A Short Description of CA Electric Utility Companies and the Agencies that Regulate Them

Pacific Gas and Electric, Southern California Edison and San Diego Gas and Electric are the three large investor owned utilities (IOUs) in CA. There are also other private companies such as Liberty Utilities, PacifiCorp and Bear Valley Electric. A number of true publicly owned utilities also exist like the one owned by the City of Santa Clara. Santa Clara has operated its own electric, water and sewer utilities for more than a century and has lower electric power prices than those charged by PG&E. There are over forty five such Load Serving Entities or LSE’s in California, and they include Alameda Municipal Power, City of Anaheim, Burbank Water and Power, Glendale Water and Power and the Los Angeles Department of Water and Power. 

There is no legal lock that PG&E has on our access to electricity service. Gonzales Electric Authority was recently formed by the Salinas Valley town of Gonzales, 9,000 population. The town hired Concentric Power to build a distribution grid (called a microgrid) that the town will own. This project includes solar energy generation and battery storage for their businesses needing reliable power, and for an agricultural industrial park. If this town chose to do so, it is now in a position to begin replacing PG&E.

Pacific Gas and Electric was formed around 1905 with the merger of the San Francisco Gas and Electric Company and the California Gas and Electric Corporation. Over the following century, through many purchases and consolidations, PG&E became the large company it is today. An interesting detail of this expansion was the acquisition of mining industry reservoir dams and flumes originally built for placer mining operations. PG&E has about 16 million people living in its service territory.

Southern California Edison (SCE) formed in similar ways to PG&E. SCE is the largest holding of Edison International. SCE’s service territory includes about 15 million people.

San Diego Gas and Electric is owned by Sempra Energy. Its service territory includes about 3.3 million people. Sempra Energy owns the Southern California Gas Company or SoCalGas.

The California Public Utilities Commission

This huge state agency, the CPUC, began in the 19th Century as the California Railroad Commission

The Commission regulates investor-owned electric and natural gas utilities, railroads and rail transit systems, for-hire passenger carriers: i.e. limousines, airport shuttles, charter and scheduled bus operators, transportation network companies like Uber and Lyft, telephone communications, broadband markets such as Comcast and AT&T, and investor-owned water utilities like California American Water.

This is quite a list.  Not all of these sectors are monopolies in the markets where they function. But the big players like the telecoms, utilities and rail, in many parts of California are sole source monopolies. This monopoly status reflects back to the original purpose of the Commission which was to rationalize rail line expansion development and to regulate prices on these rail lines, that are inherent monopolies on the routes that each owns or controls. This monopoly control is why the Commission sets prices. Price or Rate Setting is an elaborate process for electrical power. For example, a regulated utility has a guaranteed profit margin built into the rates it can charge you for electricity. 

Theoretically, the CPUC is the mediator between you and Comcast, for example. You may only have one company from whom you can buy high speed wired internet. Many people are in this situation. A major role of the CPUC is to protect you from price gouging by monopolies. There is of course controversy over how well this works. The five Commissioners of the CPUC are appointed by the Governor of California. Under the Commissioners are the Administrative Law Judges who manage the Proceedings of the Commission. A Proceeding is a legalistic regulatory process that hopefully includes the public’s interest. The Commission pays what is called  “Intervenor Compensation” to cover legal and other costs for non-profit entities who engage in Commission Proceedings to represent the public. The staff of the CPUC supply the engineering, accounting and public safety expertise of the Commission. 

To understand the CPUC takes time and involvement in the business of the Commission. An author of this website filed a docketed (placed on the Commission’s schedule) safety Complaint against PG&E in 2018. That safety Complaint was adjudicated by an assigned Administrative Law Judge without the merits of the electrical safety issues  in that Complaint ever being considered. The issues addressed by the Judge were essentially limited to whether or not that Complaint fit within the Commission’s Rules of Procedure. 

There are at least two ways to interpret the relationship between the CPUC and the big electric utilities. One is the concept of regulatory capture, in which a government agency forms close and cooperative associations with the businesses it’s established to regulate, and that this close interaction then interferes with effective government supervision that protects the public interest.  Another perhaps more charitable notion, is the idea of a Regulatory Compact.  From this perspective the big power utilities accept regulations and limitations upon them in return for their monopoly control of an electricity or natural gas market. Either way, it will remain a complex matter of public administration for the CPUC to get this right.   

When PG&E was dramatically exposed as a danger to public safety with the 2010 San Bruno CA natural gas transmission pipeline explosion disaster,  the National Transportation Safety Board (NTSB) handled the prosecution of PG&E for their crimes in this disaster, and PG&E was convicted in federal court on six counts, including providing false information to the NTSB. 

In a formal statement, the NTSB placed partial blame for the San Bruno disaster on exemptions from approved testing issued by the California Public Utilities Commission “which likely would have detected the installation defects.  Also contributing to the accident was the CPUC’s failure to detect the inadequacies of PG&E’s pipeline integrity management program.”  Six people died in this disaster, many were injured and 38 homes were destroyed.

San Bruno can be thought of as the beginning of PG&E’s 21st century record of large scale disasters that now includes the “Wine Country” fires in 2017. Nearly 250 wildfire ignitions were part of this October 2017 Northern California Fire Storm.  Most of the seventeen major fires in this fire storm event were attributed to ignition by electrical utility equipment.  Then came the Camp Fire 2018, the Kincade Fire 2019, the Zogg Fire 2020, and the Dixie Fire 2021.

California Legislative Actions to Protect Utilities

We doubt most members of the CA Legislature understand what the Commission does or how it does it. Nevertheless, in 2019 the Legislature passed two important laws in response to utility ignited wildfires, AB (Assembly Bill) 1054 and SB (Senate Bill) 901.  AB 1054 protected PG&E from bankruptcy by creating a Wildfire Insurance Fund. This Fund placed you, collectively, as utility rate payers, in the position of paying $10.5 billion in increased electricity rates into this Fund, with PG&E shareholders responsible for another $10.5. This Fund is intended to cover the liability costs and other expenses for PG&E (and similar utilities) when fires caused by utilities occur after 2018. There are many more details to this law. It’s very complex. We think the public interest would have been best served by letting PG&E go bankrupt and be replaced with true publicly owned and smaller regional and municipal utilities. 

SB 901 changed the way utility behavior and system maintenance are viewed in the context of damages that occur from wildfires started by utility equipment. This is specified in complex changes to the “Reasonableness Standard” for evaluating how and when costs for fires are charged to utility customers. The most publicly visible part of SB 901 was the opening of a Public Utilities Commission Proceeding to supervise how utilities prepared “Wildfire Mitigation Plans” that were supposed to reduce the risk of utility ignited wildfires by various means. PG&E focused upon “Enhanced Vegetation Management” and the destruction of millions of trees in its Wildfire Mitigation Plan. Southern California Edison (SCE) has focused on upgrading its infrastructure by replacing 1200+ miles, and soon to be thousands, of miles of dangerous uninsulated power conductor cable with new triple insulated steel core aluminum cables.  To date SCE appears to have been more successful in preventing wildfires.

The strangest part of the story regarding Wildfire Mitigation Plans is that the CA Public Utilities Commission (CPUC) did not changed one standard in its own regulations (General Order 95) for overhead power equipment design involved with wildfire ignitions; that is, except for a 2017 High Wildfire Threat District Map adopted in an earlier Proceeding that included a “recommendation” to cut more trees. General Order 95 regulations specify the design, strength, and safety profile of overhead utility equipment. 

In our opinion there are many defects and omissions in General Order 95.  But the Legislature never instructed the CPUC to update its own standards for power line fire safety. The utilities then each wrote their own Wildfire Mitigation Plans. 

An example of the strangeness of General Order 95 is that these elaborate regulations mention the word “fuse(s)” and “fused” three times in 602 pages. Not once are fuses described in terms of their type or safety performance. Fuses are the most fundamental safety devices in any electrical circuit. Fuses have existed since the 19th century, at the very beginning of electrification.

We regard this as just one of several examples that demonstrate the reluctance of the CPUC to set effective and updated circuit safety standards. Their rules, General Order 165, for inspections, record keeping and replacement for old equipment are remarkably weak. This rule didn’t protect the 85 people of Paradise CA who died in the Camp Fire.

This rule 12.3 is one example.  The original version of General Order 95 was adopted in 1941-1942.  The following is in the 2020 version of General Order 95.

12.3 Lines Constructed Prior to This Order: The requirements of this Order, other than the safety factor requirements specified in Rule 12.2, do not apply to lines or portions of lines constructed or reconstructed prior to the effective date of this Order. In all other particulars, such lines or portions of lines shall conform to the requirements of the rules in effect at the time of their construction or reconstruction. Lines or portions of lines constructed or reconstructed before July 1, 1942, may conform to and be maintained in accordance with the requirements of this Order, instead of the requirements in effect at the time of such construction or reconstruction.

Substation Safety

CPUC General Order 174 contains the Commission’s safety rules for electric power substations. Substations are central to the operation of a power utility. General Order 174 is essentially limited to one point: The utility shall establish and conduct safety inspections of its own substations. 

Substations are often sited in urban areas and they modulate the immense power coming in from transmission lines and then route that power to the distribution feeder circuits on your street. This “hands off” approach of the CPUC when it comes to regulation is, in our opinion, part of the reason PG&E’s equipment is so extensively in need of replacement and updating.

The California Independent System Operator or CAISO

CAISO manages the high voltage transmission grid and operates a wholesale energy market for power in California. CAISO does not own transmission circuits. It regulates the power market and manages the sale of power to and from IOUs and LSEs (Load Serving Entities) and independent power generators supplying power in California, and to our state from other western states.

CAISO is in turn regulated by the Federal Energy Regulatory Commission. The FERC is a national agency that regulates the interstate transmission of natural gas, oil, and electricity. FERC also regulates hydropower projects. 

This is not the entire list of regulatory agencies involved with power utility supplies for California. For example the FERC has a water impoundment Dam Safety Program that oversees the safety of hydropower reservoir dams.

The California Board of Forestry and Fire Protection

The Board of Forestry writes the Forest Practice Rules that are carried out by CalFire (CA Department of Forestry and Fire Protection) and manages the licensing of Registered Professional Foresters or RPFs. An RPF license allows a person to prepare logging permits for private lands in CA. The most common commercial logging permit is called a THP or Timber Harvest Permit. There are numerous types of logging permits today and several are called “Exemptions.” Exemption means that a particular permit is exempt for the obligation to prepare a full THP.

CalFire and the Board of Forestry are part of the story of PG&E because PG&E’s tree removals along its powerlines require a “Utility Right of Way (ROW) Exemption” permit; also because CalFire conducts the wildfire investigations to determine the cause and responsibility for wildfires in State Responsibility Areas. 

CalFire has some regulations for power-pole vegetation clearance that apply to situations not addressed by the CPUC. CalFire also prepares the “Power Line Fire Prevention Field Guide” which distinguishes equipment that is either exempt, or non-exempt, from vegetation clearance regulations due to the fire ignition risks of specific power pole equipment such as fuses.

In 2019 the Board of Forestry began a rule making process to change certain regulations for THP Exemptions applying to utility Right of Ways. Members of our organization participated formally in this “Rule Plead” by attending meetings and submitting extensive written comments. This process was abruptly terminated or suspended by the Board, months ago for reasons undisclosed.