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Carrizo Plains solar farm’s credit rating drops to ‘junk’ as PG&E bankruptcy looms

Representatives for the massive Topaz Solar Farm in the Carrizo Plains are keeping an eye on PG&E, now that the farm’s only source of revenue seems poised to declare bankruptcy.

The 550-megawatt photovoltaic solar farm in eastern San Luis Obispo County relies on the cash-strapped public utility. By contract, PG&E purchases 100 percent of the electricity produced at the farm.

“Topaz is monitoring the dynamic situation surrounding PG&E’s financial situation,” Jessi Strawn, director of corporate communications for Berkshire Hathaway Energy, wrote in an email to The Tribune on Tuesday. “Topaz continues to perform obligations under its power purchase agreement.”

“Maintaining financially healthy utilities in California is good for current and future renewable energy investments in the state,” Strawn added, “and is important for meeting the state’s renewable energy goals.”

Berkshire Hathaway Energy, also known as BHE Renewables, owns the farm.

PG&E’s potential bankruptcy is already taking a toll on the solar farm’s credit rating.

S&P Global Ratings downgraded Topaz Solar Farm’s credit rating from “BBB” to “B” on Jan. 10— a downgrade that pushed the farm’s rating into “junk” status.

Corporations whose credit rating is below a “BBB” are typically more susceptible to defaulting on payments, and for those with a “B” rating, “adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments on the obligation,” according to S&P’s ratings guide.

In its decision to downgrade Topaz, S&P noted the solar farm “receives all of its revenue from PG&E under a long-term power purchase and sale agreement (PPSA). Our rating on the solar project is currently capped by our view of the credit quality of PG&E, its utility offtaker.”

S&P also downgraded PG&E’s credit rating to “B” last week.

S&P kept Topaz Solar Farm on its Creditwatch negative listing — meaning its rating could still go down — to reflect “the increasing risk that we will downgrade PG&E by one or more notches over the next few months.”

If S&P lowers its PG&E ratings again, it could do the same to Topaz Farms, it said.

PG&E’s potential bankruptcy filing could trigger a cross default for Topaz’s financing, S&P warned, unless the power contract with PG&E is replaced within 90 days of the filing.

Strawn declined to comment further on the farm’s relationship with PG&E, or whether it was seeking other purchasers of its electricity. She also declined to disclose how many people work at the farm.

According to its website, Topaz Solar Farm has added $417 million into the local economy — including $192 million for the roughly 400 construction jobs required to build the plant between 2012 and 2014. That total also included “$52 million in economic output for local suppliers, $14 million in sales taxes during construction and up to $400,000 per year in new property tax revenues,” according to the website.

The farm spans about 4,700 acres and provides enough electricity to power more than 180,000 average California households, according to the website.

 

Carrizo Plains solar farm’s credit rating drops to ‘junk’ as PG&E bankruptcy looms, by Kaytlyn Leslie, The Tribune, January 16, 2019.

How will PG&E’s bankruptcy impact SLO County? Your questions answered

Now that it looks certain PG&E will declare bankruptcy, you might be wondering what that means for San Luis Obispo County.

After all, the utility is the biggest private local employer, and operates Diablo Canyon nuclear power plant, which is currently in the early stages of an intensive, decades-long shutdown.

So here are the answers to key questions that arose soon after PG&E’s announcement Monday.

If you have more questions you’d like answered, send them to Tribune reporter Kaytlyn Leslie at kleslie@thetribunenews.com and they could be featured in a follow-up.

Q: When will PG&E file for bankruptcy?

On or about Jan. 29. The utility was required, under a state law signed in September by former Gov. Jerry Brown, to give 15 days’ notice before filing. That’s what it did Monday. The notice came out about 12 hours after CEO Geisha Williams resigned.

Q: What has PG&E said about this move?

In a press statement, the utility company said it “does not expect any impact to electric or natural gas service for its customers.” It also said it is “committed to continuing to make investments in system safety as it works with regulators, policymakers and other key stakeholders to consider a range of alternatives to provide for the safe delivery of natural gas and electric service for the long-term in an environment that continues to be challenged by climate change.”

It also said its employees are expected to continue to receive their pay and benefits.

Q: What happens to Diablo Canyon decommissioning?

Business as usual, according to PG&E. Normal operations at the nuclear power plant are not expected to be impacted by the bankruptcy, and the decommissioning process is expected to move forward as anticipated, PG&E spokesman Blair Jones told The Tribune on Monday.

No layoffs of workers are anticipated, and the company does not have plans to sell or close Diablo Canyon prematurely.

Q: If PG&E goes bankrupt, will it still pay local property taxes?

PG&E is the largest taxpayer in San Luis Obispo County, representing about 5.88 percent of the county’s total budget, according to documents filed with the California Public Utilities Commission during the Diablo Canyon closure consideration.

When PG&E last went bankrupt in 2001, the company at first paid less than half of its property tax due that year, according to previous Tribune reports. (PG&E paid the rest at a later date.)

That isn’t expected to happen this time. Jones said on Tuesday that the company still intends “to honor and pay franchise taxes as normal, following the Chapter 11 filing.”

This means the county, local school districts, flood control zones and cemetery districts that receive revenue from PG&E’s property taxes will likely still get that money this year.

Q: What about local donations from PG&E?

This is one area that will definitely be impacted by the bankruptcy. According to the company’s “Reorganization Information” FAQ on its website, its charitable giving program for 2019 has been put on hold and will be subject to review under the bankruptcy proceedings.

“We regret we cannot make any financial commitments toward events, programs or partnerships at this time,” reads the website.

The PG&E Corp. Foundation’s charitable giving program — separate from the above program — is also being re-evaluated.

So don’t expect any of those big checks from the company this year.

Q: What will happen to workers’ pensions?

Jones on Tuesday said PG&E doesn’t expect any changes to its tax-qualified pension plan.

“The company currently intends to continue to make regular pension contributions to that plan as normal,” he said.

Tom Danzell, business manager for the International Brotherhood of Electrical Workers, Chapter 1245, said on Tuesday that though he thinks the likelihood of the proceedings impacting local pensions is “extremely low,” it is one of the union’s most pressing concerns.

“It’s a high damage if it were to. It’s something of great concern to employees and retirees,” he said.

The union, which Danzel said represents 500 Diablo Canyon workers and a couple hundred other electrical workers between Buellton and Templeton, is committed to protecting its workers through the proceedings, he added.

Q: Didn’t the Legislature bail out PG&E?

The Legislature, in passing SB 901 last fall, gave PG&E and other utilities limited protection against wildfire claims. Among other things, the law says the Public Utilities Commission could allow utilities to pass some wildfire claim expenses onto ratepayers if the utilities aren’t strong enough financially to shoulder the costs themselves.

The protection, however, only includes the 2017 fires, not the massive Camp Fire last year. Assemblyman Chris Holden, D-Pasadena, earlier vowed to would introduce legislation to extend the protections to include the Camp Fire, but said Monday he won’t.

“The playing field of solutions, quite frankly, has shifted from the Legislature to the courts,” he said.

Fire officials have not determined a cause for that fire, but many residents already have sued PG&E, which had a power-line malfunction near the fire ignition point.

Q: Does bankruptcy mean PG&E would go out of business? Will the lights go out?

No, and no. PG&E would file for protection under Chapter 11 of the federal bankruptcy code. Chapter 11 allows the company to stay in business while it sorts out its ever-growing debt load. PG&E kept the lights on during the three years it spent in Chapter 11 between 2001 and 2004, when it was clobbered by rising power costs during the energy crisis. The state suffered several days of rolling blackouts in 2001, but they were spread beyond PG&E’s territory and weren’t caused by the bankruptcy.

Q: Will bankruptcy lead to higher rates?

Rates could go up, but not necessarily because of a bankruptcy filing.

Pacific Gas and Electric Co. has already asked the Public Utilities Commission for authority to raise rates by 6.4 percent in 2020. If the rate hike is granted in full, monthly gas bills would increase $1.84 and electric bills would rise $8.73, on average. The higher rates would generate about $1.1 billion in additional annual revenue. PG&E says about half would be spent on wildfire prevention initiatives, such as installing high-definition cameras in remote areas and trimming trees more aggressively.

But bankruptcies can add enormous legal costs, and PG&E could seek to have ratepayers absorb those expenses. “Bankruptcy is never a clean, easy process, and there’s a lot of costs involved just in terms of lawyers and accountants,” said James Bushnell, a UC Davis energy economist. “Some of that is going to be passed onto ratepayers.”

Mark Toney, executive director of The Utility Reform Network in San Francisco, said ratepayer interests would be neglected. “It puts the decision in the hands of a bankruptcy judge whose first priority is paying creditors off. The ratepayers are the last priority.”

Q: How does bankruptcy benefit PG&E?

Chapter 11 gives companies breathing room of sorts, the chance to sort out their debts while they keep operating. One possible outcome is that PG&E would use a court-supervised auction to sell its natural-gas division to raise money to pay wildfire claims.

Q: What about PG&E executives?

Williams, the former CEO, will get her severance payments, according to a statement filed by PG&E on Monday with the Securities and Exchange Commission. That will total nearly $2.4 million, according to an earlier filing.

Q: Will wildfire survivors get paid in full?

Bankruptcy could reduce the amount of money available for paying survivors who’ve sued PG&E over the Camp Fire and the 2017 fires. Survivors would be declared “unsecured creditors” and would be lumped in with other such creditors — namely the investors who hold roughly $18 billion in long-term debt owed by the utility and its corporate parent, PG&E Corp.

Wildfire victims seeking recovery “could be in deep trouble,” said Jared Ellias, a bankruptcy-law expert at UC Hastings College of Law in San Francisco.

Ellias did say, however, that bankruptcy could speed the processing of damage claims. A bankruptcy trustee could require that survivors get some funds long before the courts could resolve the mountain of lawsuits. “Bankruptcy is often much faster than state court,” he said.

Q: So how much would these creditors receive?

It’s too early to tell. But it’s worth noting that PG&E’s bonds have been trading at about 78 cents on the dollar, said Carol Levenson of Gimme Credit LLC, a debt-analysis firm. That suggests bondholders aren’t counting on getting paid in full, she said. The same could apply to fire survivors.

Survivors’ lawyers say they believe they can recover damages for their clients regardless. “PG&E has a lot of assets,” said Dario de Ghetaldi, a Bay Area lawyer who’s suing PG&E on survivors’ behalf. “I think there will be sufficient assets to protect the victims ultimately.”

Q: What happens if the gas division is sold?

For many California ratepayers, it would mean writing two utility checks each month instead of one. Sacramento residents do that already, paying PG&E for gas and SMUD for electricity.

A sale would be overseen by the PUC. But it brings up another concern for Northern California residents, many of whom haven’t forgotten the San Bruno gas explosion that killed eight people and leveled a neighborhood in 2010: Who would be their new gas company or companies, and would they be any better than PG&E?

“We really have to make sure that who they sell it to is experienced (and) has a good track record in operating gas pipeline systems in a safe manner,” Toney said. “We don’t want to see venture capital firms buying it or parties that don’t have experience and aren’t going to put the public interest first.”

Q: Have PG&E stockholders been affected?

Yes. The company already suspended quarterly dividend payments in late 2017, and its stock price has been crushed since it disclosed that it experienced trouble on a transmission tower near the spot where the Camp Fire ignited Nov. 8. PG&E shares fell to $8.17 on Monday and have lost 80 percent of their value since the Camp Fire started.

Q: What happens next?

Aside from bankruptcy, plenty. A federal judge has told PG&E to appear in court Jan. 30 to respond to his plan to require the company to fix transmission lines and take other safety steps. In February, PG&E will release its latest financial results, which will provide more detailed analysis on the potential liabilities from the Camp Fire.

For more information on the reorganization efforts, visit PG&E’s “Reorganization Information”page on its website, www.pge.com.

 

How will PG&E’s bankruptcy impact SLO County? Your questions answered, by Kaytlyn Leslie And Dale Kasler, The Tribune, January 15, 2019.

What happens to a bankrupt PG&E’s solar contracts?

As soon as this morning’s news hit the wires, one of the first questions asked around energy twitter was what was going to happen to the gigawatts of wind and solar projects that hold contracts with Pacific Gas & Electric Company (PG&E), now that it has announced plans to file for bankruptcy.

As usual there were a variety of views, with Tyler Norris of Cypress Creek Renewables and Jigar Shah expressing the opinion that these contracts were unlikely to be vacated.

However, Ben Serrurier of Cypress Creek warned that there could be “haircuts” to older power purchase agreements (PPAs).

 

Any perception that these contracts are safe was further undermined by both Fitch and S&P downgrading the credit rating of the Topaz Solar project before the bankruptcy.

So what is it? Are these contracts safe, or not? The truth is that no one we talked to was willing to make too strong a statement one way or the other, but we did get some insights into what might happen.

 

Unprecedented

PG&E has announced that it will file a voluntary petition for Chapter 11, which is a financial move that allows it to reorganize its debts, and does not involve liquidation. Along with this, the utility is expected to continue normal operations including supplying power to its customers.

And while we have had utility bankruptcies – PG&E has even gone bankrupt before – what we have not had is a utility bankruptcy in the era of strong renewable energy mandates. This was noted by Elias Hinckley, an energy lawyer at firm K&L Gates.

“California consumers are still going to need power,” Hinckley told pv magazine USA. “That power is still going to have to provided under the regulatory framework that California has created, which sets a high bar for renewable energy inclusion.”

Solar Energy Industries Association (SEIA) has also expressed that the California government may play a role. “We are confident that California’s leaders will work to ensure that existing contractual obligations for solar projects are honored and that the state lives up to its climate commitments,” stated SEIA CEO Abigail Ross Hopper. “SEIA is monitoring this issue closely and engaging with the Governor’s office, legislators, and the PUC to protect the state’s investments in current and future renewable energy.”

And while exactly what happens from here is unclear, legal precedent suggests that it will be the bankruptcy court that is the final arbiter. In fact, in September a bankruptcy court in Ohio asserted that even though wholesale power contracts are governed by the Federal Energy Regulatory Commission, it had primacy in deciding the fate of power contracts signed by Ohio utility FirstEnergy.

In terms of how the court could decide, another factor could be how contracts are structured.

 

Uncertainty

In the meantime, another impact of this development is that it is likely to throw any pending contracts with PG&E into chaos. This is less of a concern for solar. PG&E, like California’s other two large investor-owned utilities, over-procured renewable energy in advance of state’s 2020 renewable energy mandate, leading to a lull in large-scale procurement.

However for batteries this could be a bigger deal, and Hinckley of K&L Gates says this uncertainty is actually the biggest issue for California’s large-scale energy storage market.One factor is that the bankruptcy process may last years, and until it is concluded solar and storage projects seeking to sell power to PG&E may be prohibitively difficult to finance.

 

The future of utilities

But by far the biggest question is what will happen after the Chapter 11 process. California regulators have already suggested that they may break up PG&E or make it public, and there is no guarantee that the post-bankruptcy utility will look anything like it does today.

But it is not only PG&E that is in danger.

“I don’t think people have fully realized how big of a thing this is, and it isn’t just PG&E that has exposure here,” notes Hinckley. He observes that with climate change intensifying wildfires, utilities in fire-prone regions could see an increase in their basic cost to operate.

Someone is going to have to foot the bill for this, and if this involves a big increase in the price of retail electricity, this could drive greater adoption of rooftop solar and storage.

There are many unanswered questions here, and we at pv magazine USA will be exploring these in the coming weeks and months as this story plays out.

 

What happens to a bankrupt PG&E’s solar contracts?, by Christian Roselund, PV Magazine, January 14, 2019.

Who Could Get Hurt by PG&E’s Fire-Driven Bankruptcy

PG&E Corp., owner of California’s largest electric utility, warned Monday that it plans to file for bankruptcy protection on Jan. 29, pushed to the brink by wildfire lawsuits that could cost the company $30 billion. It’s the latest fallout from two years of massive blazes that have killed more than 130 Californians and destroyed tens of thousands of properties. The move could trigger big changes for PG&E, its 20,000 employees and the roughly 16 million people it serves. It raises the question of whether people who blame PG&E for burning down their homes will receive the compensation they want. And could bankruptcy derail California’s fight against global warming?

1. Will the lights stay on?

Yes. When utilities file for bankruptcy, they don’t cease operations. PG&E’s utility unit — Pacific Gas and Electric Co. — filed for bankruptcy in 2001 during the California electricity crisis without interrupting service. PG&E said Monday it expects to have $5.5 billion in “debtor in possession” financing lined up to carry it through the bankruptcy process.

2. Will customer bills go up?

Probably, but it’s impossible to say until the bankruptcy process is well underway. And for once, the decision to raise rates won’t rest solely with regulators at the California Public Utilities Commission. Rate increases will be tied to whatever reorganization plan the bankruptcy court judge overseeing the proceeding approves. California passed a law last year allowing PG&E to pass on to ratepayers some of the costs of wildfires for which it had been blamed in 2017, but it’s not clear how the law’s provisions will apply to a company that’s already in bankruptcy. Indeed, some of those provisions were designed to prevent utilities from going bankrupt.

3. What about the employees?

They will continue to work, responding to outages and maintaining the company’s vast web of wires and natural gas pipelines. They will still get paid, and the company will continue to fund their health care, a senior executive with the company’s Pacific Gas and Electric utility said Monday.

4. What happens to all the wildfire victims suing PG&E?

Filing for bankruptcy puts those lawsuits — total estimated liability: $30 billion — on hold and wraps them into the bankruptcy proceedings. That’s part of bankruptcy’s appeal to PG&E. The company would be able to bring all those cases into a single forum for resolving its financial problems, including wildfire suits. Bankruptcy filings also can force litigants to accept smaller settlements than they would have been able to negotiate otherwise.

5. How about the shareholders?

Don’t expect to see your dividends again anytime soon. PG&E stopped issuing dividends after the 2017 fires, and a bankruptcy proceeding would likely put off the resumption of issuing dividends by several years. But analysts don’t expect shareholders to be wiped out.

6. What role is the state taking?

The legislature last year gave PG&E the ability to issue bonds to pay off its 2017 wildfire lawsuit costs. A key state politician has drafted — but not yet introduced — a bill that would do the same for 2018. But PG&E argues the bond process set up by the legislature will take too long to help. Meanwhile, California politicians seem to be losing patience with PG&E. Governor Gavin Newsom’s response Monday morning didn’t indicate he would try to prevent the bankruptcy.

7. Could this interfere with California’s climate change goals?

California is requiring all its utilities to increase their use of renewable power, and PG&E has already lined up enough power purchase contracts to meet the state’s targets for the next few years. But the state’s climate fight very much relies on healthy electric utilities in multiple ways, such as deploying electric vehicle charging stations and making homes more efficient. Newsom is expected to make climate one of his signature issues and has already said that he wants California’s utilities to be strong enough to invest in the state’s energy transition. Meanwhile, analysts are waiting to see if PG&E will use bankruptcy proceedings to get out of some of the most expensive renewable contracts it signed years ago, before the costs of wind and solar power plunged.

 

Who Could Get Hurt by PG&E’s Fire-Driven Bankruptcy: QuickTake, by David R. Baker, Bloomberg, January 14, 2019.

Governor Newsom Statement on PG&E Announcing Intention to File Bankruptcy

SACRAMENTO — California Governor Gavin Newsom issued the following statement after the Pacific Gas and Electric Company (PG&E) announced its intention to file for bankruptcy:

“PG&E provides gas and electric service to 16 million Californians. From the moment I was elected, I have been closely monitoring the impact of PG&E’s existing and potential future liability for the deadly wildfires on the victims of the fires and the consumers who rely on PG&E for their electric and gas service.

“When I took office one week ago today, I immediately instructed my team to meet with the California Public Utilities Commission, CAISO, PG&E, and labor unions representing the workers who work for PG&E. My staff and I have been in constant contact throughout the week and over the weekend with these stakeholders and regulators. Everyone’s immediate focus is, rightfully, on ensuring Californians have continuous, reliable and safe electric and gas service.

“While PG&E announced its intent to file bankruptcy today, the company should continue to honor promises made to energy suppliers and to our community. Throughout the months ahead, I will be working with the Legislature and all stakeholders on a solution that ensures consumers have access to safe, affordable and reliable service, fire victims are treated fairly, and California can continue to make progress toward our climate goals.”

 

Governor Newsom Statement on PG&E Announcing Intention to File Bankruptcy, Office of Governor Gavin Newsom, January 14, 2019.

PG&E tells local officials bankruptcy filing won’t affect energy rates

Pacific Gas & Electric Corp., the country’s largest utility, announced Monday it will file for Chapter 11 bankruptcy — a move that creates uncertainty as to whether Humboldt County energy ratepayers will be affected.

PG&E currently faces $30 billion in potential damages from litigation over a series of wildfires in California during 2017 and 2018. Many were killed and thousands of structures were destroyed.

“The number one priority must be to protect ratepayers and fire survivors,” state Sen. Mike McGuire said in a statement. “We must ensure PG&E doesn’t miss a beat with their electric and gas contracts and we must have survivors at the top of mind to make sure they are taken care of every step of the way.”

The Redwood Coast Energy Authority Board of Directors will receive an update Jan. 28 as to how the filing will impact local energy rates. The board has already heard from PG&E, which said the utility’s bankruptcy won’t change rates “in any way,” RCEA board member and 2nd District Supervisor Estelle Fennell told the Times-Standard.

“We’re working with PG&E and (Community Choice Aggregators) to find out in the long term how they’re going to resolve PG&E’s role in the provision of power,” Fennell said.

The California Public Utilities Commission, which oversees all state utilities, could possibly look at a restructuring, Fennell suggested.

Locally, PG&E owns multiple Eel River dams and over 5,000 acres of land in the area, which the utility was using for the Potter Valley energy project. In September, the utility began seeking to auction off the parcels associated with the project.

Rep. Jared Huffman said the utility’s status will be a state issue and out of his purview, but he added that it’s “hard to imagine” that the bankruptcy won’t affect ratepayers at some level, given the scale of liability.

“As we work through this issue — and I have no idea how it ends relative to PG&E solvency — we have to confront this bigger issue of climate change and disaster preparedness,” Huffman said. “Whatever happens in the PG&E bankruptcy, I think we’re going to need to look at creative reforms so we don’t have mass firestorms caused by failed power supplies and dry conditions.”

Shomik Mukherjee can be reached at 707-441-0504. The Associated Press contributed to this report.

 

PG&E tells local officials bankruptcy filing won’t affect energy rates, by Shomik Mukherjee, Times Standard, January 14, 2019.

CalCCA Statement on PG&E Bankruptcy Announcement

Concord, Calif. – With Pacific Gas & Electric (PG&E) facing billions of dollars in potential wildfire liabilities the investor-owned utility has announced it is on the verge of filing for protection under Chapter 11 of the U.S. Bankruptcy Code. Today, the California Community Choice Association (CalCCA) issued the following statement:

“Community Choice Aggregators (CCAs) are committed to providing reliable service, clean energy at competitive rates, and innovative programs that benefit people, the environment and the economy in communities across California. They are closely monitoring any developments related to PG&E’s financial situation and are in the process of evaluating potential impacts on CCA customers and operations.”

###

About CalCCA: The California Community Choice Association supports the development and long-term sustainability of locally-run Community Choice Aggregation (CCA) electricity providers in California. There are currently 19 operational CCA programs in California serving an estimated 8 million customers.

For more information about CalCCA, visit www.cal-cca.org.

Press Contact: Leora Broydo Vestel

(415) 999-4757 | leora@cal-cca.org 

Modern energy infrastructure could mitigate California’s wildfire crisis

What is the value of technology that can sense a problem with a power line and cut the electricity flowing through it faster than it’s able to hit the ground and ignite nearby vegetation? What about mini independent power grids that can disconnect from the main utility and function in the case of a system-wide failure — allowing critical infrastructure like hospitals and first responders to still operate while mitigating the potential fire hazard for the larger community?

Clean technologies like these that allow greater control over the power grid already exist.

They’re the kinds of solutions that should make hard choices easier — like the decision that local utility PG&E had to make about whether or not to keep power running during November’s fire in Paradise, California. Solutions like these mean that people may not lose their homes to fire, that power can be restored in minutes or hours versus days or weeks, and that essential services can keep lights and heating and cooling systems on during emergencies.

The question is — why aren’t utilities racing to incorporate them?

We used to be a nation that invested in energy technology and while some utilities have begun testing and incorporating newer clean technologies — we’re not anywhere near a transition.

The conversation has been stuck at the estimated $1 trillion cost of building a modern smart grid across the country. But we’re already spending $150 billion per year right now from outages due to weather alone. And in 2017, PG&E faced up to $6 billion for damages from that year’s wildfires. At that price, across the country, we could be integrating synchrophaser sensors that can detect and react within seconds to problems along miles of power lines, (which San Diego Gas and Electric has begun doing), along with microgrids.

Microgrids would make the biggest difference in a natural disaster. A large connected grid means limitless vulnerabilities that can wipe out the entire system, and continuous power that’s hard to isolate and manage when there are trouble spots. Self-contained and resilient — if there’s a problem with a microgrid, it only affects the immediate area. In the case of a wildfire it can be entirely shutdown, remotely managed, and easily restarted once danger has passed. Their small, compact nature also means that select sections of the grid can be kept in operation even if everything else is off.

While major utilities in the state have yet to adopt them, California has notable microgrids in operation — several of which belong to the military and serve as teaching examples: Camp Pendleton, Fort Hunter Liggett and Borrego Springs. Even Alcatraz runs on a microgrid.

Historically, the United States has always made the shift to the next era of power generation — from wood and hydro, to coal, to oil and then nuclear — but that hasn’t been happening this time around as renewables and clean technologies have become viable. The current power grid is literally stuck in the 60’s — an analogue system that relies on centralized generation and endless miles of cables, poles and substations spread over long distances. One major disruption along the line and the whole thing can go down, and worse, as we’ve repeatedly now seen in California — it can contribute to the damage done.

The unfortunate short answer to why utilities have been slow to adopt these innovations is that “it’s complicated.” It involves changing behavior and re-orienting and aligning current disincentives built into the regulated utility system into incentives to invest and deploy. This is the nature of moving from central generation to the future of distributed generation. Utilities, regulators and politicians are unsure of how to control and make money from distributed generation.

As the fires in California have demonstrated, natural disasters as a result of drier land from lack of rainfall, increasingly dangerous storms and other climate change related problems are already here and will only get worse. The California Climate Assessment forecasts that by 2050 the area burned by fire in the state will increase by 77 percent and costs will go up by 24 percent.  — But the need for better technology is as simple as the reality that it will always be impossible to maintain tens of thousands of miles of cables and the natural world that grows around them to a level that ensures safety without incident.

Making the investment in modernizing our energy infrastructure means we’ll be prepared with a more resilient system for future natural disasters. Now that we know — there’s no excuse for inaction.

Jigar Shah is the founder of renewable energy company SunEdison.

 

Modern energy infrastructure could mitigate California’s wildfire crisis, by Jigar Shah, The Hill, January 12, 2019.

Embattled PG&E Has Long History With California’s New Governor

With its equipment suspected of causing the deadliest wildfire in California history, PG&E Corp. may find its fate in the hands of someone familiar: Gavin Newsom, the former mayor of its home town.

Newsom, California’s governor-elect, will take office in early January, and the aftermath of Butte County’s Camp Fire will be one of the most pressing issues on his agenda.

The disaster killed at least 88 people and leveled the town of Paradise, creating a crisis for thousands of people left homeless. It also has sent shares of PG&E, the state’s largest utility, plunging and left regulators raising questions about its future — matters that Newsom, ultimately, must address.

Whether he will prove to be an ally for the company is an open question.

As mayor of San Francisco from 2004 to 2011, Newsom has already had to work closely with PG&E, whose ties to the city stretch back more than a century. He was considered friendly with the company, opposing efforts to create a municipal utility. In the past year, PG&E — and almost all its top executives — gave to his gubernatorial campaign.

And yet, Newsom also pushed PG&E to close one of the city’s last fossil-fuel power plants. As mayor, he berated the company for repeated equipment failures that caused manhole fires, blackouts and in one case, a sidewalk explosion that left a pedestrian with severe burns. More recently, as lieutenant governor, Newsom pressured PG&E to close California’s last nuclear plant.

Now the company is facing one of its gravest crises. Although no cause for the Nov. 8 Camp Fire has been determined, one of PG&E’s high-voltage transmission lines malfunctioned about 15 minutes before the fire started, in the same area where investigators say the flames began. The utility’s equipment has already been blamed for starting 17 of last year’s Northern California wildfires, which together killed 44 people, and survivors of this month’s blaze have filed suit against the company.

PG&E faces an estimated $17 billion in liabilities for the 2017 fires, and CoreLogic Inc. expects losses from the Camp Fire to reach as high as $13 billion. While one state lawmaker plans legislation to help the company deal with any costs arising from the Camp Fire, another wants it broken up. And the state’s utilities commission is exploring whether PG&E needs to be restructured, or possibly split into pieces.

Newsom hasn’t taken a stand on the proposed legislation, and his staff declined to make him available for this story. He will, however, have to get involved, even if public anger at PG&E makes that perilous, said Dan Schnur, a veteran California political analyst.

“There’s going to be considerable public pressure on Newsom to act,” said Schnur, a professor at the University of Southern California’s Annenberg School of Communication and Journalism. “Legislators get to choose which fights they lead. Governors generally don’t have that flexibility.”

PG&E declined to comment specifically on its relationship with Newsom. But Lynsey Paulo, a spokeswoman for the company, said it makes a point of working with many politicians.

“PG&E holds itself to the highest ethical standards of public disclosure and compliance, and we participate in the political process, working with elected officials at all levels on a variety of matters that are important to our state and local communities,” she said.

Newsom’s predecessor, Jerry Brown, was seen as an ally for the state’s utility companies, whose help he needed to boost the use of renewable power and fight climate change. One of his closest aides — Nancy McFadden, who died this year — had previously worked for PG&E. The governor’s sister, Kathleen L. Brown, sits on the board of another California utility owner, Sempra Energy.

Newsom, a centrist Democrat and San Francisco native, was among many of the city’s political leaders who were “cozy” with PG&E, said Tom Ammiano, who served more than a decade on the board of supervisors before winning a state Assembly seat. (Ammiano is also a Democrat but hails from a further left-leaning faction of the party than Newsom.) The company, whose Pacific Gas and Electric Co. utility was founded in the city in 1905, had long been considered the 500-pound gorilla of local politics and remains one of San Francisco’s largest employers.

Ballot Opposition

Newsom sided with PG&E to oppose a 2008 ballot measure that would have increased San Francisco’s use of renewable power — and given city officials the ability to set up a municipal utility on PG&E’s home turf. The campaign against the measure was led by one of Newsom’s advisers at the time, who had also worked with PG&E. But Newsom insisted that the adviser kept the interests of his clients separate.

“We had the public power thing — we thought it would be a good idea,” said Jake McGoldrick, a former supervisor who served from 2001 to 2009. “I never saw him show any sign of interest in any kind of municipalization.”

But while Newsom was mayor, the city sued to stop a 2010 statewide ballot measure sponsored by PG&E that would have made it far more difficult for California cities and counties to get into the electricity business. The city couldn’t keep the initiative off the ballot, but voters defeated it, even after PG&E spent $46 million on the campaign.

As lieutenant governor, Newsom used his leverage as chairman of the State Lands Commission to pressure PG&E into closing its Diablo Canyon nuclear plant, which is almost surrounded by earthquake faults. The utility, already worried that a flood of cheap renewable power could soon render the plant unprofitable, decided to retire it. The commission extended the leases long enough to ensure the orderly closure of the plant, now scheduled to shut down in 2025.

The debate over Diablo Canyon didn’t prevent PG&E from donating to Newsom’s successful run for governor. The company this year gave $58,400, according to state records, while its executives added $41,500. Chief Executive Officer Geisha Williams pitched in $10,000. Newsom raised $47.5 million for his campaign, according to data from the California Secretary of State.

‘Done Right’

Nathan Ballard, who served as Newsom’s spokesman during much of his tenure as mayor, said Newsom always insisted that the company resolve its problems rather than pushing for its breakup. Such problems included replacing aging infrastructure in San Francisco that, several times, caught fire or caused blackouts.

“He was always very aggressive about making sure PG&E got it done right,” Ballard said.

Ballard, who said he talks to the governor-elect regularly but won’t be part of the incoming administration, said he has “no doubt” Newsom would tackle the issue of wildfires and utility liability.

“It will be driven by Governor Gavin Newsom,” Ballard said.

— With assistance by Romy Varghese

 

Embattled PG&E Has Long History With California’s New Governor, by David R. Baker, Bloomberg, December 2, 2018.

PG&E Proposes Ditching Demand Charges for Commercial EV Charging

Businesses generally need to see cost savings in order to justify switching to an electric vehicle fleet.

“They need the rates to be better than gas or diesel if they’re going to give up their diesel bus or truck,” said Cal Silcox, clean transportation strategy manager at California utility Pacific Gas & Electric.

Right now, there’s no guarantee that commercial and industrial customers in PG&E territory will see any fuel savings, he said. That’s largely because of the demand charges C&I customers are required to pay when their electricity use spikes — such as during a high-powered EV charging event.

That’s why PG&E is hoping to replace demand charges with a new subscription rate plan for customers that are using commercial EV (CEV) charging. The proposal, submitted to the California Public Utilities Commission Monday, allows customers to choose the amount of power they need for their charging stations and pay for it with a flat monthly fee — similar to picking a cellphone data plan.

The proposal would create a new rate class for CEV charging and would offer two types of rates within that: one for customers with charging up to 100 kilowatts and one for customers with charging over 100 kilowatts.

“As EV charging stations become more common in places such as multi-family residences, businesses, transit stations and other commercial spaces, PG&E has recognized that the existing rate structure does not best meet the needs of commercial EV charging,” according to a company press release. “Currently, public or fleet EV chargers on PG&E’s commercial electric rates can see higher costs than the typical business customer, on average. These costs pose challenges to the expansion of EVs and needed charging stations.”

CEV customers currently pay 30-40 cents per kilowatt-hour in PG&E territory, while commercial buildings pay 18-25 cents per kilowatt-hour, Silcox explained. The new plan brings customer costs in line with their cost of service. PG&E’s modeling shows that it could save a transit agency, for instance, 20-34 percent on what it is paying today.

“We think it should get the price down to equal or less than the cost of diesel so it’s competitive and…makes the business case for going electric positive for them,” he said.

While the subscription fee is lower than the demand charges PG&E’s commercial customers currently pay, the plan is not unlimited. So if a customer’s electricity usage exceeds its rate program, it will have to pay for overages. But because the plan is monthly (rather than yearly, as some commercial rates are), customers have more insight into their usage and can adjust quickly to avoid additional payments in the future.

Also, any CEV customer that buys a plan covering their maximum charging capacity installed on site should never go over that limit, unless they add more chargers. Some customers may intentionally pick a subscription plan that covers less load than their charging stations require, running the risk of overages. But they would only elect to do so if they thought they could save more money through managed charging.

In that scenario, imagine a transit agency has a fleet of five electric buses and five 50-kilowatt chargers to fuel them up, said Silcox. The agency could either buy a 250-kilowatt subscription plan and cover all of its needs for the five buses, or purchase a 200-kilowatt plan and cover the remaining 50 kilowatts of charging load with energy storage or load management and potentially pay less overall.

The new proposed rate also includes a basic time-of-use structure that remains the same every day of the week and throughout the year. The time-of-use rate is specifically designed to encourage CEV charging during the middle of the day (with super off-peak rates offered between 9 a.m. and 2 p.m.) so that customers are taking advantage of California’s surplus solar power.

Peak hours would start at 4 p.m. under the subscription plan, which aligns with new time periods approved by the California Public Utilities Commission earlier this year. The peak period for CEV customers would end at 10 p.m. (an hour later than other customers), when prices start to decline again.

A new approach to ratemaking

PG&E has been working with California’s other investor-owned utilities to develop a new framework for designing rates, which is focused less on conventional rate classes and more on meeting a customer’s specific needs, for, say, EV charging. The utilities recently outlined this “modern rate architecture” concept in a white paper.

Margot Everett, senior director of rates and regulatory analytics at PG&E, said the fundamental idea is that rates need to get more granular in order to reflect how electricity customers actually use a utility’s products, which include energy generation, as well as the poles-and-wires delivery system, other services around that, and the utility’s public policy initiatives such as low-income programs. This approach also involves creating a rate that reflects a customer’s fair share of their cost of service, without creating other distortions in rate design.

“That’s the direction the state is going,” Everett said. “Really creating transparency around rates, really making sure our rates are meeting customers’ needs and making sure customers are paying for what they use…and not paying for other people’s costs.”

When asked why other utilities don’t take the same approach, Everett posited it’s mostly because they’re hesitant to do so.

“I think you’re going against a norm that’s been part of rate design for 100 years,” she said. “Creating rate classes based on how big you are or who you are, your demographic…is just the way utilities have been doing this for years.”

“Other utilities can start thinking in terms of creating different customer classes and recognizing that with technology evolution and customer choice, customers are not as homogenous as they used to be,” Everett continued. “This type of rate design worked fine in the 1970s, when everybody had pretty much the same type of load. […] Now you have customers that have a lot of choice, and we need to be thinking about how our customers are different and [considering] that it costs us something different to serve them.”

Moving to this new ratemaking model will require finding ways to gather more data. It could also be met with some pushback. Rooftop solar supporters have long opposed putting solar customers into a separate rate class from other residential customers, because these proposals typically reduce the economic benefits of going solar.

Things could be changing now that the solar market is maturing, though. And things could be different for EVs from the get-go, given that the additional load is generally a positive thing for utilities, whereas rooftop solar took load away.

PG&E says stakeholders have generally reacted favorably to the new subscription rate proposal so far. Everett said the California Public Utilities Commission and the advocacy group at the commission have also seen the plan receive positive responses. Regulators are highly motivated to approve this rate or something like it, she said, given that California’s two other investor-owned utilities already have CEV rates in place.

Because PG&E’s latest proposal isn’t tied to an EV infrastructure build-out and consequently doesn’t come with a big rate request, as previous EV filings have, the utility is hopeful it will move quickly.

Some industry members are too.

“ChargePoint applauds PG&E for the innovative commercial electric vehicle rate proposal that will, if approved, benefit EV drivers by significantly reducing barriers for operating charging stations in California,” said Renee Samson, director of utility solutions for ChargePoint, in a statement. ChargePoint hopes the new rate design will serve as an example for utilities around the country moving to support transportation electrification.”

“Creative new rate designs that help transit fleets like ours save on fuel costs will help enable us to make the transition to a 100 percent clean fleet, further reducing emissions on behalf of the residents that rely upon our fleet for safe, efficient, and reliable transportation throughout San Joaquin County,” said Donna DeMartino, chief executive officer for San Joaquin Regional Transit District. “PG&E’s proposed rate design provides a critical portion of that solution, and its approval will help bring us closer to our zero emissions goal.”

 

PG&E Proposes Ditching Demand Charges for Commercial EV Charging, by Julia Pyper, Greentech Media,  November 7, 2018.