SEMPRA Energy Wants Ratepayers to Pay for Their Negligence

It’s standard operating procedure for San Diego based SEMPRA Energy, parent corporation of San Diego Gas and Electric, to delay costly maintenance and then, when there is a breakdown in the system such as the 2007 Witch Creek Fire which burned 198,000 acres, killed two people, injured 40 firefighters and destroyed more than 1,100 homes, to go to the California Public Utilities Commission (CPUC) and get a ruling that would allow them to charge the ratepayers for costs associated with that disaster.

This is standard business procedure for SEMPRA which has the CPUC in the palm of its hands. They have played this game time and again.

The problem is aging infrastructure, infrastructure that SEMPRA has a responsibility to maintain and upgrade. But upgrading infrastructure and maintaining its power and gas lines is expensive and subtracts from its bottom line profit margins.

So SEMPRA’s strategy is very simple. Don’t spend the money on maintenance and then, when a disaster happens, go to the CPUC whose members it has wined and dined, and ask for a rate increase so that the ratepayers, not SEMPRA, pays for the costs associated with the disaster such as paying off homeowners whose homes have been burned down in the fire. Hey, it’s cheaper than doing routine maintenance.

SEMPRA’s problems in the Witch Creek fire arose because its insurance policy was not sufficient to cover all the costs of the fire. Total costs of the fire are in the $2 billion range with insurance only covering $1.1 billion. A state inquiry found that SDG&E lines ignited the 2007 firestorms because the company did not properly design, build and maintain its equipment.

So naturally instead of SEMPRA hitting up its stockholders for the difference, it expects its ratepayers, many of whom were actual victims of the fire, to pay the bill. It has filed with the CPUC for approval for a rate increase on the grounds that it is needed to pay for the fire that SDG&E itself caused due to lack of maintenance and negligence.

An attorney for UCAN (Utility Consumers’ Action Network) said it works out to about $356 more a year for an average utility customer. How could the California PUC make it possible for SEMPRA to charge its ratepayers for its own negligence which caused a large swath of death and destruction inSan DiegoCounty in 2007?

Simple. The CPUC is in the pocket of not only SEMPRA, but the other big California utilities like Pacific Gas and Electric based in San Francisco. For example, commissioners have twice approved rate increases in the tens of millions of dollars for SDG&E customers to cover the company’s higher wildfire liability insurance costs. CPUC members and staffers have had paid vacations courtesy of SEMPRA, Pacific Gas & Electric and Southern California Edison.

The Fairmont Kea Lani in Maui

After Mike Peevey ended his term as President of the CPUC, he helped to create the California Public Utilities Commisssion Foundation which held a fund-raising dinner where tables sold for $20,000. each. Among the buyers were San Diego Gas & Electric, child of parent SEMPRA. Up until 2000, the CPUC was regarded as the best utility regulatory body in the nation, but under Peevey it became the utility corporations’ best friend. Par for the course for the Bush years.

And politicians who support the utility corporations’ agenda get their share of free travel as well. Each year more than a dozen California state lawmakers enjoy a free trip to Hawaii. In 2011 they checked into the luxurious Fairmont Kea Lani hotel in Maui. California law prohibits state lawmakers from taking more than $400 a year in gifts. But as ever there’s a loophole. The $13,000. trip to Maui for lawmakers was paid for by a nonprofit corporation, the Independent Voter Project (huh?), which is a front group for the utility companies (and other corporate interests).

San Diego politicians are among other recipients of SEMPRA’s largesse. Bob Filner is the only mayoral candidate who has not received money from SDG&E, its parent company SEMPRA, or their employees. Nathan Fletcher, Bonnie Dumanis and Carl DeMaio have all taken SDG&E or SEMPRA money, but claim that it hasn’t affected their judgment or proclivities. Yeah, sure.

Only Bob Filner hasn’t taken money from these companies.

But free trips for regulators and cozying up to lawmakers is not the only way utility corporations screw the public. There’s another way. While your payroll and income taxes are taken out of your paycheck before you get paid, Congress lets corporations earn money today and defer taxes till years later.

For example, Pacific Gas & Electric, a company responsible for the 2010 San Bruno gas line explosion which killed 8 people and destroyed 38 homes, had about $450 million of deferred taxes in its ADIT (Accumulated Deferred Income Tax account) in 2011 when it filed with the CPUC for a rate hike. The filing explained how long it holds on to this money before actually paying the government. In some cases it was 37 years.

Meanwhile, inflation has reduced the value of the money it owes and investment has increased it. From 1954 to 2006, corporate-owned electric utilities got tax benefits worth $450 billion. So while you pay your taxes upfront, utilities can delay paying them for up to 37 years.

It’s important to realize that not only does SEMPRA want San Diego ratepayers to pay for the 2007 Witch Creek fires; they also want the CPUC to rule that ratepayers should pay for all future fires. “The people of San Diego County will rise up if they find out they’re going to be charged for past fires, future fires, negligent behavior or not,” said Diane Conklin, of the citizens watchdog group Mussey Grade Road Alliance. “They will be furious.”

It’s not like SEMPRA thinks it has the CPUC in their hip pocket or anything. Profits are maximized by deferring maintenance, waiting for disasters to happen and then gouging ratepayers and taxpayers, average citizens, to pay for it. David Cay Johnston in his newly published book, The Fine Print, says:

No other modern country gives corporations the unfettered power found in Americato gouge customers, shortchange workers and erect barriers to fair play. A big reason is that so little of the news, which informs us about the world around us, addresses the private government-approved mechanisms by which price gouging is employed to redistribute income upward. When news breaks about one company buying another, the focus is almost always on the bottom line and how shareholders will benefit from higher prices and less competition; much less is said about added costs for customers as competition wanes. This powerful yet subtle bias appeals to advertisers such as mutual funds and other financial services companies who wish to address investors.



John Lawrence

John Lawrence graduated from Georgia Tech, Stanford and University of California at San Diego. While at UCSD, he was one of the original writer/workers on the San Diego Free Press in the late 1960s. He founded the San Diego Jazz Society in 1984 which had grants from the San Diego Commission for Arts and Culture and presented both local and nationally known jazz artists. His website is Social Choice and Beyond which exemplifies his interest in Economic Democracy. His book is East West Synthesis. He also blogs at Will Blog For Food. He can be reached at