. So these contracts are all above current market prices. Although it would be a complex and controversial affair to renegotiate these contracts, a bankruptcy is where and when this kind of thing would most likely happen, and doing so would benefit all electricity customers, CCA and bundled alike. We are all paying those above market costs. Some experts are adamant that these contracts cannot and should not be abrogated, others argue that the unprecedented nature of the dynamics we are facing should be taken into account and renegotiating these contracts should be considered. A PV Magazine article features the two points of view,
The Global Climate
Many experts whose thinking is largely stuck in the 20th century paradigm of big centralized generation, big transmission, and helpless ratepayers (not customers with a choice, but captive ratepayers) who just pay the bills and dare not ask too many questions, assert that we need to keep the big utilities as is in order to do big renewables. They are saying we cannot let PG&E fail, with its ability to do large scale renewables and other climate-addressing projects and programs. They’ve got it all wrong. They are ignoring the global transformation that is going on all around them.
The central station model is dying and is being replaced with a dynamic, decentralized, democratized, digitized, and decarbonized system where ratepayers are being transformed not just into customers with more choices, but also into clean generators and manipulators of their own electricity use. With the advent of practical and affordable stationary energy storage, this trend will only grow. This is where the response to the global climate crisis is the most effective, at the most local level – every single household, business, and institution in every community plays a role. We don’t need a U.N. agreement to roll out the response, the response is occurring at the local government level. And at the local government level, the best vehicle for navigating the transition to a localized energy paradigm, is Community Choice Energy. The state should recognize this and should work with all of the stakeholders including CCAs to strengthen their role in advancing the new paradigm.
Some have referred to the looming PG&E bankruptcy as among the first large climate bankruptcies. This may well be true. It may also be true that opportunities may emerge in the process that will enable communities to leap forward into the new clean decentralized energy system that can also by the way, be far more resilient against future calamity of any sort, if it is designed well with self-sufficient and islandable mini-grids, among other things.
The Center staff is keeping its eye on the situation as the story continues to break. We are in the early days. Check back at both the Center for Climate Protection’s e-news and Clean Power Exchange’s e-news as the story unfolds.