CPUC opens door on potential PG&E rate hikes as soon as 2025

The California Public Utilities Commission opened the door on Thursday to potential PG&E rate increases as soon as next year, adopting a new rate making process that will let the utility recoup its costs for completing energization projects.

Energization projects help connect new customers to the electricity grid, increase capacity for existing customers, and increase transmission capacity to deliver greater loads in the future as the state moves to stop selling gas-powered vehicles by 2035 and achieve carbon neutrality by 2045.

Prior to the CPUC meeting was a protest outside its San Francisco headquarters organized by the Party for Socialism and Liberation. The group rallied against rate hikes and public safety shutoffs, which the company said it performed during the recent heat wave out of caution against wildfires.

The activists also called for the abolishment of PG&E entirely and replacing it with a nonprofit publicly controlled utility created by the Legislature in 2020.

The Golden State Energy Act, Senate Bill 350, created a nonprofit public benefit corporation to serve as a receiver for all of PG&E's assets. PG&E had filed for Chapter 11 bankruptcy in early 2019 after fires caused by its power lines burned hundreds of thousands of acres in Northern California and led to more than 100 deaths.

PG&E goes through an application process every four years to set rates in line with what the CPUC votes to be a reasonable revenue. But after state lawmakers passed Senate Bill 410, the "Powering Up Californians Act," and Assembly Bill 50 in 2023 to accelerate the electrification of the state's grid, the utility gained a new way to recover costs for upgrading its grid.

Under the rate setting plan for 2023-2026, PG&E was already required to spend about $2.5 billion of its revenue on energization projects. Thursday's vote paves the way for it to spend an additional $2.3 billion and recover a percentage through rate increases for completed projects.

The annual amounts PG&E could recover would be capped at $144.31 million in 2024, $91.568 million in 2025, and $99.071 million in 2026, according to the staff report prepared by Commissioner John Reynolds and administrative Judges John Larsen and Justin Regnier.

Part of the need for the law arose from the fact that PG&E and other utilities were not completing electrification projects fast enough to meet the state's growing demand.

Commissioner Darcie Houck said the projects were needed in some of the most important areas the state was trying to address. She listed housing, water treatment plants, data centers, EV chargers and hospitals as critical infrastructure that needed quick action from PG&E to be energized.

Houck said she was sensitive to the impact of rate increases and said any proposed increases would still be reviewed for reasonableness under CPUC procedures.

"But this infrastructure does cost money, and we have to balance those critical issues to make sure people are receiving the services that they need," she said during the CPUC's meeting.

Commissioners stressed that the vote Thursday was not a rate increase but was a necessary consideration in line with new requirements put on the utility by the state.

Still, several public commenters spoke in person and via phone at the hybrid meeting in San Francisco, objecting to any proposal to increase rates on customers when the company remained a for-profit entity.

Colin Miller, whose group protested rate increases and the utility's fundamental structure, told the CPUC during its public comment period that the commission should reject any rate increases the utility proposes.

"We are outraged that PG&E is seeking to raise our rates yet again when millions of Californians are already crushed by the rising cost of everything, rising debt, and struggling to make ends meet as it is," Miller said.

PG&E stock was valued at $17.96 per share at the end of trading Thursday, according to the company's website for its investors, up about 1.8% for the day.

The company said in February when it announced its 2023 earnings that it was not planning to raise rates beyond the rate of inflation, writing "we are focused on continuing to increase investment in our energy system while also containing customer bill impact at or below assumed inflation in the 2-4% range."

The company recorded a $2.2 billion profit in 2023, up from $1.8 billion in 2022, after posting substantial losses each of the previous three years, according to PG&E.

A spokesperson for state Sen. Steven Bradford, Chair of the Senate Committee on Energy Utilities and Communications, said he was not aware of the Golden State Energy plan moving forward since PG&E emerged from bankruptcy in 2020.

Roger Lin, attorney for the Center for Biological Diversity, said in a 2023 interview that the construction of transmission towers and power stations is the number one reason rates are increasing,

"Wildfire mitigation projects to bury transmission lines, which keeps them from starting fires, is the second largest reason our rates keep increasing. Transmission buildout is also the thing that lines the utility's pockets the most," he said.