The following is a letter to the Editors of the Orange County Register in response to an exceptionally well-researched report by columnist Terri Sforza. The letter was written by Public Watchdogs’ Director of Development, Nina Babiarz,
In the original opinion, Sforza pointed out the link between our sky-high electric rate increases, and how utility profits, are directly connected to the utilities’ questionable “costs.” In this response, Babiarz draws a direct correlation between California’s horrifically high electric bills and the California State Auditor’s assessment conclusion that the actual costs that utilities are charging ratepayers has never been verified or by the California Public Utilities Commission.
This is our letter to the Orange County Register:
Teri Sforza presented a timely and well-researched column that recognizes how our electric bills have doubled in the last ten years. As the article states, investor-owned utilities (IOUs) do not make their profits selling electricity, but from a guaranteed rate “of the return on their capital investments” which are set by State regulators at the California Public Utilities Commission (CPUC).
Last year the California State Auditor released a report that harshly criticized the CPUC because it clearly indicates that, after decades of approving the rate increases Sforza documented, the CPUC has made no effort to verify how much money a utility has spent on infrastructure. Even when that work is mandated by the CPUC itself, there is no CPUC procedure developed or in place by which the CPUC can verify that the utility ever completed the CPUC mandated work, let alone verify the accuracy of costs they spent to do the work. In other words, the CPUC has the profit-driven utilities on the honor system for confirming if projects were built and how much the utilities expended. Until this defect is objectively and effectively addressed, Californians will be forever at the mercy of predatory utilities.
The state audit notes that Californians pay the highest electric rates in the continental United States:
“The operating expenses for the four utilities increased by 5 percent to 37 percent between their two most recently approved general rate cases. However, some of the most significant reasons for the unexpected rate increases in 2022 were because utilities’ actual costs were higher than those previously forcasted, and they needed to increase their rates to recover the difference.”
The audit further states:
“Moreover, the CPUC and Cal Advocates lack processes to ensure that utilities’ projected costs are not overstated.”
Adding that:
“Reviewing how much the utility earned compared to the authorized rate of return and identifying where the utility was able to gain efficiencies should be a critical first step in ensuring that the utility’s projected costs were appropriate.”
…and makes a recommendation that the CPUC should:
“strengthen their processes to ensure that utilities have actually completed the work for which the utilities are seeking reimbursement through rates,”….
“because currently available documents do not readily or sufficiently explain the reasons for rate increases”
“The CPUC also lacks an effective process for ensuring that utility customers are fully informed of the reasons their utility is raising their rates. The CPUC neither clearly and comprehensively communicates the reasons for the cost increases it authorizes at the start of each cycle, nor has it established a mechanism to clearly communicate the reasons for rate increases that utilities seek midcycle. By not providing customers with that information, the CPUC neglects opportunities to improve the public’s understanding of why rates are increasing.”
The audit concludes with this critical recommendation:
To promote transparency, the CPUC should by February 2024 institute a process that requires utilities to periodically publish actual rate-of-return calculations, using a methodology acceptable to the CPUC and to Cal Advocates. Further, when the actual rate of return significantly exceeds the authorized rate of return, the CPUC should require that the utilities identify the major costs categories where projected costs exceeded actual costs and provide supporting documents. The CPUC’s Energy Division should then publish this information so that it is available to Cal Advocates and to other interested parties, and it should objectively analyze the information for the CPUC.
When Public Watchdogs contacted the State Auditor’s office to inquire as to who was responsible for the oversight to ensure the recommended report to develop policies and procedures by which the utilities’ costs are validated, the response was that would be none other than the CPUC…
Because “The Public has a Right to Know,’” Public Watchdogs has serious concerns that the delivery of a report to ‘promote transparency’ has been delegated to a Utility Commission that is wearing blinders.
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