Dive Brief:

• The California Public Utilities Commission (CPUC) last Friday announced it is considering several options to ensure safe energy service in Pacific Gas & Electric's (PG&E) territory, including splitting the natural gas and electric delivery businesses into separate companies.
• The moves are on the table due to the state's devastating wildfires and the possible role PG&E's electric system played in sparking some blazes. Also last week, regulators issued a proposed rulemaking to adopt a methodology for future utility requests for wildfire cost recovery.
• PG&E responded in a weekend statement, saying the utility understands regulators' "serious concerns" and is "open to a range of solutions."

Dive Insight:

California regulators have said they want to shield PG&E from bankruptcy, but that could still include dramatic changes for the large investor-owned utility, according to the Friday ruling.

In a statement, the commission said it had "initiated the next phase of its investigation into PG&E's and PG&E Corp.'s safety culture by examining the companies' current corporate governance, management, and structure to determine the best path forward for Northern Californians to receive safe energy service."

Regulators say they are considering a wide range of possibilities including:

• replacing the existing PG&E and PG&E Corp. board of directors with "directors with a stronger background and focus on safety";
• directing PG&E to retain new corporate management;
• conditioning PG&E's return on equity on safety performance;
• splitting PG&E's natural gas and electric distribution and transmission divisions into separate companies controlled by a holding company;
• reorganizing PG&E's corporate structure to include regional subsidiaries;
• revoking holding company authorization so PG&E is exclusively a regulated utility;
• and reconstituting some or all of PG&E as a publicly owned utility or utilities.

"This is not a punitive exercise. The keystone question is would, compared to PG&E and PG&E Corp. as presently constituted, any of the proposals provide Northern Californians with safer natural gas and electric service at just and reasonable rates," CPUC President Michael Picker said in a statement.

Opening comments in the proceeding are due Jan. 30.

Directed by the legislature, the commission also issued a proposed rulemaking to adopt a new wildfire cost recovery methodology for utilities.

California's electric utilities are all struggling with wildfire mitigation, but PG&E has been under particular scrutiny over the possibility that its equipment played a role in sparking the deadly Camp Fire blaze. While regulators and lawmakers have struggled with issues of liability and cost recovery, other solutions have been on the table as well.

Regulators are examining the practice of proactively de-energizing power lines during high-risk conditions that could spark wildfires.

PG&E responded to the commission's actions in an emailed statement. 

"We understand and recognize the CPUC's serious concerns and acknowledge that while we have made progress, we have more work to do. We're open to a range of solutions that will help make the energy system safer for the customers we serve," PG&E said.

Utility officials say the company's board of directors and senior management team have already been considering corrective actions beyond the recent operational changes and programs. 

To the commission's cost-recovery rulemaking, PG&E said time is of the essence.

"We believe that all stakeholders can agree that there needs to be a timely resolution of the proceeding," PG&E said. "All Californians would benefit from the CPUC accelerating this important work to support the wildfire victims."

CPUC's cost recovery proceeding would include PG&E, Southern California Edison, San Diego Gas & Electric, Liberty Utilities, Bear Valley Electric Service and Pacific Power. The commission may vote on the proposed rulemaking at its Jan. 10 meeting.

Regulators noted that the proceeding will not include the consideration of cost recovery "for any specific fire event."