Dive Brief:

• The California Public Utilities Commission on June 18 established a process to take comment on proposals to improve the safety culture of Pacific Gas & Electric, including potentially splitting apart its gas and electric businesses.
• Another proposal would establish a periodic review of PG&E's certificate of public convenience and necessity (CPCN), and link the utilty's rate of return on equity to safety performance metrics. A periodic review of PG&E's CPCN could "reduce the utility's sense of entitlement to its monopoly position, which tends to build complacency. In order to continue in business, a utility would have to perform well, or risk losing its CPCN," said the commission.
• The CPUC launched a review of PG&E's safety and structure in December, as it considered the role PG&E's electric system played in sparking some California wildfires. The commission is considering a total of four proposals for the utility, and all would mark significant changes.

Dive Insight:

Regulators are considering dividing PG&E into separate gas and electric utilities, or selling the gas assets, in order to address the utility's large size and "provide a narrower safety focus." That could work, but the utility's size has also allowed it to capture efficiencies of scale both in terms of rates and carbon savings.

"With a narrower focus, the hope would be that the company, and management in particular, would be able to concentrate on ensuring an improved safety culture and superior safety performance throughout the organization," the commission explained in its order.

But the Sierra Club has warned that splitting the utility apart could slow progress in achieving the state's climate goals by giving the new gas utility reasons to oppose electrification.

Another proposal considers modifying or eliminating PG&E Corp.'s holding company structure to eliminate unregulated subsidiaries and affiliates.

"PG&E would be just a utility, and could concentrate on being a safe utility, without the added financial and managerial complexities (and costs) of a holding company structure," according to the order.

PG&E has said it is amenable to a number of solutions, though it warned some proposals could cause customer rates to rise. 

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

PG&E is currently in bankruptcy due to wildfire liabilities, opening the door to broad changes. San Francisco is considering buying portions of PG&E's grid that serve the city to avoid paying for distribution service it says is increasingly expensive.

Last month, a report from the San Francisco Public Utilities Commission concluded public ownership of San Francisco's electric grid "has the potential for significant long-term benefits relative to investment costs and risks."

Opening comments on the restructuring proposals are due to the CPUC July 19, with reply comments due Aug. 2.