The Burlingame Voice

PG&E: The Revolving Door & Climbing Rates

One of the biggest stories of the last 5+ years has been the power outages, blackouts, wildfires, and the San Bruno gas explosion that have plagued Northern California and PG&E.  Here in B'game, we have had outage issues over the years that lead to the founding of Burlingamers Unwilling to Live with Blackouts (BULB) that appeared to get PG&E to do some equipment upgrades that improved uptime.  We have been lucky in not having any wildfires, but anything can happen--there is plenty of fuel in Mills Canyon and throughout our City of Trees and in our up-the-hill neighbor H'borough.  Keep your fingers crossed.

The Wall Street Journal published a three and a half full page investigative piece on PG&E on December 28th.  If you have access and missed it, go back and read it.  Otherwise I will be taking a few excerpts from it to illustrate not only the PG&E failings, but those of the CPUC and Gov. Brown and Newsom.  There is plenty of blame to go around.  This first installment starts with the revolving door at the top.  It's never easy to turnaround a huge operation like PG&E and heavily regulated utilities are even harder than a regular large company.  It takes strong leadership, methodological and patient strategy and execution and good relations with the regulator and investors.  Stability helps too and we have not had that in the CEO's office.

The Journal article starts with Peter Darbee taking over from 35-year veteran Gordon Smith in 2005.  Known as the "Green CEO" who arrived with a plan for "business transformation" using Accenture as a major consultant and a mission to move towards more green power, Darbee fell far short on the earnings front and resigned in the wake of the San Bruno explosion.  There was an interim CEO, Lee Cox, until Tony Earley was hired from DTE Energy in Detoit on a "back to basics" theme.  Infrastructure investment went up

PG&E traditionally had spent $5 to maintain its far bigger electrical transmission and distribution system for every dollar it spent maintaining its gas network each year. The furor over the San Bruno explosion skewed spending toward gas.

In 2011, the company spent $237.8 million to maintain its gas network, more than twice the amount in 2010, according to federal filings. That spending kept rising, hitting $658.3 million in 2016, when it topped the spending on electric upkeep by $60 million.

Then came the power failure at Candlestick during Monday Night Football.  Earnings suffered for a number of reasons and Early was gone in 2011 and

In his final year, PG&E’s average cost of electricity for residential customers had risen an inflation-adjusted 10% to 20 cents per kilowatt hour, among the most expensive of any large utility in the country.  Mr. Earley, who had touted his practical-minded, back-to-basics approach, returned to Detroit, never having tamed PG&E.

“We are coming back to Michigan when this adventure is over,” he had promised the Detroit Economic Club two years earlier. “One of the reasons is someone once summed up San Francisco absolutely perfectly. They described the city as 49 square miles surrounded by reality.”

The next CEO, Geisha Williams, had been the PR face of PG&E during the San Bruno aftermath and was elevated to CEO with an emphasis on "affordability" of rates.  Then the major fires started and continued

While its service area burned, PG&E’s residential electricity rates averaged 21 cents a kilowatt hour in 2017, rising to 22 cents the next year. Only New York’s Consolidated Edison and San Diego Gas & Electric charged more among the nation’s largest utilities.

She lasted 14 months, followed by another interim CEO, John Simon, until another industry vet, Bill Johnson, was brought in from Tennessee Valley Authority (TVA) in April of last year.  In addition to all of the operational issues, Johnson has competing bankruptcy plans to shepherd, an ever climbing green energy mandate to satisfy and hundreds of wildfire and blackout-related claims to work through.  That is a lot of change - people and strategy - at the top for any organization to digest while keeping the lights on.

Friends With Benefits: New CalPERS Guy Gets Tough

We haven't addressed much in our "Friends With Benefits" category since this post in August of 2017 that noted an 11.2% return that year and a 68% funded ratio for benefits.  During the council rotation Monday night, Mike Brownrigg commented that some of the unheralded accomplishments of the council this year was additional funding for pension benefits.  Compared to many cities we are in good shape--emphasis on compared to many other California cities.  This matters because the added funds come out of the funds available for everything else in town.  Last week, the WSJ had a piece on the new investment head at CalPERS that was revealing and encouraging

It didn’t take Yu Ben Meng long to find problems at the nation’s largest pension fund.  Six months after starting as investment chief of the California Public Employees’ Retirement System, he told board members at a Santa Rosa, Calif., gathering in July that some older investments might be valued too richly, said people familiar with the matter. By fall, the fund had shaved the value of a real-estate investment trust and was looking more closely at a five-plus-year-old bet on a solar developer, other people said.

Now as his first year comes to a close, Calpers has cut ties with a longstanding manager on a hometown project, jettisoned under-performing stock pickers, and slowed work on a multi-billion-dollar private-equity experiment.  Calpers’ has struggled to consistently meet its 7% yearly target at a time of high retirement costs and ultra-low interest rates. The pension fund has on hand only about 70% of the assets it will need to fund future retirement checks.  He told board members in January that the world today has many bigger, more nimble asset managers not based in Sacramento.

The fund also jettisoned four of five firms in a program that sought to attract women and minority managers that his predecessor helped grow.  Cuts to such a program “could be a hot potato and have political ramifications,“ said Co-Chairman Howard Marks of Oaktree Capital Management. ”But if your job is to achieve investment performance, you can’t be confused about what’s No. 1.”

Staffers are looking more closely at a developer of solar energy assets that some staffers at the fund believe is worth half or less of what it is valued at, a person familiar with the matter said.

So he won't overtake Judge George Miriam as person-of-the-year, but I'm thinking he makes an excellent runner-up.  Now if Yu can just keep the Legislature and Newsom from burning through the $21.5 billion budget surplus on pet projects and be as disciplined as B'game has been, we might get somewhere.

Death...Oops... Trains and Taxes

Since affordability is such a hot topic these days we should examine each and every effort to degrade our affordability.  Gas taxes.  Highway 101 fees.  Natural gas bans in new buildings--or at least so far only new buildings--so we can spend oodles on electricity.  School bonds and parcel taxes.  More bonds for affordable housing.  A sliver for the Rec Center.  I'll bet some of the regular Voice commenters can remember some that I am missing.  So here are the latest two-- a slice for the train and a big bite on commercial property which is to say a big bite on brick and mortar retail.  Amazon must be thrilled.

Slicing Up the PG&E Pie

The city of San Francisco is ready to offer PG&E $2.5 billion to buy the utility's lines within the city.  Let's just leave aside the question of whether a city that can't keep its streets clean, stop 30,000 car burglaries per year, build a subway line or Van Ness Avenue remotely on time, or run a bus system properly should be in the electricity business.  Those are great questions, but here we ask "What about Burlingame?"  The Wall Street Journal posits a bad answer to that question:

The removal of San Francisco from PG&E’s 70,000-square-mile service territory would likely affect rates and service for those in rural and suburban areas outside of the city by reducing the number of customers paying for the operation and maintenance of the grid.

Michael Wara, head of the climate- and energy-policy program at Stanford University’s Woods Institute, said it is incumbent upon California to examine how San Francisco’s takeover bid would affect those customers.  “In order for this to happen, the state of California would have to be amenable,” he said. “There is reason to suspect it might have some negative consequences for the people left behind.”

We've already got cost and reliability issues with the electricity we are getting and the wildfire liability that PG&E faces certainly isn't going to make the cost issues any better.  Let's just hope our neighbor to the north doesn't stick it to us even more by taking a bigger slice of the pie.

Berserkley: Natural Gas and Gasbags

I could create a new Voice category called "Berkeley Insanity" and it would easily merit a dozen posts per year.  Ridiculing Berserkley is so easy that it can get addictive, but I'll just take this one hit and then stop for awhile.  Today's Chronicle front page piece says "Berkeley: City first in U.S. to bar gas lines in home construction".

Berkeley has become the first city in the nation to ban the installation of natural gas lines in new homes.  The City Council on Tuesday night unanimously voted to ban gas from new low-rise residential buildings starting Jan. 1.  The natural gas ordinance, introduced by Councilwoman Kate Harrison, requires all new single-family homes, town homes and small apartment buildings to have electric infrastructure.

California Energy Commission Chairman David Hochschild, a Berkeley resident, also spoke at the meeting and said that 50 cities across the state, including San Francisco, are considering similar action and Berkeley would pave the way for future legislation.

What makes this so stupid is that just last week the big headlines were about PG&E's plans to shut off electricity during high fire danger situations.  Anyone remember the Oakland hills fire?  Anyone think it couldn't happen again?  And to top it all off, the U.S. has been a net exporter of natural gas for more than a year and has driven the price of natural gas down 87% from its peak in 2005.  In the meantime, hardly anyone thinks electricity prices are going anywhere but up.  So much for "affordable housing" from that bastion of East Bay wisdom.  I'm grateful these sorts of ideas don't infect Burlingame too often although we must be vigilant every two years at election time (which is fast approaching again).

Planning Climate Action in B'game

The climate action planning continues in B'game.  Here are some of the tangible activities courtesy of the Daily Journal reporting on the Joint Council-Planning Commission meeting last month:

Officials are crafting the proposal in an effort to reduce greenhouse gas emissions over the coming two decades through improved mobility routes, more efficient development practices, natural resource conservation and more.  Among the most notable programs and practices identified to cut greenhouse gas emissions are:

• implementing a transportation demand management plan
• establishing a complete streets network
• adopting more efficient construction management
• becoming more energy efficient and
• supporting Peninsula Clean Energy

We will have to see just how tangible these become in the face of potential mass over-development driven by Senate Bill 50 (if it becomes law).

Lot Y Goes Electric

You may have noticed that Lot Y on Chula Vista just south of Broadway has been under construction for a couple of weeks as a company called EVgo installs six charging station spots and an ADA compatible charging spot.  Three parking spaces are being lost to make room for the seven new EV charging spots that will be unavailable to gas-powered vehicles.  That is a net of ten fewer spaces for gas cars.  According to the staff report from December 2017

Parking Lot Y off of Chula Vista Avenue was selected for the following reasons:

- It services the Broadway business district and is located close to a primarily multifamily residential neighborhood.

- It is easily accessible to regional and local EV drivers. - It is currently underutilized.

- It has access to a nearby PG&E power source.

Another driver for locating in Broadway is the relatively high number of EV drivers in the area. The state tracks redeemed EV rebates, which accounts for about 75% of EV owners. In San Mateo County, the 94010 zip code (which includes Burlingame and Hillsborough) received the highest number of rebates at 557. The total rebate count in the County is 5,806, and 125,548 rebates have been issued statewide.

I'm betting that a number of those 557 rebates in B'game and H'borough are for Teslas, but it is not clear that you will be able to charge your Tesla in these spaces since

The charging stations would be universally compatible for fast charging-compatible EVs (including CHAdeMO and CCS standards) and accessible to EVgo subscribers and non-subscribers

But according to this Reuters piece

Besides CCS, there are three other standards that will charge batteries fast: Tesla’s Supercharger system, CHAdeMO, or Charge de Move, developed by Japanese firms including carmakers Nissan and Mitsubishi, and GB/T in China, the world’s biggest electric car market.  “I think over time CHAdeMO and CCS converge, likely into the current CCS standard, and the jury is out as to what will happen to Tesla,” said Pasquale Romano, chief executive officer of Silicon Valley-based ChargePoint, which runs one of the world’s largest charging station networks.

As noted above, one of the goals was to provide charging convenience for people in multi-family homes so perhaps Teslas were not the target market for this "charging plaza".  The good news is that EVgo is paying the city enough in license fees that the lost parking meter revenue should be a wash.  Whether Lot Y remains "under utilized" so that finding a spot when you need it isn't too hard is yet to be seen when there are ten fewer spots to choose from.  And if news reports about the possibility of electric rates going up 50% in NorCal due to PG&E's issues, we might see the EV car market stall.

Earthquake Warning: 3 Months Without Water

The SF Chronicle is reporting on a USGS study about the impact of a major quake in the Bay Area--something they say is overdue

While nearly 113 years have passed without a major earthquake on the fault from the Peninsula north, the quiet will end. It could happen tomorrow or next week or decades from now. When it does, hundreds of thousands if not millions of people will feel the ground shake like they’ve never felt before.  Based on current understanding of earthquake recurrence, that’s a statistical anomaly, according to a report this month from U.S. Geological Survey scientists.  According to a 1,000-year earthquake history of those fault branches, the chances that not a single site would experience a major temblor in any given 100-year period is about 0.3%, the paper said.

Yep, we are riding on a 0.3% wave of luck.  Burlingame is doing more than most to prepare for this by way of our annual Neighborhood Network disaster drills, supply caches, ham radio courses and the like we discussed here.  The added bit of information from the USGS study is that a major quake on our San Andreas fault would have the probability of causing 3.7 million people to go without water for the following periods of time:

1-3 days has a 60% probability

1 week has a 58% probability

1 month has a 48% probability

3 months with no water has a 30.5% probability

Wow.  It's basically 50/50 that we would have to go a month without running water.  That is one of the reasons I believe we should be strengthening the Hetch Hetchy pipeline, building more reservoirs and limiting further population growth until we have done that.  It is somewhere between sad, ironic and scary that plenty of politicians read the headlines about the IPCC's 100 year climate change model and want immediate action, but this much nearer and more identifiable threat goes unnoticed.  Forewarned is forearmed.  This year's drill is Saturday, October 12th.  Put it on your calendar and if you don't have a group working in your part of B'game, think about volunteering.

Update:  I just got my 33 gallon water barrel with pump and preservatives to last 5 years from our local B'game preparedness experts, Earthshakes.com.  $143 all in and very well worth it.  Here it is

 

Affordability Problems Explained

The former CEO of Cypress Semiconductor, T.J. Rodgers, has been an outspoken critic of much of what goes on it Sacramento for decades.  His latest pointed critique of brand spanking new Guv. Gavin brings some well-known statistics together in one place in reply to Gavin telling the business community I should (must?  will?) do more about affordability.

When I was CEO of Cypress Semiconductor, I chose Round Rock, Texas, over San Jose, Calif., for Cypress’s second wafer-fabrication plant, and I chose to locate our third plant in Bloomington, Minn. Other CEOs made similar decisions. Silicon Valley barely has any silicon left; there are now zero state-of-the-art wafer-fabrication plants here. We had to move because government has made Silicon Valley uncompetitive for manufacturing.

Despite boasting the second-highest gasoline tax in the U.S., California’s roads are so potholed it actually pays to buy tire insurance. California power costs around 15.7 cents a kilowatt-hour, compared with 11.2 cents in Oregon and 9.7 cents in Washington state. But even those state-regulated windfall rates aren’t enough: Pacific Gas & Electric is about to go bankrupt again.

California took in record tax revenue in 2018, beating estimates by $1 billion according to the Los Angeles Times. But Mr. Newsom demanded even more: “I want to see the [companies in Silicon] Valley step up and match our contributions,” he said.

Rodgers also invokes the dreaded NIMBYs but doesn't dwell on that aspect of the housing supply equation.  Nice to know our electricity is 62% more expensive than the State of Washington's juice.  Anyone know where you can buy good tire insurance for those trips on El Camino?

 

Clean Power or Reliable Power?

Congrats to readers who have developed their Critical Thinking skills and can recognize my provocative, but ultimately false, title of this post.  The falsehood is the appearance of a dichotomy between clean power and reliable power.  We can probably have both, but do we have them right now?  The big outage in downtown San Mateo is almost five hours old as I type.  I am just opening the glossy brochure that arrived in the mail from Peninsula Clean Energy courtesy of the SMC Office of Sustainability.  Based on the massive traffic jam on El Camino, the extra car emissions and likelihood of a lot of spoiled food and health emergencies, one has to wonder if the County and various City Councils are focused on the right thing? I'm glad it wasn't pouring rain without working sump pumps.  Personally, I vote for reliable power first.  One of the few worthwhile things ex-councilwoman Terry Nagel advocated for was more reliable electricity in town.  I'm not sure we ever got it, but the aspiration was good.

In the fun facts from Germany department, we get this

The mindless (German) rush to renewables has already done tremendous damage to the German standard of living, with 300,000 households each year having their electricity turned off for non-payment.  With the cost of consumer-born subsidies at 25 euros bln per annum and surcharges of 6.88 euro cents per kWh, or twice the market price of a kilowatt, Germans pay three times more than Americans today.

Worse is to come.  According to the German consumer agency NAEB, by 2020, they will be paying 45 euro cents per kWh, compared to 10 cents for the U.S. and 20 cents in France.

Lest we digress too far, take a look at your PG&E bill.  "Delivery" is the bulk of the cost and that is where the power failures originate.  You can feel free to stay enrolled in the I-didn't-ask-for-this "Clean Power" program and save 5% on the minor part of the bill, but don't lose sight of the real issue-- reliable first world electricity.  Councilwoman Donna Colson has promised me an article about the benefits of Clean Power--which we will publish.  This post is just contextual background for that future post.