Monopoly Much? America's Largest Utility Hikes Rates Most In 9 Years Despite NatGas Price Crash
Happy New Year Californians - behold the power of monopoly and regulatory capture.
Submitted by Wolf Richter via WolfStreet.com,
“We want our customers and their families to know that we are here to help them make smart energy choices and save money whenever possible,” cooed Laurie Giammona, senior VP and chief customer officer of Pacific Gas and Electric, on Wednesday between Christmas and New Year’s, when no one was supposed to pay attention.
It was the propitious day when the beloved utility that distributes gas and electricity in the northern two-thirds of California announced that on January 1st it would jack up its rates.
America’s largest electric utility and the second largest gas utility by number of customers, the utility whose 2010 gas-pipeline explosion in San Bruno, just south of San Francisco, killed 8 people, injured another 66, and burned down 38 homes, the utility that is still digging in its heels after five years since the explosion and is now under investigation by the California Public Utilities Commission because it failed to deliver certain documents, the very same PUC that is being probed by a federal grand jury for potential illegal ties between the regulators and the executives of PG&E in this ballooning corruption scandal … well, this beloved utility now has announced a very special New Year’s resolution.
It will hike natural gas rates for the average residential customer by 4.0% and electricity rates by a stunning 8.5%, for a combined rate increase of 7%, the steepest since 2006.
The average small business is going to get whacked by a combined rate increase of 5.1%.
That’s on top of the 6% rate increase it had successfully inflicted on its customers a year ago.
Rate increases, despite a plunge in the price of natural gas
That plunge started in 2008 and has hit new lows on December 17, when the price of natural gas hit $1.68 per million Btu at the NYMEX, the lowest since March 23, 1999. When adjusted for inflation, it was below the prices tracked by NYMEX going back to 1990. This historic price collapse has been eviscerating the US natural gas industry and its investors [read… Carnage in US Natural Gas as Price Falls off the Chart.]
Much of the power PG&E distributes is generated by natural gas. And all of the natural gas it distributes is, well, the same natural gas whose price has plunged to historic lows.
In fact, in its third quarter financial statement, PG&E admits as much: its cost of electricity over the first nine months of 2015 dropped 8.8% year-over-year, and its cost of natural gas plunged 36%!
The thing is, despite the juicy rate increases imposed at the beginning of 2015, operating revenues have fallen about 1% so far in 2015, as Californians use less energy from their beloved utilities. It’s an existential struggle all utilities face.
However, the company pointed out that the rate increases won’t be used to pay for the fines and penalties associated with the San Bruno pipeline explosion.
Those will largely be covered by the proceeds from a public offering last August of 6.8 million common shares at $51.90 per share. Wells Fargo, the underwriter for the offering, got a bundle of fees. But money is fungible. It’s like water. It flows wherever gravity pulls it, and no one can separate it.
So why the rate increase? The SFGate:
The changes follow a decision by the California Public Utilities Commission in 2014 to let PG&E collect an extra $2.37 billion in revenue from its customers over three years, from the start of 2014 through the end of 2016. The additional money will pay for maintenance and upgrades to PG&E’s sprawling electricity grid and natural gas pipeline network….
What else is PG&E doing with this moolah?
It is paying rich quarterly dividends of $0.455 per common share. With 489 million shares outstanding in the third quarter, dividends for a year would amount to $890 million. So for the three-year period in question (2014-2016), this would amount to, give or take, $2.7 billion, more than enough to pay for the maintenance and upgrades of its system.
If it faced real competition, or a real regulator, PG&E would be forced to pay for maintenance and upgrades with other means than rate increases when its input costs are plunging while it’s paying out a rich dividend.
And how are its customers supposed to deal with the rate increases? PG&E, according to the SFGate, “urged its customers to contact the utility for ways to save energy.” So, turn down the heater, put on another fleece, buy more efficient appliances, and hunt down subsidies for low-income households.
As always, it’s just the beginning.
In September, PG&E asked the Public Utility Commission for another $2.7 billion in revenue increases for the three-year period of 2017-2019. That particular amount of money would be used ostensibly to prepare for natural disasters. Over the same period, it would still pay out $2.7 billion in dividends. The PUC, under federal grand-jury investigation for its cozy ties to PG&E, has not yet voted on this doozie.
Turns out, for utilities, the party is over, again. Read… Dear Electric Utility CEO: Merry Xmas and Cut the Dividend?
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I live in California, and have been off the grid for 45 years - 27 solar panels and an Outback system biltchezzz.
My son put 20 panels on his roof in a east bay subdivision, figured a 6 year payback - wound up being a 5 year payback. Neighbors came, watched his meter run backwards in the summer when they were paying through the ass (mostly air conditioning), and now there are 4 (or 5) roofs with panels in his subdivision, and more planned for this spring. This recent obsene rate hike will only accelerate that growth.
I keep saying guys and girls, the future of solar ain't big centralized so-called mega watt solar farms distributing electricity through the mega billion dollar grid (and charging you monthly for it), it is individual homes with a bunch of panels on the roof. This is one place where a homeowner in the suburbs can break from the system, so far, in most states.
Better do it before it becomes illeagal. Being hooked to the local power utility is like being in debt to the bank - you get to pay ever month.
Full disclosure; once upon a time (1964-1966) I worked for PG&E.
And solar ain't free - I have (spread over 35 plus years) over $20 grand in my system, and it requires about and hour and a half maintenance per month - mostly checking and topping off battery water - and about $3000 every 4 to 6 years for a new set of heavy duty batteries - I have 16 of the suckers. Commercial systems in the city/suburbs don't require as much maintenance, btw - mine is a localized, homebuilt system. My son's is a lot more efficient, but I was one of the pioneers locally in this stuff; my first full bore set of four panels went up in the 1970's. (I think, might have been the early '80's.)
If you live in Chico, the power company has to buy your "surplus" generated around the noon hours in the summer. They have to pay a crazy high rate. Without mandated payments from the electric company would you still be in the black? Trust me, the electric company does not want your home-brewed electricity - nor should they want it. How this larceny is done is explained in the climate skeptic web site Watts up with that? http://wattsupwiththat.com/
"Trust me"
No thanks. You are a proven liar.
Sorry.
Trust me, the electric company does not want your home-brewed electricity - nor should they want it.
Oh that filthy bathtub brew power. Must be as bad as that bathtub gin the "government" used to poison to murder "citizens" who helped other "citizens" disobey orders banning the sale of a product.
+10
Or that vile home-distilled whiskey from West Penn that sparked our first executuve overreach before even 1800.
Are you using lead acid? I have been looking at solar, but energy storage seems to be the real hurdle.
Best batteries ever mass produced.
https://en.m.wikipedia.org/wiki/Nickel–iron_battery
Last forever.
These look interesting http://www.velkess.com
This really helps in keeping your lead acid batteries hydrated at all times.
http://batteryhydration.com/
If you're going to do it over a long enough time period to amortize the up-front, flywheels can be a better TCO option.
Sounds about like my system, started in '79, never grid tied, built on till the point where now it's almost luxury level power - dollar cost averaging. And people said I don't handle money well, and "how can you live like that" kinds of questions when I was "poor". They said it would take forever to "pay off". They weren't counting the cost the power co wanted to run wires out to the boonies in that calculation I suppose.
They're gone - they couldn't "live like that" once the banks wanted them to pay their mortgages. But I could, and now I'm better off than most in the neighborhood, free and clear totally (always). I have nicer neighbors now.
Payback here in VA was pretty swift, even at first when the $/watt was higher, because I started with bare land, and due to the delegation of building permit power to the ... power company, I never had to get a permit to build and am taxed on my "barns" - some of which are decent places to live in, somehow. But taxed at poverty levels because if you don't have power co power, you don't have power, right? Their own hubris used against them.
I'm using Xantrex for the electronics and Rolls-Surette for batteries - you might want to check that latter out, they live a lot longer than your average L-16 clone.
I like the freedom from having to sweat a monthly bill. When I was a city boy, I found out that they only estimated the bill, so you'd run up a huge one in heating or cooling season, and not find out till the next power-hungry season - that can really be a painful surprise. I'm sorta fond of the low tax rate too, but that seems to be possible only if you started with bare land (here), and then built on it.
They just don't know how to asses this crazy alternative lifestyle...I ain't complainin.
One other subtle point: using your own generation makes you think about your consumption a bit more than being hooked to the nat-gas fired mainline from PG&E; as a resuit you start naturally curbing the habits that come from being numb to the consequences of ones actions until slapped in the face later in the month and your average kWh goes down considerably without any real sacrifice.
Solar makes sense because of huge federal tax rebates. Misallocation of resources. Stinkin socialism for tree huggers.
So trying to find oil under a mile of water and frac'ing somehow make lots of "sense"? How much sense does tying yourself to a non-renewable resource make long term? How much sense does it make to have an economy tied to a resource that specifically enables ones enemies?
And then we can talk about tax incentives for the oil industry, as long as we're discussing "stinking socialism".
If you are using wet cells there is no reason to replace them every 3-4 years.
My advice is to move to VRLA and forget checking the water.
The outback is ok, as well as Morningstar.
You you need to do is make VERY sure your panels can charge your battery system back up EVERYDAY, regardless of cloud cover. To do this you do the following:
1. Compute your evergy requirements, usually means your base load like freezer, firdge, average your washing machine, drier and microwave over a week to get your numbers,
2. Compute your 24 hour requirements in Watt Hours, Divide this by the efficiency of the MPPT controller that you will use in 6 to you give and "effective load" based at the DC side. You will also need to divide this by the efficiency of your AC inverter. I recommend Victron inverters form Holland, -20-+60C, 5-95% non condensing humidity and ~92-95% efficient.
3. Compute the clear day 1000W/m^2 irradiance in your area, for CA its ~4-5 hours per day,
4. Divide 2 by the number of hours in 3, this will give you the Watts you need per dayloght hour to charge your batteries. That will be the number of clear-day-panels you need.
5. To size your batteries, you need to decide on your desired daily depth-of-discharge, I recommend 20-30% only so that you can get 5 years out of your batteries ( 5 x 365 = 1800 cycles). To do this take your load discribed in item 2 and divide by 48 which will give you the amp hours required. Use 48Vdc and NOT 24 to lower your I-squared-R losses. The higher the voltage, the lower the current the lower the power losses in your connection wires.
6. Size your controllers. USE ONLY MPPT CONTROLLERS!!!! You want to be running all your panels at their maximum power points, you only get this with MPPT controllers. If you use a PWM controller your panel voltage will be set by the battery bus level and this will NOT be the maximum power point of th epanels which will throw our your computations in item 3.
7. Take the controller sizie and add at 20% fudge factor on because batteries are not 100% efficient at charging. For example, if you need to push 100 Joules into a battery, you'll need to actually push 110 or so because the battery consumes energy while recharging, nothing is perfectly effecient(that 10J is the heat you feel on the batteries when they charge),
8. Now take everything you have done above and multuiply the number of panels you have by 4. If you need to increase the controllers, do so.
We have done item 8 to ensure that we can recharge the battery bank fully even on cloudy days. Note that cloudy days you will not be using air conditioning. On sunny days you will have 75% of the solar generated capacity to run your airconditioners since your batteries will recharge in about 2 hours with a clear sky. Note that I have made NO provision here to run airconditioners over night here, you will have to adjust 2 if you want to do that.
The 4 factor comes from studying the irradiance charts form the University of Colorado, excellent site and data. On a clear day direct irradiance dominiates and is about 5 hours in CA at ~1000W/m^2(all panels are spec'd at this irradiance level in the spec sheets). On a cloudy day there is no direct irradiance, only indirect and it is 25% of the clear day level, but, you get 10 hours of it, not 5. So it works out.
Go nuts. I priced this stuff out in Singapore and it would take us 20 years ot break even when oil was at US$120 so never pursued it. PUB here adjusts power rates based on the price of natural gas and oil on a monthly basis, its free markiet rates and doing so makes the electricity here much cheaper than you guys pay, hence soalr doesn't work out here.
Go nuts.
Squid
Public Service New Mexico wants ~15%. Part of their reasoning is lower residential consumption. Although, they will shutdown half of their San Juan (Four Corners) coal-fireds. That's fine for the region (mercury from coal-fired plants is in all our game-fish, license has warnings to not over consume wild fish) but if the industrial age continues China and India will more than make up the difference. Meanwhile, there are very few places to escape unless you're far away from the tentacles of metro/urban areas, preferrable out of the same county.
Rinse and repeat. Fleece and repeat. The years change, but the cons stay the same.
dup
ENRON with gas
Enron was involved with gas, broadband and water too. They were trying to acquire water rights ala Nesle here in the US and Europe when they went down. Their wind assets were not part of the bankruptcy.
http://www.greenbiz.com/blog/2002/01/15/were-enrons-answers-blowing-wind
The european assets were finally wrapped up in April 2015
http://m.accountancyage.com/aa/news/2402871/pwc-winds-up-last-remnants-o...
Corporate and .gov, colluding for corruption... No Way
I am certain that the White Hot furnace of capitalist competition will bring nothing but grief to those extorting hihg prices for gas at a time when the gas itself is plunging in price. In the marketplace there will arise new suppliers who will outcompete these price gougers. Other companies will use the lower prices for their natural gas to run the price increasers out of business. Where I in California, I would, like any smart customer, call a different more competitive company and tell them to hook me up to their gas services. The unseen hand will punish those who overprice, and let the competitors flurish buy providing reasonably priced gas. Let it be known, those who fail to please the customer are on their way to bankruptcy. This is the way of free markets, the price gouger always ends up out of business. Sorry to hear that Pacific Gas and Electric will be going out of business due to their poor service at over priced rates. We have freedom in America, if one provider screws us, we simply use our free market rights to shift our business to the better provider. This endless fact of competition always self regulates and delivers the best service at the best rates. Look at the phone companies, and cable tv for example, facing fierce competition, they are forced to always imrpove service and keep rates well down, or else lose out to competitors.
So just you wait! PGE will be punished by the Free, Fair and Open markets that are a Hallmark of America in the year 2016.
You're at the top of form Jack - that really didn't need a /sarc tag it was so good. +++
Droppin' a double dose of cynicism for the new year....Well done sir.
By the way, Jack, PG&E spent millions in 2010 in an effort to effectively block all competition; some called it PG&E’s monopoly insurance.
Technically it was called Vote Yes on 16 to seal in its monopoly by imposing a two-thirds vote as well as an expensive election requirement on local governments before they could contract with alternative suppliers of electricity. The measure failed.
No need to wonder who paid for all its deceptive advertising on radio stations and the Internet, for those special voting slate mailers recommending candidates and issues as voter guides paid for by PG&E, those direct mail pieces, those innocent sounding voices on commercials saying “Isn’t it time we had a chance to vote?”
It was one of the more deceptive campaigns I've seen, out and out lies; a classic case of what’s wrong with the current political system.
For a company with lots of really expensive equipment spread throughout a huge geographic area, they sure do underestimate the actual billable cost of pissing off the wrong people.
My mom was across the street filling up at a gas station when they had their little incident with an exploding gas main in San Bruno, CA; I predicted these rate hikes then.
A married couple in California, both teachers, can retire on as much as $212,000 annually, plus benefits. That’s America on the slide
California has become a socialist haven where the connected and the favored voting bloc take the fruit of American labor and American savings. And those left paying the bill head straight for poverty.
As for PG&E, this is the essence of a utility protecting its huge, obscene rate increase by supplementing the income of the favored voting bloc – in this case, welfare recipients. As its rates go higher and higher, PG&E adds more and more people to its welfare rolls. It’s called socialism.
PG&G features a smiling Mexican family that has just received its “significant discount” on its gas and electricity bill to tout its CARE Program. Save as much as 30% or more,” PG&E gushes, as if PG&E is footing the discount rather than passing it on to you..
“We know that it can be difficult to cover all your expenses each month," PG&E croons. "That's why we offer CARE, the California Alternate Rates for Energy Program. It gives qualified households deep discounts on their energy bills. We care and want to help."
Who is this "we" PG&E's talkng about? You're right; it's you.
http://www.pge.com/en/myhome/saveenergymoney/financialassistance/care/index.page?WT.mc_id=Vanity_care
LOL!!! This is what you get when you try to centrally plan your eCONomy and DESTROY TRUE PRICE DISCOVERY!!!!
Coming soon, everywhere eventually. Global Weimar motherfuckers.
I don't feel sorry for Californians anymore. They're trapped by illegal immigration, liberal government employee unions and environmental wackos. They just need to move before housing crashes again.
Sometimes easier said than done. I can tell you I have closed all my businesses in the Golden State and will re-open them in a friendlier Sunshine state. Not to much longer.
Beam me up!
probably plenty of pg&e stock in the pension funds too.
PG&E and state goobermint are in bed to use utility rates to pay down debt and keep pensions paid for.
If this works, California will never have to pay down its debt - LMFAO!!!! Gummamint always works. LMFAO!!!!
To all Californian companies eager to move, Texas says hello.
Parasites, Goverment & Elites... Destroy a once great state.
Did you guys with the solar count Fed tax credits into your payback time? Don't get me wrong, I like alternative energy. Just not so much when a guy from cloudy Illinois has to subsidize you.
30 states have mandates for renewable energy that will require the use of more expensive wind and solar energy. Since those sources depend on the weather, they require backup generation — a hidden factor that can add significantly to the overall cost to consumers.
Nowhere are the forces more in play than in California, which has the nation's most aggressive mandate for renewable power. Major utilities must obtain 33% of their power from renewable sources by 2020, not counting low-cost hydropower from giant dams in the Sierra Nevada mountains.
In some cases, the renewable power costs as much as twice the price of electricity from new gas-fired power plants.
That's hilarious they are bitching about a 6% increase.
Look at Ontario. That type of increase often comes every HALF a year. As a Christmas present, the rates are going up about 14%. (they removed a 10% discount).
Current power costs average around 25+ cents per kWh, when all costs are added in.
Also, they SAY that power is only 8.3 (night), 12.3 (day) and 17.5 (peak) cents per kWh, BUT that's without delivery, government fees, line losses, debt retirement, and taxs. Often the "other" fees are greater than the cost of the electricty used.
Oh, and ontario is another land of solar panels and windmills and they pay MANY TIMES the going rate for that electricty supplied to the grid. Solar from 35 to 81 cents per kWh, and wind is 12 cents per kWh.
Great for people with panels. You generate power and put it into the grid, and you are paid 35 to 81 cents per kWh, and you turn around and use the same power, but only pay the going retail rate.
California has a hole in their underground natural gas storage facility, an abandoned oil well. Their stockpile of gas is spewing into the atmosphere, and they can't stockpile any more cheap gas because there's a big hole in their storage facility.
The customers are just going to have to pay.
There are no real markets, real competitors or real regulators. Madness reigns.
welcome to the show. we pay 40+ cents a kilowatt. fortunately it makes total offgrid solar/wind an efficient option. the local utility hs already pushed back on net metering for grid ties with the wholesale price for energy returned to the utility and an increase in price for standby power from the grid. the problem is the utilities have not yet entered the leased solar system market to retain customers. until they do, the public utilities will be under pressure to raise rates for legacy customers.
If there is enough rope left after the politicians, they can be next in line.
I live in Minnesota. Installed a 20k jacobs wind gen back in 1996 for about 26k. Has paid foritself in spades. Fully electric 3400 sf home with 5 ton geothermal heat pump. We have NO heat bill, NO electric bill and no hot water cost in the summer as the pump uses waste heat from A/C. But yes we have a fireplace and do burn some wood as the wife likes to keep the house at about 110 degrees. As a matter of fact just picked up the mail and my electric bill shows na 86 dollar credit for the month from Dakota Electric.
Interconnection with net metering is the ticket. The way electric prices are increasing, we are going to hit $4000.00 per year in equivilent retail electric generation.
Adding solar is next. Gotta hedge on the safe side.
Good for you. MN also has relatively cheap power as a result of co-op coal power plants in ND that provide them juice. I was completely astonished to see how much power one small plant provided to an enormous portion of MN.
Depends on location. I'm in small town MN and our cash strapped city fucking gouges us on utilities. But home prices are so cheap it's worth it.
I have serviced a bunch of jacobs (and other) turbines. They do indeed (if well sited) produce. That said, they do require a lot of maintenence (grease) and it gets very messy changing the gear oil. I saw one that self destructed because the field current was lost and the blade tips went supersonic. The customer called me to stop it as the brakes wouldn't work and melted when engaged. He also made the mistake of replacing the original blades with larger ones and had improperly adjusted the the tail vane (furling)....
You should know how to flash the field at the controller in the event you end up in the same situation. Also shut it down before any big wind storm arrives.
It's starting to look like all the predators are in a frenzy to rip the last of the meat off the bones of the middle class and the baby boomers. They seem to be in a hurry.
Abengoa
http://www.zerohedge.com/news/2015-08-04/meet-solyndra-20-us-taxpayer-su...
A-holes. If PGE needs capital for grid and pipeline maintenance, they should bloody well be forced to raise that capital in the open market.
I don't give a rats ass if the stock price suffers. The PUC should have as absolute policy that dividends may not be paid in years where rates are increased beyond the inflation of the raw materials (natgas etc). IN years of deflation, rates should be REDUCED accordingly.
The whole C-suite at PGE should be fired, and the crooked members (not all of them) at the PUC should be booted out and prosecuted.
Sure looks like a fucking RICO scheme to me.