Commissioner James Danly Dissent Regarding Pacific Gas and Electric Company

Commissioner James Danly Statement
March 17, 2022
Docket No. ER16-2320-002

I dissent from this order reducing the Return on Equity (ROE) component of Pacific Gas and Electric Company’s (PG&E) proposed rate by over 100 basis points based on a finding that PG&E was an “average” risk utility in 2017.[1]  In my view, it simply is not credible that PG&E faced the same risks as any other “average” utility in light of  rampant wildfires, California’s inverse condemnation laws (which require PG&E to compensate landowners for fire damage), and a host of other risks unique to a utility attempting to survive in California’s challenging legal and regulatory environment, in 2017 and since.[2]  Let us not forget that the inverse condemnation laws “helped drive the nation’s largest utility [PG&E] into bankruptcy protection . . .  as it faced at least $20 billion in losses stemming from a series of deadly and destructive wildfires in 2017 and 2018.”[3]  With the nation’s largest utility recently bankrupt, now does not seem like an opportune time to slash its ROE based on esoteric arguments that the risks did not seem so bad back in 2017.[4]

This common sense-defying outcome underscores a fundamental concern I have with the Commission’s convoluted ROE precedent and policy:  we have created a Rube Goldberg machine that ultimately can be manipulated into supporting any ROE a majority of Commissioners favors at a given moment.  The recent trend is to reduce ROEs, and that is what we do here.

Meanwhile, the Commission will be at the front of the line to criticize PG&E after the next catastrophic wildfire for failing to invest in upgrades and fire protection measures.  I would prefer to grant PG&E’s rate proposal now, which it fully supported with record evidence sufficient to meet its burden under section 205 of the Federal Power Act.[5]

For these reasons, I respectfully dissent.