California Legislators Consider Cracking Down on How Utilities Spend Customers' Money

A crackdown on how some of the nation’s largest utilities spend customers’ money faces a do-or-die vote Monday in the California Legislature.

Californians already pay some of the highest electricity rates in the country, in part because of the expensive work required to maintain and upgrade electrical equipment to reduce the risk of wildfires in a state with long, dry summers.

As rates continue to climb, utilities like Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric have faced increasing scrutiny from consumer groups over how they spend the money they collect.

Utilities aren’t allowed to use money from customers to pay for things like advertising or lobbying. Instead, utilities must pay for those activities with money from private investors who have bought stock shares.

Consumer groups say utilities are finding ways around those rules. They accuse them of using money from customers to fund trade groups that lobby legislators and for TV ads disguised as public service announcements, including some recent ads by PG&E.

A legislative bill, SB 938,  would expand the definitions of prohibited advertising and political influence to include things like regulators’ decisions on rate-setting and franchises for electrical and gas corporations. It would also allow regulators to fine utilities that break the rules.

“It’s always fun to be able to give away other people’s money and use other people’s money to try to advance their own interests,” said state Sen. Dave Min, a Democrat who authored the bill. “But for a regulated industry like (investor-owned utilities), I would submit that that’s not good policy.”

The bill faces fierce opposition from utilities and some labor unions that fear it would prohibit union members who work for utilities from lobbying.

The bill had a public hearing last week in a committee, but it failed to pass after multiple Democrats, who hold large majorities in both legislative chambers, did not vote. The committee is scheduled to hear the bill again Monday. If it fails a second time, it likely won’t pass this year.

Min said he has accepted amendments to address lawmakers’ concerns, including allowing a grace period for utilities to correct errors and requiring that any money collected from fines be put into the state’s general fund. Still, he said it was “50-50” whether the bill would survive Monday’s vote.

PG&E opposes the bill because it said it would take away the power of state regulators to examine utility companies’ costs and decide whether it is “just or reasonable” for customers to pay for them.

Plus, PG&E lobbyist Brandon Ebeck said it’s appropriate for customers to pay for the company’s membership fees that go to various industry associations because they benefit customers. He noted that those groups coordinate emergency response and wildfire training. When the war in Ukraine started, the Edison Electric Institute — a national association representing investor-owned utilities — sought to find surplus equipment to be sent to Ukraine.

“There’s a lot of benefits to customers,” Ebeck said.

Consumer groups argue that the current rules for utilities “incentivizes them to see what they can get away with,” said Matt Vespa, an attorney with the advocacy group Earthjustice.

Those groups and Min point to as much as $6 million in TV ads PG&E paid to tout its plan to bury power lines to reduce wildfire risk, which some consumer groups opposed because it increased customers’ bills.

The ads first aired in 2022 and feature CEO Patti Poppe in a company-branded hard hat who said the company is “transforming your hometown utility from the ground up.”

The utility recorded the expenses for those ads as coming from a customer-funded account dedicated to reducing wildfire risk, as first reported by the Sacramento Bee. PG&E spokesperson Lynsey Paulo said the company has not yet asked regulators to review that expense. The California Public Utilities Commission will decide whether customer funds can pay for the ads.

Paulo noted state regulators allow utilities to use money from customers to pay for safety communications on television.

“Our customers have told us they want to know how we are investing to improve safety and reliability,” Paulo said. “We also use digital and email communications, but some customers do not have internet or email access, so we use methods including television spots to communicate with all of our customers.”

Some consumer groups said the ads have crossed the line.

“Only at PG&E would [Poppe’s] attempts at brand rehabilitation be considered a ‘safety message,’” said Mark Toney, executive director of the Utility Reform Network. “This blatant misuse of ratepayer funds is exactly why we need SB 938 and its clear rules and required disclosures for advertising costs.”