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California utility explores splitting gas, electric operations for safety

by Dale Kasler, Sacramento Bee |

Driven into bankruptcy by runaway wildfire claims, Pacific Gas & Electric Co. says splitting the utility in two would increase customer safety but raises the possibility of higher rates.

In a lengthy filing with the California Public Utilities Commission, the troubled utility said separating its gas and electric divisions into separate companies “has the potential to reduce the total risks managed by a single entity.” The separation could “improve the development of each entity’s safety management system,” it added.

The commission launched a formal investigation into PG&E’s safety culture in December, a month after the Camp Fire killed 85 people and destroyed much of the town of Paradise. Among other things, the PUC is examining whether the $17 billion-a-year company should be carved into two separate companies.

Multiple news reports say PG&E had been exploring a split-up months before the company filed for Chapter 11 bankruptcy protection in late January. Under one scenario, PG&E would sell its gas operations to raise cash to help pay wildfire liabilities.

The company says its liabilities could exceed $30 billion, even though it’s been absolved of any wrongdoing by Cal Fire in the deadly October 2017 Tubbs Fire in Sonoma County. Cal Fire has said PG&E equipment is to blame for at least a dozen other fires from October 2017, and the agency is investigating whether a faulty transmission tower caused the Camp Fire.

In the weeks following the Camp Fire, the company has come under mounting pressure to improve safety. The federal judge overseeing PG&E’s criminal probation — a legacy of the 2010 San Bruno natural gas pipeline explosion — has threatened to impose dramatic fire-safety restrictions on the utility this summer, including a massive equipment-inspection program and major blackouts if winds kick up. PG&E and state officials are pushing back on the judge’s proposal.

In its filing last week with the PUC, the company said splitting up the gas and electric businesses “appears feasible from a technical and operational perspective. The gas system and electric system are functionally independent from one another and each has its own operational control center.” The gas division accounts for about one-fourth of the utility’s revenue.

On the other hand, PG&E said the restructuring could raise rates for customers. “Separation could create incremental costs,” the company told the PUC. “These incremental costs would include one-time costs associated with the duplicatoin of services that are currently shared, such as technology infrastructure, service centers, equipment storage, and billing and customer support.” The two entities would also have to create their own divisions covering services such as legal, personnel, insurance and real estate.

PG&E said those new costs could be reduced by putting the two new companies under a single holding company.

The utility said it’s skeptical of claims that a complete government takeover of PG&E — one of the options being explored by the PUC and others — would make conditions safer. It disputed the notion that “the profit motive” drives investor-owned utilities to skimp on safety initiatives.

The utility also doubted that carving up PG&E along regional lines would improve safety. It said such a restructuring “would be a lengthy, complex and costly process that would require the investment of significant time and resources that may be more efficiently invested in safety and reliability initiatives with greater potential impact .... There also is the risk that smaller entities would lack the breadth of expertise and knowledge that can help improve safety and reliability.”