Money slated to put PG&E power lines underground was diverted for years: 2 Investigates

For decades, Pacific Gas & Electric had been diverting money away from power line undergrounding projects to what it calls “other high priority system improvements.”

PG&E did not provide 2 Investigates details on exactly how much and where the diverted money went. A spokeswoman said the funds were directed to “other work as needed to provide safe, reliable and efficient service.”

But according to public documents obtained by 2 Investigates from the California Public Utilities Commission (CPUC), over the last 17 years $246 million dollars meant for city and county power line undergrounding was left unspent.

These were pots of money PG&E had the discretion to move to other projects without ratepayer feedback or regulator oversight.

That change after a 2017 CPUC decision for PG&E to implement an accounting system, which came about around the same time the City Hayward and PG&E submitted a joint proposal for an audit of the utility’s power line undergrounding project. The audit is currently underway and is being overseen by the CPUC.  

Critics say the policy change came too late and without enough transparency.

“They did not track those accounts,” said Mark Toney, Executive Director of ratepayer advocacy group TURN. “PG&E took advantage of ratepayers and cities that didn’t have a clue there was money building up.”

2 Investigates examined records of unused funds belonging to cities and towns. Since 2000, the amount of unspent money consistently and dramatically grew. In 2000, PG&E recorded $0 unspent power line undergrounding money. In fact, according to documents it even went slightly over its budget. But by 2016, nearly $44 million dollars were left unspent.

PG&E said “Undergrounding is not a silver bullet to wildfire prevention,” but as some cities and ratepayer advocates argue, power line undergrounding is part of the larger issue.

Toney said PG&E diverting ratepayer-generated funds without oversight is the real cause for concern.

“We’re paying for it, and PG&E is spending it somewhere else,” said Toney. “They can divert it to corporate bonuses, to more shareholders’ dividends, anywhere they want.”

“Rule 20A [or undergrounding] credits are allocated to cities and counties annually and are only deducted once a project is completed or cancelled by the city or county after PG&E has started work,” said PG&E spokeswoman Lynsey Paulo.

In March, the California Public Utilities Commission approved the audit of PG&E’s undergrounding program. The audit is being paid for by PG&E and is not expected to cost more than $1 million.

PG&E told 2 Investigates it “appreciates the CPUC’s directives on the audit scope and process and will continue to collaboratively work with the City of Hayward and the CPUC’s Energy Division throughout the bid selection and audit process.”

2 Investigates learned the regulating agency may be part of the problem. A 2016 CPUC study of its own statewide undergrounding program found years of issues. They include cost overruns, long timelines and a statewide balance of unused undergrounding money totaling about $1 billion.

Authors of the review called that money “the billion-dollar risk” that “[posed] a potential financial risk to utility ratepayers.”

The study also described a two-part review of the state program where, after the early 2000s, phase two of the review was indefinitely suspended.

PG&E declined an on-camera interview but sent 2 Investigates a written statement:

The Rule 20A [undergrounding] program does not have a safety component requirement, and its primary intent is beautification. Prior to the 2017 General Rate Case decision, PG&E could redirect unspent Rule 20A funding to other work as needed to provide safe, reliable and efficient work.

In March, the CPUC approved the scope for the undergrounding audit, expanding the list of objectives. The scope of the audit includes the following:

  1. Ensure that PG&E has fully accounted for annual Rule 20A [undergrounding] amounts.
  2. Ensure that localities will receive the full benefit of these funds.
  3. Assess progress in implementing steps PG&E has taken to increase its capability to perform undergrounding work.
  4. Assess PG&E’s processes to verify eligibility of Rule 20A projects.
  5. Verify the reliability of Rule 20A project cost estimates.

The next steps in the process include bidders submitting their audit offers by August 6, 2018. CPUC staff will score the proposals, interview bidders and select the winning bidder by September 4, 2018.

The audit is expected to be complete within nine months from the time PG&E’ contracts out the work.