Ratepayers spend millions to save billions on utilities, but why do we have to?

Electric rates, gas rates, water rates — they go up. And up. And up.

Policing these regularly scheduled consumer agonies — or rubber-stamping them, as critics often charge — is the job of the California Public Utilities Commission. This powerful regulator is charged with ensuring that rate hikes and policy decisions are fair and justified.

Not sure the PUC is up to the task alone? Layers have been built in to the system to keep a watchful eye on the regulator that’s supposed to keep a watchful eye on the utilities. The first layer is the PUC’s Division of Public Advocates, which we call the in-house Solomon the Wise. It’s charged with representing the little guy against the interests of the giant investor-owned utilities (which are, essentially, monopolies).

But the Public Advocate is swamped! So in 1981, an “intervenors” program was set up to invite outside help and further amplify the little guy’s voice amid the powerful megaphones of Southern California Edison, San Diego Gas & Electric, Pacific Gas & Electric, etc. Think of it as policing the policing of the utility police, if you will.

Ratepayers foot the bill for millions of dollars a year for this outside help. Over slightly more than four years, outside intervenors — nonprofits, lawyers, environmental groups, etc. — have asked the PUC for $67.1 million for their work, and the PUC has agreed to pay them $57.1 million.

Pennies spent on dollars saved, data from the intervenors suggest. Over recent years, intervenors have saved consumers billions by opposing utility rate hikes and over-the-top capital projects.

The PUC says the intervenor program allows it to hear different perspectives and make more informed decisions. That’s a swell idea. But when you consider that California has some of the highest utility bills in the entire nation nonetheless, one might wonder just how well the system is working.

The average cost per kilowatt in California was 29.49 cents, the third highest in the nation, according to data from EnergyBot. Only Rhode Island, at 31.22, and Hawaii, at 44.28, had higher rates.

But averages mask variations, California’s largest intervenor said. Southern California Edison customers pay an average of 30.2 cents; SDG&E customers, 32.6; and PG&E customers, 46.6, according to figures compiled by The Utility Reform Network, or TURN.

The lowest average in the nation was in Nebraska, where a kilowatt cost just 9.85 cents.

One might argue that the problem here is the PUC itself.

TURNing tables

The largest group getting intervenor comp, by far, is TURN. It requested $26.4 million between 2020 and early 2024, and was awarded $24.8 million.

Over that time, it has saved Californians hundreds of millions of dollars, its accounting shows. In a typical year, its legal staff of 12 attorneys and five policy analysts work on about 100 proceedings at the PUC. For example, TURN recently:

• Helped win a ruling preventing SDG&E from recovering $514 million from customers that it spent on wildfire mitigation before a reasonableness review by the PUC.

• Helped win a ruling preventing Edison from recovering $85 million from customers that it spent on tree trimming in non–high fire risk areas.

• Helped win $400 million in savings for PG&E, SCE, SoCal Gas and SDG&E ratepayers by getting PUC to reduce “Cost of Capital” profit rates (more on that in a minute).

• Saved PG&E customers $5 billion from the utility’s original 2023–26 general rate case request. TURN opposed PG&E’s attempt to collect $950 million from customers for wildfire mitigation that the CPUC had yet to find just and reasonable and prevented PG&E from charging customers for rebuilding systems in Paradise destroyed by the Camp fire.

• Saved Edison customers $750 million when the PUC denied its proposal for heat pump subsidies.

• Won a ruling requiring Edison to return $83 million, pay $19 million and adopt stronger whistleblower education programs for mismanaging a ratepayer-funded energy efficiency light bulb program.

Does the intervenor program bring ratepayer value? Folks can decide for themselves, said Executive Director Mark Toney.

“It’s pennies compared to what the utilities spend advocating for increases,” he said. “Utilities spend over $100 million a year, each, advocating for rate increases, with ratepayer money. Intervenors spend a tiny fraction of that to stop some increases. Not all of them. It’s a resource mismatch.”

News flash, folks: Electric companies don’t make money from selling electricity.

They make money from the PUC-set rate of return on capital investments. That’s their profit. So there’s an incentive for utilities to spend more money on capital investments than they have to, Toney said.

Lately, a huge driver of rate increases has been hardening the electrical system against devastating wildfires. The quicker and less expensive way to do this is to use above-ground, insulated poles and wires rather than digging down and burying lines. The safety profile is essentially the same, Toney said.

But utilities make more money choosing expensive capital projects over cheaper ones.

Toney gives Edison credit here: It decided to go the insulated overhead route and has done close to 7,000 miles at a cost of some $800,000 a mile.

PG&E, however, decided to bury its lines. It’s slower, not measurably safer and costs some $4 million a mile, he said.

“Where the fault squarely lies is with the CPUC, the body responsible for reviewing and approving rate increases, or not,” Toney said. “They have been overly generous to the companies, specifically to their shareholders.”

That might be a function of a PUC full of commissioners who were once executives at the major investor-owned utilities, who are lobbied by the major investor-owned utilities. You think?

David v. Goliath

Sixteen states have intervenor compensation programs, but only six were in active use, according to a recent report for the National Association of Regulatory Utility Commissioners.

Those were in California, Idaho, Michigan, Minnesota, Oregon and Wisconsin, though Illinois and Washington were setting up programs.

The consensus is that intervenor compensation is money well spent.

“Traditionally, utilities are able to hire attorneys and expert consultants to build, present and support their positions in regulatory proceedings, typically passing those costs through to their ratepayers,” the study said.

“Large customers and customer groups generally have the economic resources needed to intervene in regulatory proceedings to protect their interests by hiring their own attorneys and expert consultants. Smaller customers, and public interest organizations, may not have the funding, time, or expertise to have their specific interests represented….

“While most states have a form of utility consumer advocate that is funded by the state to represent utility consumers, these organizations are not responsible for advocating for unique or specific issues of individual groups and frequently lack the resources to participate fully in every proceeding,” it continued. “The lack of representation from potentially impacted parties could hinder the decision-making process and outcomes of proceedings.”

The programs aren’t a panacea: Groups don’t know if they’ll get funding, or how much, until after proceedings are complete. Once they file a claim, the PUC can take a long time to decide if they contributed substantially. Those uncertainties make it hard for newer and less experienced people and organizations to participate. And as more join it, it gets harder to show how any one specifically added value.

The amounts requested, and awarded, vary from year to year and can reflect the passion behind what’s on the PUC’s agenda — controversial new rules for solar energy, say, or an income-based fixed service charge for electricity, rate hikes, etc. To wit:

• In 2020, intervenors asked for $12.1 million and got $13 million.

• In 2021, they requested $18.7 million and got $10 million.

• In 2022, they asked for $11.7 million and got $13.2 million.

• In 2023, they asked for $13.6 million and got $14 million.

• And so far in 2024, they’ve asked for $10.7 million and have gotten $7 million.

PUC spokeswoman Terrie Prosper said that this isn’t quite an apples-to-apples comparison, as award decisions aren’t necessarily made in the same year that claims are filed. So a decision issued in 2020 may have resolved a claim filed in 2019, she said.

The California State Auditor looked at the program a dozen years ago and concluded that it can substantially benefit ratepayers. One intervenor’s opposition in a rate case saved consumers $354 million, while the intervenor got $784,000 for its work. Another intervenor in a similar rate case saved ratepayers $130 million, and got $586,000 in compensation.

Save us

So it seems good that California has this system, but terrible that it needs this system, and tragic that this system still can’t keep rates sane.

Over the years, we’ve spoken with many expert types about how to fix this. Fewer industry insiders on the PUC, maybe. Lowering rates of return for the utility companies.

Prices keep going up because the sky’s the limit, Toney said.

“Right now, there are no limits to how much utilities can request, or how many times a year they can make a request,” he said. “There are no limits to how much the CPUC can authorize.

“Utilities should have a cap, a limit, no more than the cost-of-living adjustment for Social Security, say, rather than the double-digit increases per year for the past five years. Let’s cap it at 2, 4, 5 percent.”

TURN is sponsoring a package of six reform bills in the Legislature this year, dealing with affordability and accountability. If Toney could wave a magic wand, this is what would happen:

“There would be incentive for investor-owned utilities to exercise fiscal restraint,” he said. “One, a cap on increases. Two, a requirement that they choose the least-cost solution instead of the most-cost solution. And three, when they overspend, shareholders have to pay 50% of the cost overruns so it doesn’t all fall on the ratepayers. That would reduce costs immediately!

“The sad truth is, companies are more accountable to their shareholders than they are to their ratepayers.”

Seems high time we do something about that, no?