Code of (Mis)Conduct

Posted March 30, 2018

Located at the southernmost end of a state famous for its sun and sand, San Diego tops every other region in the US when it comes to solar energy. Solar is clean and cheap, so why are residents there paying for some of the dirtiest* and most expensive electricity in California?

San Diego stands out from other California counties in another way, too: it is the only one served by its own exclusive investor-owned utility (IOU), San Diego Gas & Electric (SDG&E). More importantly, SDG&E is also the state’s only IOU owned by a parent company — a natural gas corporation, Sempra Energy, which is currently under investigation for potentially illegally lobbying against clean energy programs.

Coincidence, or not?

Let’s back up a little. The state’s three IOUs, Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and SDG&E, have a long record of working against the best interests of residents in their service areas. For example, PG&E spent a whopping $46 million — money that could have been used to, say, prevent deadly wildfires — on a campaign in support of Prop 16, a measure that would have made it more difficult for areas to form their own Community Choice Energy (CCE) programs. All told, the utility outspent pro-CCE grassroots activists on billboards, mailers, commercials, and other ads by about $45,910,000... and still lost!

PG&E’s expensive defeat showed the state legislature two things: Californians want CCE, and the IOUs will do whatever they think it takes to stop it.

Accordingly, the state passed SB 790 in 2011 to create a Code of Conduct that limited the IOUs’ ability to use their bigger budgets and brand recognition to unfairly suppress CCE efforts. Under these regulations, the IOUs are prohibited from disseminating non-factual or biased information, using funds collected from ratepayers to lobby against CCE, swaying opinion by releasing customer data, or offering special incentives to areas that reject CCE — a form of bribery, essentially.

"[IOUs] have inherent market power derived from, among other things, name recognition among customers, longstanding relationships with customers, joint control over regulated operations and competitive generation services, access to competitive customer information, and the potential to cross-subsidize competitive generation services...." Introduction to SB 790

California’s Public Utilities Commission (CPUC) is required by law to perform annual third-party audits of the IOUs to make sure they are in compliance, but has failed to conduct a single one in more than five years. In that time the state’s IOUs may have committed multiple violations of the Code of Conduct with no consequences — and now they want to gut it to make their future infractions legal.

In a joint petition filed on January 30, the IOUs requested that the CPUC fast-track a repeal of the provisions prohibiting them from engaging in direct lobbying to politicians and the media. If the CPUC agrees, the IOUs would essentially be allowed to pick up right where they left off when they were using their deep pockets, misinformation campaigns, and closed-door meetings with elected officials to stop CCE.

The CPUC is not required to comply or even respond to the IOUs. However, the commission has proven it has a clear bias in favor of the state’s IOUs in the past. In December of 2017, California lawmakers alerted the attorney general’s office that the CPUC was likely illegally colluding with IOUs. The result, they said, was the offloading of millions of dollars in utility costs onto ratepayers. The commission has not released a public statement on this issue yet.

Which brings us back to Sempra.

Sempra Energy, SDG&E’s parent company, has been lobbying against CCE in San Diego since at least 2016 through their new San Diego-based anti-CCE marketing offshoot, Sempra Services. Sempra Energy claims that Sempra Services, as an Independent Marketing Division (IMD), is not financed from SDG&E ratepayer revenue and so is exempt from most of the lobbying restrictions specified in the Code. Through this IMD, Sempra has “donated” large sums of money to carefully-chosen people and organizations to stimulate the creation of astroturf group Clear the Air Coalition, which is also staffed by Sempra lobbyists. Unsurprisingly, Clear the Air is a vocal opponent of movement to create a CCE program for San Diego.  

"They get a dime, then they come in and say SDG&E should get dollars." Mike Aguirre, former City of San Diego attorney

Prior to 2017, however, Sempra Services was operating without CPUC approval, holding multiple private meetings with San Diego County politicians in potential violation of state law. Spokespeople for Sempra Services and the electeds involved say CCE was not discussed, but the CPUC investigation to determine if Sempra acted illegally is ongoing.

Regardless of the CPUC’s decisions on Sempra Services and the Code of Conduct, the state’s IOUs have clearly demonstrated time and time again that they will flout the rules and work against the best interests of millions of people in order to maximize their bottom line. These utilities now want to make it even easier for them to block CCE efforts, despite all the advantages CCE programs can and do bring. The question now is, will San Diego — and the rest of California — be denied a choice other than the monopoly electric utilities that continually harm them?

Have something to say to the CPUC on this topic? Email them at [email protected] and let them know how they can best represent your interests.

*SDG&E’s emission factor, a measure of how much GHGs are emitted for each unit of electricity made, can be estimated at about 460 lbs of CO2 per MWh for 2016. For comparison, PG&E’s self-reported emission factor for the same year was 239.67 lbs CO2/MWh, and SCE’s was 564. Much of SDG&E’s electricity comes from natural gas, which is not surprising considering that it is owned by a natural gas holding company. This heavy reliance on fossil fuels actually gives San Diego’s non-renewable energy a larger relative carbon footprint than PG&E’s and SCE’s mostly carbon-free (nuclear and large hydroelectric) portfolios — despite the fact that SDG&E is technically using more renewable energy (43%) than either PG&E (33%) or SCE (28%). For comparison, CCE Sonoma Clean Power is using 42% renewables with an emission factor of 97.76.

- Jon Conway, Ph.D., Greenpower Research Director

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