Where Goes PG&E, then Goes Dominion?

PG&E Corp., California’s largest electric utility, has filed for bankruptcy protection after incurring billions of dollars in liabilities and potential liabilities in wildfire damages. The California legislature, totally controlled by Democrats, is giving the utility no succor, reports the Wall Street Journal. Writes the Journal:

A company that was once one of the most influential in Sacramento and regularly got its way on legislation and regulation now has few defenders left. The reason, Sacramento veterans say, is that years of bad news related to deadly fires and other disasters have made the company unpopular among the public.

That sentiment now outweighs the goodwill PG&E had amassed from years of lobbying, donations and other close ties to key leaders, they say.

What brought about this turnabout? Decades of strict zoning in metropolitan areas pushed up housing prices to stratospheric levels, impelling hundreds of thousands (millions?) of Californians to seek housing in cheap land and housing in the boonies. PG&E was required as part of its mandate to serve the public to extend electric power lines to these scattered developments. Meanwhile, state policy overturned the previous practice of clear cutting and controlled burns in woodlands, resulting in the accumulation of a massive amount of fuel. Then nature intervened in the form of an extended drought. When power lines failed, as they periodically do, they sparked massive wildfires.

PG&E may bear some share of the blame for California’s misfortunes. One can argue the particulars. But the political class also bears blame for policies that accelerated exurban sprawl and turned arid woodlands into potential furnaces. Of course, being a politician means never having to say you’re sorry.

One can only speculate what bankruptcy means for PG&E’s ability to maintain reliable electric service. The company filed for bankruptcy in 2001 and managed to survive, so it may arise again.

Electric utilities are a favorite whipping boy of the left. Nowhere is that more in evidence than in Virginia, where the leftist wing of the Democratic Party has made a practice of demonizing the power companies, especially Dominion Energy. (That’s not to say that Dominion hasn’t brought on much of the criticism upon itself, as Steve Haner’s reporting and commentary have amply demonstrated). However, much of the criticism is unwarranted, as I have strived to point out..

Many Virginia Democrats are refusing to take contributions from the power company, blaming the company for ills from coal ash to not moving rapidly enough toward a green electric grid. With the Dems poised to take control of the legislature, Dominion soon may face a more hostile environment than it has seen since the days of howlin’ Henry Howell. The PG&E scenario should terrify the executives in the Dominion C suite. Such an outcome could very well happen here.

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30 responses to “Where Goes PG&E, then Goes Dominion?

  1. Live by the sword, die by the sword. I’d like to know much more about the regulatory environment in California, the relative strength or weakness of any oversight agency, and history of legislative rushing into places it ought not go, before drawing any parallels to Virginia. I suspect not long ago PG&E wanted decisions made in the statehouse and not a regulatory courtroom, and is now paying a price for that. It will be pretty funny when, a year from now, Dominion is down at the Assembly pushing hard for SCC independence….

    • Steve says” I’d like to know much more about the regulatory environment in California, the relative strength or weakness of any oversight agency, and history of legislative rushing into places it ought not go, before drawing any parallels to Virginia.”

      As in so many things, Acbar is highly informed here. See below from his earlier comment on this website.

      “A history lesson:

      Years ago, in the ’80s, California utility bills became so loaded with subsidies like these that the typical retail electric bill became grossly larger than the actual utility-cost-based calculation. The PSC became powerless to stop the legislated subsidies and even added to them.

      There were some bright economists who thought up a clever way to defeat this trend using wholesale markets. The idea was, create a California electricity exchange into which anyone (including independent generators) could sell, and from which anyone (including resellers of bulk electricity) could buy, and let the retail customer have the right to buy from any of these resellers at a deregulated, competitive price, and consign the traditional utilities to a wires-only role, operating as common carriers, to deliver these competitive options to every customer that wanted them. There was a famous summary of this proposal, called the “Blue Book,” which won the support of all concerned. Even the utilities supported it, as they saw this as the only way out of the death spiral they were in due to all those subsidies. The economic forces of retail competition, or “retail access,” would do what legislators didn’t have the sense or political will to do: impose market discipline on retail rates.

      Well, it started a trend, that Blue Book, and the FERC decided in a series of late ’80s and early ’90s orders to impose wholesale markets on the entire nation, along with independent system operators to run them, and retail access became the rage in State after State, including in Virginia. Deregulation and market-based rates were adopted widely across the electric utility industry. We’ve still got those laws on the books in Virginia, but with severe restrictions these days on who can use them to actually gain retail access from the likes of Dominion.

      But it should surprise no-one that the bigger retail customers are getting restless, seeking to take full advantage of the vestige of retail access still available in Virginia and even looking to loosen those restrictions someday. And it should surprise no-one that Dominion and the other electric utilities will come to see using their rates for a subsidy machine to accomplish non-utility social goals as, ultimately, an existential threat. But in the short run, they’ll continue to trade a few popular subsidies tacked onto retail bills for the outrageously favorable rate treatment they are now receiving from the GA and the cowed SCC. That’s because the utility’s management, who know where this process will lead and dread the outcome, work for a holding company that has other, short-term financial imperatives and shareholders to please. And boy are they kept pleased.

      California, here we come. Or, deja vu all over again.”

  2. I’m agog at Jim’s penchant to weave these disparate things together!

    Do we also blame California politicos for building the roads that folks use to “sprawl”?

    Are “restrictive” policies present everywhere up and down California – and Virginia – and that’s what is driving “sprawl”?

    Are we “forcing” Dominion to provide electricity to “sprawlers” in the exurban commuting areas in Virginia also?

    Does the fact that California has suffered extreme droughts now for a decade have anything to do with wildfires – dozens, hundreds throughout California and the west – even in areas that don’t have “sprawl”?

    How in the world can someone conflate so many things together this way to blame “liberals” for all these things… gawd .. are they responsible for bad breath also?

    Geeze Jim… that kool-aid you’re slurping is ulta high octane this morning!

  3. Reed, yes – one problem with being down at the GA and trying to post so much is I don’t spend as much time with the resulting comment strings. Not many energy questions where Acbar or TomH won’t add valuable insights and history.

  4. Steve – Thanks, for your priceless and irreplaceable good work. Reed

  5. California law on campaign contributions …

    Corporations and unions:

    $29,200/gubernatorial cand.
    $7,300/other statewide cand.
    $4,400/legislative candidate
    Amounts are per election

    Dominion Energy contributions (2018 – 2019)

    Saslaw for Senate – $22,500
    Norment for Senate – $10,500
    Kilgore for Delegate – $10,000
    Wagner for Senate – $10,000
    Lucas for Senate – $6,000
    Cox for Delegate – $5,000
    Locke for Senate – $5,000
    McDougle for Senate – $5,000
    Sickles for Delegate – $5,000

    We’re 10 months away from the election and Dominion has already donated more to 9 Virginia legislators than would be allowed in California.

    Dominion’s largest contribution to an individual politician so far in this election cycle is to Dick Saslaw. Here are the percentages of votes Saslaw received in prior elections:

    2015 – 75.6%
    2011 – 61.7%
    2007 – 77.94%
    2003 – 82.5%
    1999 – 57.6%

    As of 12/31/2018 Saslaw had $874,145 on hand.

    So … why is Dominion providing so much in campaign contributions to a politician for life who never faces a competitive election and has almost a million dollars on hand?

    Because the Byrd Machine is alive and well in Virginia. Saslaw skims a good amount of these donations for various well heeled events then bundles the rest in contributions to party committees. These donations, in turn, are handed out to Democratic politicians who shrilly claim they take no money from Dominion.

    People in Virginia increasingly hate Dominion because Dominion is a typical Richmond based Byrd Machine corporation buying off politicians across the state.

    Dominion deserves the fate of P,G&E.

  6. California is a very different regulatory environment. Seems like Dominion is still living the outfall of Capps versus Rhodes versus Hully Moore, of Dominion versus Virginia Power versus the Corporation Commission. That’s the past, now, over 25 years past, time to move on — except Mr. Ferrell hasn’t. Getting Dominion’s financial way through the GA has indeed been profitable for the shareholders but the public trust has eroded, both in the electric company and in its nominal regulators, and rebuilding that trust is a long road ahead — even though I still believe the electric company is well run and solidly committed to public service.

    California has multiple utility regulatory bodies and complex politics over who runs what, including a lot of federal/municipal power agencies. California residents have been upset over what they see as lax attention by PGE to its rural distribution system and to the unusual number of fires caused by that company, measured even against its peers; the punitive response was to pass this current “absolute liability” law holding PGE shareholders responsible for all fire claims. Well, it clearly was an over-reaction. But they will work it out. The State still needs PGE.

    • Acbar says: “… both in the electric company and in its nominal regulators, and rebuilding that trust is a long road ahead — even though I still believe the electric company is well run and solidly committed to public service.”

      I too “still believe the electric company is well run and solidly committed to public service.”

      I also believe that a strong Dominion will be, and is now, critically needed to keep Virginia strong in providing stable and affordable electric power generation, transmission, and distribution, on which it future now, more that ever, depends. Hence, that California right now is Virginia’s dead canary in the coal mine, a hard lesson that Virginia needs to learn from, if it is to avoid California’s fate. There is much here to explore.

      While, this is irrelevant to today’s discussion, I recall (but might be wrong), that a highly regarded Environmentalist (a lawyer I believe), took charge of PGE during its revolution back in the 1990s the Acbar refers too. He was a very able guy as I remember.

  7. Jim’s argument about P,G&E being the victim of government induced sprawl does not hold water.

    A list of the most densely populated US cities shows Alexandria as the most densely populated Virginia city. There are 18 California cities with denser populations than any city in Virginia.

    There are 111 California cities more densely populated than the City of Richmond.

    In fact, of the 769 cities listed with populations of 50,000 or more (in 2016) California had 164 on the list. That’s 21.3% of the cities. California has just over 12% of the US population. Meanwhile, Virginia has 13 of the country’s cities with over 50,000 people or 1.7%. Virginia has about 2.7% of the US population.

    http://www.governing.com/gov-data/population-density-land-area-cities-map.html

  8. California is widely seen as the most urban state (see Figure 3). This has been achieved in large part through state legislation. Senate Bill 375 was a radical densification measure.

    “California’s Sustainable Communities and Climate Protection Act of 2008 (Senate Bill 375)aligns land use and transportation planning to drive development towards transit-accessibleplaces and reduce car dependency. SB 375 is the land use component of California’s wider strategy to reduce greenhouse gas emissions, codified by the 2006 Global Warming Solutions Act (Assembly Bill 32). AB 32 enabled the state to regulate emissions sources and set the aggressive goal of reducing emissions to 1990 levels by 2020. SB 375 requires California Metropolitan Planning Agencies (MPOs) to create a Sustainable Communities Strategy (SCS) aspart of the federally-mandated Regional Transportation Plan. SCSs lay out the locations and types of development needed to lower vehicle miles traveled and meet greenhouse gas emission reduction targets”

    http://www.newgeography.com/content/005187-america-s-most-urban-states

    In other words, while the Imperial Clown Show in Richmond has done nothing to implement Jim Bacon’s utopian view of high density human settlement patters California’s legislature has done a lot.

    • Jim’s view of high density human settlement in VA just hit another speed bump. Tysons landowners and developers are complaining to Fairfax County that the parking maximums are too low. Despite the Silver Line, those darn people from Virginia, the District and Maryland are driving to and from Tysons.

      https://www.tysonsreporter.com/2019/01/30/developers-take-aim-at-parking-maximums-in-tysons/?mc_cid=2e2e207aee&mc_eid=7ba6f187e5

      Development means more traffic. Even when developer and local government promises to contrary were made.

      • Yes, exactly, TooManyTaxes.

        And, as you well know, this refusal by these people in Tysons to look after the well being their fellow citizens and, indeed, to instead act contrary to the interests of others, has been going on now since at least the mid – 1980’s.

        I wish we had of had more citizens like you joining the fight at its beginning, before the problems were neglected for so long, that they became intractable for generation upon generation, despite your best efforts, as they have become today.

        There is a real civics lesson here, one I fear our schools and colleges and universities far too often neglect to teach.

      • “Development means more traffic.” There’s a tipping point. Development is non-stop in Manhattan and there is no way to expand the street proportionately to the level of development. Tysons may be far from that tipping point but I see no end to sprawl unless the density continues to rise until mass transit is the only viable option for most people.

        As I’ve said before, Tysons needs a re-thinking.

        1. Eliminate all curb cuts from Rt 7 in Tysons. Rt 7 becomes a throughway with no exits in Tysons.

        2. Build parking garages on the perimeter of Tysons (similar to Reston but with a larger perimeter).

        3. Ban parking in the core of Tysons.

        4. Redevelop the endless acres of parking lots in core Tysons into the kind of walkable multi-use community Jim Bacons talks about. Leave room for parks and athletic fields.

        5. Run a free connector bus system through Tysons. Once you park in the perimeter garage you either walk, bike of take the connector bus around Tysons.

        6. Encourage on-demand car rental, bike rental, scooters and delivery services in the Tysons area.

        7. Build, build, build.

  9. PGE is just escalating the issue and yes… at some point something more reasonable will emerge.

    But just to remind, PGE has a long history of arrogant behavior and has lost the support of both taxpayers and politicos which are now prone to use them as whipping boys.

    I think Dominion may be earning a similar reputation in Virginia if they are not careful.

    It’s not “liberals” as Jim seems to want to paint it.

    I think a LOT of folks now days, including all political stripes left and right have an evolving attitude towards utilities and monopolies.

    It includes how the cable TV and internet companies are operations

    AND it includes how things like pipelines and powerlines are done.

    Some of it is NIMBY but some of it is about a perception that companies like Dominion have too much power and are not using it in a way that benefits citizens and ratepayers but rather investors.

    With respect to PGE and fires – the west has for more than a decade seen more droughts, and not just where people have “sprawled”. Huge fires are now occurring in places where few people live and in terms of clear cutting , etc.. these forests have been there for thousands of years – dropping deadwood and littering the forest floors and for thousands of years there have been wildfires but not on the scale we are seeing now – because the climate itself has changed and the west is now dryer than before. The Colorado river is running much lower than before…

    Rather than blaming someone… liberals, etc… we need to deal with the realities that are now with us.

    Some folks can blame but blame does not deal with what we have to do right now in response and that seems to be too much for some folks.

  10. > state policy overturned the previous practice
    > of clear cutting and controlled burns

    *Federal* forest management policy blocked natural wildfires for a century, and Federal appropriations funded fire-fighting efforts.

    Federal courts forced the re-examination of where clear cutting was appropriate and where selective harvest was better, with Monongahela National Forest in West Virginia being one flashpoint. The US Congress, not California, passed the National Forest Management Act of 1976. Federal agencies own 57% of the California forests, and Federal officials determine how to manage that land.

    Blaming wildfires on state policy repeats a “blame the flakey D’s in California” political talking point more than reality. If you want to blame California politicians, then blame Virginia politicians too. Our forest management policy, like every state’s, has evolved through the same policies.

  11. “PG&E may bear some share of the blame for California’s misfortunes.”

    Electrical equipment was responsible for at least 18 of 21 significant fires in 2017 as well as fires in 2018, The New York Times noted. And evidently the utility’s was found guilty for its role in the 2010 natural gas pipeline explosion that killed eight people in San Bruno, California. Certainly some blame there, but as you say …

    “One can argue the particulars.”
    Jim, you rightly suggest the political class made bad planning decisions and that should be blamed as well as PG&E. Those planning decisions could both mitigate or exacerbate the intensity of future fire seasons and the effects of climate change. A study published last year in Proceedings of the National Academy of Sciences suggests that climate change has already played a significant role in making forests in the western U.S. drier and more likely to burn.

    Looking this fact up at NOAA I found this interesting piece … “Plants take in carbon dioxide, which they need to survive, through tiny pores in their leaves called stomates. But they also lose water through these same pores every time they open—and the higher the ambient temperature, the more water they lose. Warmer weather can also cause more water to evaporate from dead plants littering the ground.”

    So drier vegetation, more frequent lighting …. the number of lightning strikes in the United States could increase by about 12 percent for every degree Celsius of warming … and the increased intensity of the CA winds all play a part in the forest fire frequency and intensity.

    I don’t know how blame gets sorted out here, BUT, I don’t see the political parallel.
    CA set its first carbon reduction goal in 2006 and the utilities have worked with the regulators and legislators for those goals. The 2020 goal was reached 3-4 years early. One third of California’s electricity already comes from renewable resources like wind and solar, and the state is on track to meet its goal of generating at least half of its electricity from renewable resources by 2030. And, the change hasn’t hurt the state’s economy. California’s low carbon diet is working. The state has achieved a 13% reduction in emissions from their peak in 2004, while growing its economy by 26%.

    California is a leader with solar legislation, and now with microgrid and storage legislation and installations too. The state’s recent passage of microgrid legislation is likely to be emulated in other states, say industry players.

    So … to call electric utilities the “favorite whipping boy of the left”. Is just wrong. Dominion is under fire for refusing to change and for blocking rules that would encourage change, and using their financial clout to profit from the democratic process. Maybe the left is just more amenable to change and conservatives, like the essence of their name, prefer to hold onto the past?

  12. Let’s try to follow the logic here:

    PG&E=California Democrats control legislature=strict zoning=sprawl=global warming=massive wildfires=California Democrats=orangutans in Borneo=PG&E bankruptcy=Democrats sweep Virginia General Assembly=Dominion goes bankrupt.

    Do I have that right?

    • Yes you do Peter. The conflation disease is it’s own wildfire of late!

      Never mind that it’s not logical or rational.. nope… just sling that hash and see if any of it sticks to something!

      The forests out west have been there for thousands of years. In only the last 300 has mankind been around. So all those thousands of years trees dropped limbs and forest litter and died and fell onto the forest floor.

      But somehow .. NOW… our lack of clearcutting the forests is responsible for these fires?

      Oh.. but see… our strict zoning – apparently everywhere there is a city – has cause folks to “sprawl” into the forests and “forced” the utility companies to provide them with electricity… oh.. and the roads – that’s liberals fault also… while they were refusing to let developers develop – they were building all these roads that allowed folks to “sprawl”.

      so … yep… all those super dense cities in California – .. they SHOULD be even more dense or else folks are going to “sprawL’ and cause forest fires and all kinds of bad stuff…

      Wait… I can “sense” a “study” coming out from one of those right-leaning “economic” think tanks that will CONFIRM all this… wait for it…

      😉

    • You left out “=spider monkeys=”

  13. For an abbreviated, but largely accurate, review of how California rates came to be deregulated, see the 3 page paper, produced for the California Senate:

    https://sor.senate.ca.gov/sites/sor.senate.ca.gov/files/ctools/How%20We%20Got%20Here%20A%20Historical%20Look%20at%20Californias%20Restructuring%20of%20Electricity%20Regulation.pdf

    The extremely short version is that the California PUC aggressively implemented FEDERALLY enacted legislation requiring the 3 large utilities to buy power from independent producers, leading to steep ramp ups in prices, which they decided could best be dealt with by introducing free market concepts into the generation market. The legislation was drafted by Republican members of the State Assembly, passed with little opposition on either side of the aisle and was signed into law by Gov. Pete Wilson (R).

    The very long (366 pages) history of these events can be found here:

    https://web.stanford.edu/~jsweeney/paper/California%20Electricity%20Crisis.pdf

  14. One of my edits failed to clear:

    The extremely short version is that the California PUC aggressively implemented FEDERALLY enacted legislation requiring the 3 large utilities to buy power from independent producers, leading to steep ramp ups in prices, which the CPUC decided could best be dealt with by introducing free market concepts into the generation market. Then the State legislature got involved. The legislation was drafted by Republican members of the State Assembly, passed with little opposition on either side of the aisle and was signed into law by Gov. Pete Wilson (R).

    • YES, Rowinguy – the Repubicans are responsible for much of the mess we are in. For example, as I said earlier on this blog:

      “Good reporting. There is an obvious flaw in enabling legislation when a public utility is caught between serving its ratepayers and its shareholders. And when those sorts decisions are regulated and overseen by political bodies, instead of administrative ones. In my view, public utilities should remain public utilities serving one master, the public interests, here the ratepayers, not private interests seeking commercial advantage in the marketplace, via political action.

      I suspect, we got off track with the Reagan administrations, its deregulation of airports, banks, S&Ls, utilities, roads, and much else. All these functions, including electricity, are too central and critical to the public interests to be effectively run by private corporate interests. We never seem to learn this lesson. Excessive deregulation, the take over of public functions by private interests, it has been the driving cause behind all of our recent recessions. Last time it was the failure of the banking and financial system. And it’s the primary reason why so much private money is involved in our political process today. It breeds crony capitalism, which ultimately leads to failure of institutions critical to the public interests . It’s also the reason the DC region is by far the wealthiest region in United States today.”

      See: https://www.baconsrebellion.com/wp/bacon-bits-rider-u-screws-u-know-who/

      • I’m not sure at all about your perspective on deregulation. As a very frequent flyer with over 2 million miles on United Airlines alone I’ve had a bird’s eye view of the US airline industry over the last 40 years. There is no question that deregulation democratized air travel.

        https://www.travelandleisure.com/airlines-airports/history-of-flight-costs

        When it comes to deregulation of electricity markets Dominion and its acolytes have conditioned us to think of California. However, Texas has what is probably the most deregulated electricity market with 85% of Texans having a choice. Interestingly, Texas is ranked #21 for electricity costs while Virginia is ranked #20. Kind of hard to see how competition has hurt the Texas market.

          • Interesting link, DJ. A couple of things about Texas. First, a quirk in the Federal Power Act exempts nearly all of Texas from regulation by FERC, so that is an obvious cost savings for its residents compared to the rest of the lower 48.

            The other thing is, compared to Virginia, Texas sits atop an ocean of natural gas, thus transportation costs for this commodity are minimal. Lastly, Texas has nearly 20,000 MW of installed wind and solar, which supply power priced at, near or even below zero for a sizeable part of the demand there.

            But, I think I agree with you that dereg has not hurt customers there as it did in CA, MD and other states, and also your observation that dereg democratized the airline industry.

        • Don, I agree with you to a point. But remember, there are two sides to every coin. Thus Texas had Enron too. Just like Virginia had a rotten Dulles Airport between 1998 and 2010. Lincoln Savings and Loan had its rotten Charles Keating in the 1980s. Even the great Fannie Mae got rotted out in late 90’s, and in first decade of 21st Century.

          Much depends on character of leaders, culture, and individuals running things. Character and what’s happening is hard to discern and separate out, particularly in the present. Even Harry Byrd had a positive side, as well as a negative one, if one digs hard enough.

        • I do agree with you here. Virginia ought to be looking at the Texas model of utility regulation.

  15. Reed–

    No intent to lay responsibility solely on the Rs, there were plenty of Ds on board with the California enactment, AB1990. I believe that the CPUC’s implementation of PURPA, which was passed in response to the Arab oil crisis and the Energy Policy Act of 1992, which was passed in fervor over the “free market,” got the California utilities in trouble initially. The “Blue Book,” referenced above by Acbar, was the CPUC’s outline of dereg, and the Assembly responded by getting into the act with AB1990. The Assembly had not really weighted down the utilities with collections for social policies in the manner that the Virginia General Assembly has fractured ratemaking here with the Rate Adjustment Clause method of guaranteed cost recovery for just about any increasing utility expense, while keeping the Commission from regulating base rates, where all the costs that are disappearing or declining (think meter readers), reside. This is just a straightforward transfer of wealth from customers to the largest political donor in the Commonwealth.

    We did escape having Enron ruin the free market here, like it did in CA.

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