Edison International’s (EIX) CEO is pushing back against state officials who want to penalize major power utilities after California regulators on Monday released proposed utility wildfire mitigation plan decisions that leave unsettled how multi-billion dollar liability costs may eventually be recovered.
CEO Pedro Pizarro told analysts during a quarterly earnings call on Tuesday that the mitigation plans are not a long-term solution to the wildfire conundrum, nor is EIX's decision to sell $1.5 billion of new equity as a short-term measure to help ride out the current political and economic uncertainty.
He pointed to a recent governor's strike team report that makes clear utilities need to be held accountable for their roles in the wildfires. Pizarro said he is "encouraged by the broad scope and sense of urgency in the report” and added that it "appropriately acknowledges" the need for addressing wildfire liability and regulatory reform -- a prime concern of affiliate Southern California Edison Co. (SCE) and other major utilities.
Pizarro said the report also recognizes the need to restore public confidence in the state's "regulatory compact," and the importance of helping the major investor-owned utilities so they can help support the state's far-ranging policy goals on climate change.
Separately, the statewide wildfire commission created by Gov. Gavin Newsom held its fourth meeting on Monday and identified three areas it would be focusing on before it submits a report at mid-year. The commission will evaluate wildfire liability and cost recovery issues, a statewide wildfire fund and homeowners' insurance availability and affordability, along with protection measures.
Also in the courts, Pizarro said utilities continue to challenge the state’s use of the inverse condemnation legal theory. The bottom line for Pizarro and the other utilities is that they "must remain financially viable" if the state is going to successfully meet its climate change mitigation goals.
In regard to a federal regulatory filing last month, Pizarro emphasized that it should not be considered a long-term solution to the elevated wildfire risks in its seeking approval for a 17.12% authorized return on equity (ROE) for the parts of its business regulated by the Federal Energy Regulatory Commission. It is seeking similar temporary earnings treatment from state regulators.
"This is not a long-term solution," Pizarro said. "It is not an efficient or effective way to resolve the wildfire issue, but it is a temporary necessity,"
The California Public Utilities Commission (CPUC) has issued its proposed decision on 2019 mitigation plans from SCE, Pacific Gas and Electric Co. (PG&E), and San Diego Gas and Electric Co., along with several smaller power utilities and two transmission operators. The plans are required by state law to "reduce the risk and occurrence of catastrophic wildfires."
In issuing its proposed decisions, which will be voted on by the five-member regulatory panel May 30, the CPUC noted that each proposed decision requires individual operators to track data and assess outcomes "so that future plans reflect this year's lessons."
Senate Bill 901 required the utilities to prepare and submit mitigation plans to "prevent, combat and respond to catastrophic wildfires affecting their service territories." CEOs like Pizarro defend their plans, but stress a lot more are needed.
PG&E also participated in a fourth bankruptcy hearing in court with its major creditors, noting that so far it still cannot estimate the overall liabilities it faces and when it will begin paying victims of the fires. During the hearing, victims' lawyers wanted to know more, but the San Francisco-based combination utility had no new information.
EIX reported first quarter net income of $278 million (85 cents/share), compared to $218 million (67 cents) for the same period last year.