By Jason Fordney

California Public Utilities Commission President Michael Picker on Tuesday asked state lawmakers for guidance on the increasingly precarious financial health of the state’s investor-owned utilities, which face growing risks stemming from wildfires.

That topic — and reliability concerns surrounding the Aliso Canyon gas storage facility — dominated discussion at a hearing of the State Senate Energy, Utilities and Communications Committee in Sacramento.

Committee Chairman Ben Hueso (D) said that “there has been one issue over another” affecting utility planning and operations, including earthquakes, floods and wildfires.

“There has always been something that complicates the ability of the state of California to provide energy to the people of the state,” Hueso said.

Picker noted that analysts had recently downgraded the credit rating of a solar project owned by an independent power producer because it holds a contract with a utility, showing the ripple effect of utility credit downgrades that have occurred recently over wildfire risk. The trend could make it more difficult for California to meet its greenhouse gas reduction goals, he said.

“If this continues, we will probably have a hard time saying to the rest of the world that we could accelerate the process of greening the grid,” Picker said.

Several IOUs have recently been downgraded or placed on credit watch by ratings agencies, leading to worries in Sacramento about a repeat of the California energy crisis of 2000-2001 and IOU bankruptcies. The State Assembly recently held its own hearing on the issue, at which Picker also spoke. (See Wildfire Costs Ignite Worry at CPUC, Legislature.)

“I see the exact same pattern with respect to the investor-owned utilities that we have seen before,” said Sen. Robert Hertzberg (D), adding that credit downgrades can cause “cross-defaults” and other complications.

“The rate at which this thing falls apart is extraordinary,” Hertzberg said. “The house of cards is impacted in a way that is not quite positive.”

Picker has repeatedly asked lawmakers for direction on the issue.

“I am not here to tell the legislature what to do,” Picker said Tuesday. “I agree that it is urgent, but I do tend to work at the direction of the legislature.”

Elected officials have publicly discussed new legislation on the issue of “inverse condemnation,” a legal provision that allows utilities to seek recovery of wildfire-related costs in regulatory proceedings. The state’s three IOUs have banded together to challenge a recent CPUC decision denying cost recovery for San Diego Gas & Electric for damages from a 2007 fire, despite the utility’s reliance on the provision. (See Sempra Joins ‘Three-Pronged’ Wildfire Front.)

Stern Objects to Aliso Canyon Decision

During the hearing, Sen. Henry Stern (D) vocalized his displeasure with a March 3 decision by CPUC Energy Division Director Edward Randolph that the legislator said “secretly granted” a Southern California Gas request for “immediate, seemingly open-ended utilization of the Aliso Canyon underground storage facility.”

In a March 5 letter to the commission, Stern asked questions about the status of gas pipelines taken out of service this winter and how those decisions were made. Stern, whose district includes Porter Ranch, the site of numerous local health complaints attributed to the facility, has called for Aliso Canyon’s closure.

But Aliso Canyon is also central to California’s electric reliability, leading CAISO to implement special measures to mitigate concerns about gas supplies to generators. (See Gas Adders a Necessary Tool, CAISO Says and CAISO Board Approves Aliso Canyon Rules Package.)

Stern said when there is a “Saturday night letter from Ed Randolph” that becomes public, “it starts to corrode that public trust.”

“We want to see this public trust restored, and it’s just not there right now,” Stern said. “People are going to assume the worst.”

Picker responded that he had recently proposed a moratorium on new commercial gas hookups in the Los Angeles County area that met heavy resistance from the business community. At its most recent meeting, the commission withdrew the proposed agenda item.

Picker said that “there is a core denial” of gas supply concerns and that “I need your help to get through that.” The real need for gas units is peaking power, he said.

“I completely agree there is plenty of blame to spread around here,” Stern said.

Picker also briefly sparred with Sen. Mike McGuire (D), who objected to Picker’s recent public suggestion that ratepayers in high-risk fire zones pay more for electricity. Picker used the example of homeowner’s insurance premiums in those areas that are higher based on fire risk.

McGuire, a Democrat from the North Coast district, which includes Marin County, replied that many of the fires occurred in areas without heavy tree growth.

“I will fight it with every bone in my body,” McGuire said of Picker’s proposal.

Picker and CPUC staff recently sent the commission’s 2017 annual report to the legislature, along with the Office of Ratepayer Advocates report.