Economic Impacts of PG&E’s Proposed Capital Expenditures in 2011 General Rate Case

For over 30 years, TGG experts have filed testimony in over 60 regulatory proceedings in jurisdictions throughout North America. In 2010, TGG provided Direct Expert Testimony on behalf of The Greenlining Institute in Pacific Gas & Electric’s 2011 General Rate Case (GRC) before the California Public Utilities Commission (CPUC).

Greenlining is a California-based non-profit, working for racial and economic justice. In 2010, PG&E requested approval from the CPUC for approximately $8 billion dollars in proposed capital expenditures for 2011-2013. This significant increase in capital expenditures would translate into higher rates for consumers. Based on an IHS Global Insight study, PG&E claimed that these capital investments these capital investments would provide a positive economic stimulus, creating additional employment and other economic activity.

TGG’s testimony analyzed the economic development impacts of PG&E’s proposed capital expenditures and associated rate increases; our analysis, focusing on job creation and stimulus, critiqued the flawed IHS Global Insight job study. TGG then considered the impacts of these expenditures and rate increases on customers and communities within the PG&E service area. Our testimony included equity considerations relating to the uneven distribution of the costs and benefits (throughout different demographics and regions). TGG recommended that PG&E increase its Supplier Diversity activities in order to offset adverse impacts on customers and communities while addressing these equity concerns.

TGG also analyzed PG&E’s Customer Retention and Economic Development (Load Attraction and Retention) activities. We concluded that ratepayers should not provide funding in support of Customer Retention.

Our Rebuttal Testimony analyzed the direct testimony of other intervenors with respect to economic development impacts of the proposed capital expenditures and quantification of these impacts.

TGG also provided Greenlining with an Expert Report on the Economics of Supplier Diversity, which (a) outlined the main arguments for supplier diversity from the economics and business literature; and (b) made an economic case for Supplier Diversity in the 2011 GRC. This research further strengthened the Supplier Diversity recommendations made in TGG’s Direct Testimony.

Update: In 2008, PG&E barely met the CPUC minimum 15% goal goal for minority-owned business procurement. Greenlining’s 2009 Supplier Diversity Report gave the company a C- in terms of overall minority-owned business spending. The CPUC’s rules to promote supplier diversity (from businesses owned by minorities, women and LGBT) coupled with Greenlining’s long-term advocacy have had an impressive impact on supplier diversity. PG&E increased its supplier diversity significantly over the last decade. In fact, PG&E earned an A- for 2015 and 2016 minority-owned business spending, which almost doubled from 2008. During the same period, PG&E earned an A from Greenlining for overall supplier diversity procurement.

By 2018 and 2019, PG&E’s minority-owned business spending had decreased approximately 25% of total procurement, earning a B from Greenlining in the 2020 Supplier Diversity Report Card. According to PG&E’s 2019 Supplier Diversity Annual Report, “PG&E spent more than $3 billion – over 40 percent of the company’s total supply chain spend – with diverse suppliers.” While diverse suppliers is a broader category than minority-owned businesses, PG&E has significantly improved its efforts in supplier diversity since 2009.

At the same time, PG&E’s capital expenditures have also increased dramatically from the proposed range of $2.5-$2.8 billion annually (over 2011-2013) in GRC 2011 to an actual capex spend of over $7B in 2019. The 2019-2024 capex forecast in the PG&E Business Outlook for February 2020 (p. 30) ranges from $7B to $8.7B during the period. According to PG&E, “[u]nprecedented level of system investments, accelerated wildfire risk reduction, and continued execution of gas safety commitments drive substantial capital investments.” PG&E filed for bankruptcy in 2019, claiming an estimated $30 billon in liability for wildfires started with its own poorly-maintained equipment. After exiting from bankruptcy in July 2020, PG&E must balance unprecedented safety investments with acceptable rate increases.

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