Pacific Gas and Electric Company

Pacific Gas and Electric Company

Type	Public
Traded as	NYSE: PCG Dow Jones Utility Average component S&P 500 Component
Industry	Electricity Natural gas
Founded	1905
Headquarters	Pacific Gas & Electric Building San Francisco, California, United States
Products	Electricity Natural gas
Revenue	US$ 14.956 Billion (2011)[1]
Operating income	US$ 1.942 Billion (2011)[1]
Net income	US$ 858 Million (2011)[1]
Total assets	US$49.75 Billion (2011)[1]
Number of employees	19,424 (2012)[2]
Website	pge.com

The Pacific Gas and Electric Company, commonly known as PG&E, is an investor-owned utility that provides natural gas and electricity to most of the northern two-thirds of California, from Bakersfield almost to the Oregon border. It is the leading subsidiary of the PG&E Corporation.

PG&E was founded in 1905 and is currently headquartered in the Pacific Gas & Electric Building in San Francisco.

History

Early history

San Francisco Gas

In the 1850s, manufactured gas was introduced in the United States as a means of lighting. Gasworks were built in the larger eastern American cities, but there was no gas industry in the West, however. In San Francisco, street lighting was available only on Merchant Street, in the form of oil lamps.^[3]

Three brothers—Peter, James, and Michael Donahue—became interested in gas manufacturing while running the foundry that later became Union Iron Works, the largest shipbuilding operation on the West Coast.^[4][5] Joseph G. Eastland, an engineer and clerk at the foundry, joined them in gathering as much information on gas making as they could find. In July 1852, James applied for and received from the Common Council of the City of San Francisco a franchise to erect a gasworks, lay pipes in the streets and install street lamps to light the city with "brilliant gas". The council specified that gas should be supplied to households "at such rates as will make it to their interest to use it in preference to any other material".^[6] The Donahue brothers and Eastland incorporated the San Francisco Gas Company on August 31, 1852, with $150,000 of authorized capital. The company became the first gas utility in the West. Its official seal bore the inscription "Fiat Lux"—let there be light—the same slogan later adopted by the University of California. There were 11 original stockholders, and the three Donahue brothers subscribed for 610 of the 1,500 shares.^[7]

The original location for the gas works was bounded by First, Fremont, Howard and Natoma streets south of Market, on the then shore of the San Francisco Bay. Work on the plant started in November, 1852, and it was ready for operation only a few months later. On the night of February 11, 1854, the streets of San Francisco were for the first time lighted by gas. To celebrate the event, the company held a gala banquet at the Oriental Hotel.^[8] Gas lighting quickly gained public favor. In the first year of operation, there were 237 customers. That number more than doubled the next year, to 563. By the end of 1855, the company had laid more than 6 ½ miles of pipe and 154 street lamps were in operation.^[9]

The growing popularity of gas light led to the establishment of competing gas companies, including Aubin Patent Gas Company and Citizens Gas Company. These smaller companies were quickly acquired by the San Francisco Gas Company. However, one rival provided serious competition.^[10] The City Gas Company was founded in April 1870 by the Bank of California to compete with the gas monopoly held by the Donahue brothers' operation.^[11] City Gas began operation in 1872 and initiated a price war with the San Francisco Gas Company.^[10] In 1873, the companies negotiated their consolidation as a compromise and the Bank of California gained part ownership of "the most lucrative gas monopoly in the West".^[11] On April 1, 1873, the San Francisco Gas Light Company was formed, representing a merger of the San Francisco Gas Company, the City Gas Company, and the Metropolitan Gas Company.^[10][12]

San Francisco Gas and Electric

Gas utilities, including San Francisco Gas Light, faced new competition with the introduction of electric lighting to California.^[13] In 1879, San Francisco was the first city in the U.S. to have a central generating station for electric customers.^[14][15] To stay competitive, the San Francisco Gas Light Company introduced the Argand lamp that same year. The lamp increased the light capacity of gas street lamps, but proved to be an expensive improvement and was not generally adopted.^[13] Meanwhile, the demand for electric light in the stores and factories of downtown San Francisco continued to grow. The first electric street light was erected in 1888 in front of City Hall, and the electrical grid supporting it was gradually extended. A second generating station was constructed in 1888 by the California Electric Light Company to increase production capacity.^[16]

New competition also emerged in the 1880s in the form of water gas, an improved illuminant patented by Thaddeus Lowe. The United Gas Improvement Company, a water gas manufacturer organized after purchasing the Lowe gas patents, acquired a lease and then an interest in San Francisco's Central Gas Light Company on November 1, 1883.^[17][18] United was acquired by the Pacific Gas Improvement Company in 1884. Under the management of president Albert Miller, Pacific Gas Improvement developed into a formidable competitor to San Francisco Gas Light.^[17] Horace A. Miller, Secretary and C. O. G. Miller (Christian Otto Gerberding Miller), President, owned and controlled not only the Pacific Gas Improvement Company but also the Pacific Gas Lighting Company (Pacific Lighting Company). C.O.G. Miller is buried in a Pyramid mausoleum at Mountain View Cemetery, Oakland CA. Horace Miller built an enormous mansion in Piedmont, CA at 445 Mountain Avenue in 1913, designed by Arthur Brown, famous San Francisco architect.

In 1888, San Francisco Gas Light built its own water gas plant at the Potrero gas works. The manufacturing of water gas proved successful due to the increased availability of inexpensive petroleum. The company decided to construct a modern gas works with both updated water gas manufacturing technology and a modern coal-gas plant as a hedge against shortages in the supply of oil.^[19] In 1891, the North Beach Gas Works was completed under the direction of San Francisco Gas Light president and engineer Joseph B. Crockett. The facility was the largest gas holder in the U.S. west of Chicago.^[19][20]

In 1896, the Edison Light and Power Company merged with the San Francisco Gas Light Company to form the new San Francisco Gas and Electric Company.^[21] Consolidation of gas and electric companies solved problems for both utilities by eliminating competition and producing economic savings through joint operation.^[13] Other companies that began operation as active competitors but eventually merged into the San Francisco Gas and Electric Company included the Equitable Gas Light Company, the Independent Electric Light and Power Company, and the Independent Gas and Power Company.^[22] In 1903, the company purchased its main competitor for gas lighting, the Pacific Gas Improvement Company.^[17]

Pacific Gas and Electric Company

The San Francisco Gas and Electric Company and the California Gas and Electric Corporation merged to form the Pacific Gas and Electric Company (PG&E) on October 10, 1905.^[23] The consolidation provided the California Gas and Electric Corporation with access to the large San Francisco market and a base for further financing. The San Francisco Gas and Electric Company, in turn, was able to reinforce its electric system, which until then had been powered entirely by steam-operated generating plants, and could not compete with lower cost hydroelectric power.^[24] After the merger was formally completed, engineers and management from both organizations formulated plans for coordinating and unifying the two gas and electric systems.^[24] However, the two firms maintained separate corporate identities until 1911.^[24]

PG&E began delivering natural gas to San Francisco and northern California in 1930 through the longest pipeline in the world, connecting the Texas gas fields to northern California with compressor stations that included cooling towers every 300 miles (480 km), at Topock, Arizona, on the state line, and near the town of Hinkley, California. With the introduction of natural gas, the company began retiring its polluting gas manufacturing facilities, though it kept some plants on standby.

The 1906 San Francisco earthquake

PG&E was significantly affected by the 1906 San Francisco earthquake.^[23] The company's assorted central offices were damaged by the quake and destroyed by the subsequent fire. Its San Francisco Gas and Electric Company subsidiary in particular suffered significant infrastructure loss, as its distribution systems—miles of gas mains and electric wires—were dissevered. Only two gas and two electric plants, all located far from the city, survived the destruction.^[25][26] These functioning facilities—including the new 4,000,000-foot crude oil gas works at Potrero Point—played critical roles in San Francisco's rebuilding efforts.^[27][28] Many of PG&E's utility competitors ceased operation following the Great Earthquake. However, the company's substantial capital allowed it to survive, rebuild, and expand.<ref name=O'Donnel>O'Donnell, Arthur J. (2003). Soul of the Grid: A Cultural Biography of the California Independent System Operator. iUniverse. ISBN 0595293484. </ref>

Sacramento Electric, Gas and Railway Company

In 1906, PG&E purchased the Sacramento Electric, Gas and Railway Company and took control of its railway operations in and around Sacramento.^[29] The Sacramento City Street Railway began operating under the Pacific Gas & Electric name in 1915, and its track and services subsequently expanded.^[29][30] By 1931 the Sacramento Street Railway Division operated 75 streetcars on 47 miles (76 km) of track.^[31] PG&E's streetcars were powered by the company's hydroelectric plant in Folsom.^[32] In 1943, PG&E sold the rail service to Pacific City Lines, which was later acquired by National City Lines. Several streetcar lines were soon converted to bus service, and the track was abandoned entirely in 1947.^[29][30]

During this same period, Pacific City Lines and its successor, National City Lines, with funding from General Motors, Firestone Tire, Standard Oil of California (through a subsidiary, Federal Engineering), Phillips Petroleum, and Mack Trucks were buying streetcar lines and rapidly converting most of them to bus service. This consortium was convicted in 1949 of Federal charges involving conspiracy to monopolize interstate commerce in the sale of buses and supplies to National City Lines and its subsidiaries. The actions became known as the Great American Streetcar Scandal or the General Motors Streetcar Conspiracy.^[33]

Further Consolidation and Expansion

Within a few years of its incorporation, PG&E made significant inroads into Northern California's hydroelectric industry through purchase of existing water storage and conveyance facilities. These included many reservoirs, dams, ditches and flumes built by mining interests in the Sierras that were no longer commercially viable.^[34] By 1914, PG&E was the largest integrated utility system on the Pacific Coast. The company handled 26 percent of the electric and gas business in California. Its operations spanned 37,000 square miles across 30 counties.^[35]

The company expanded in the 1920s through strategic consolidation. Important acquisitions during this period included the California Telephone and Light Company, the Western States Gas and Electric Company and the Sierra and San Francisco Power Company, which provided hydropower to San Francisco's streetcars.^[36][37] These three companies added valuable properties and power and water sources. By the end of 1927, PG&E had nearly one million customers and provided electricity to 300 Northern Californian communities.^[36]

In 1930, PG&E purchased majority stock holdings in two major Californian utility systems—Great Western Power and San Joaquin Light and Power—from The North American Company, a New York investment firm. In return, North American received shares of PG&E's common stock worth $114 million. PG&E also gained control of two smaller utilities, Midland Counties Public Service and the Fresno Water Company, which was later sold.^[38] The acquisition of these utilities did not result in an immediate merger of property and personnel. The Great Western Power Company and the San Joaquin Company remained separate corporate entities for several more years. But through this final major consolidation, PG&E soon served nearly all of Northern and Central California through one integrated system.^[39]

Natural Gas

The gas industry market structure was dramatically altered by the discovery of massive natural gas fields throughout the American Southwest beginning in 1918.^[40] The fuel was cleaner than manufactured gas and less expensive to produce.^[41] While natural gas sources were abundant in Southern California, no economical sources were available in Northern California. In 1929, PG&E constructed a 300-mile pipeline from the Kettleman oil field to bring natural gas to San Francisco.^[42][43] The city became the first major urban area to switch from manufactured gas to natural gas.^[40] The transition required the adjustment of burners and airflow valves on 1.75 million appliances.^[40] In 1936, PG&E expanded distribution with an additional 45-mile pipeline from Milpitas.^[44] PG&E gradually retired its gas manufacturing facilities, although some plants were kept on standby.^[45]

Defense activities boosted natural gas sales in California during World War II, but cut deeply into the state's natural reserves.^[38][46] In 1947, PG&E entered into a contract with the Southern California Gas Company and the Southern Counties Gas Company to purchase natural gas through a new 1,000-mile pipeline running from Texas and New Mexico to Los Angeles.^[46] Another agreement was reached with the El Paso Natural Gas Company of Texas for gas delivery to the California-Arizona border. In 1951, PG&E completed a 502-mile main that connected with the El Paso network at the state line.^[46]

During this period of expansion PG&E was involved in legal proceedings with the Securities and Exchange Commission regarding the company's status as a subsidiary of the North American Company. As outlined by the Public Utility Holding Company Act of 1935, a utility subsidiary was defined as a utility company with more than 10% of their stock held by a public utility holding company. Though 17% of PG&E stock was held by the North American Company at this time, PG&E filed with the SEC to be exempted from subsidiary status on the grounds that 17% ownership did not give the North American Company control and because the North American Company occupied only two board member spots.^[47][48] The North American Company backed PG&E's request by stating that they were involved in business operations in a limited capacity.^[49] The request remained unresolved until 1945 when the North American Company sold off stocks that brought its ownership to below 10%. The SEC then ruled that PG&E was not a subsidiary of the North American Company.^[50] In 1948, the North American Company sold its remaining stock in PG&E.^[48]

Nuclear plants and gas pipelines

In 1957, the company brought Vallecitos Nuclear Center, the first privately owned and operated nuclear reactor in the United States, online in Pleasanton, California. The reactor initially produced 5,000 kilowatts of power, enough to power a town of 12,000.^[51][52]

In addition to nuclear power, PG&E continued to develop natural gas supplies as well. In 1959, the company began working to obtain approval for the import of a large quantity of natural gas from Alberta, Canada to California, via a pipeline constructed by Westcoast Transmission Co. and the Alberta and Southern Gas Company on the Canadian side, and by Pacific Gas Transmission Company, a subsidiary of PG&E, on the U.S. side.^[53][54] Construction of the pipeline lasted 14 months.^[55] Testing began in 1961,^[56] and the completed 1,400-mile pipeline was dedicated in early 1962.^[55][57]

PG&E began construction on another nuclear facility, the Diablo Canyon Power Plant, in 1968.^[58] Originally slated to come online in 1979,^[58] the plant's opening was delayed for several years due to environmental protests^[58][59] and concerns over the safety of the plant’s construction.^[60][61][62] Testing of the plant began in 1984,^[63][64] and energy production was brought up to full power in 1985.^[65]

During the construction of the Diablo Canyon plant, PG&E continued its efforts to bring natural gas supplies from the North to their service area in California. In 1972, the company began exploring possibilities for a 3,000-mile pipeline from Alaska, which would travel through the Mackenzie River Valley and on to join with the previously constructed pipeline originating in Alberta.^[66]

In 1977 the Mackenzie Valley Pipeline project received approval from the U.S. Federal Power Commission^[67] and support from the Carter Administration.^[68] The pipeline still required approval from Canada, however. Plans for the pipeline were placed on hold in 1977 by a Canadian judge.^[69] Justice Thomas R. Berger of British Columbia shelved the project for at least 10 years, citing concerns from First Nations groups, whose land the pipeline would have traversed, as well as potential environmental impacts.^[69]

Postwar era

As of December 1992, PG&E operated 173 electric generating units and 85 generating stations, 18,450 miles (29,690 km) of transmission lines and 101,400 miles (163,200 km) of distribution system.

In 1997, PG&E reorganized as a holding company, PG&E Corporation. It consisted of two subsidiaries—PG&E, the regulated utility, and a non-regulated energy business.

In the later 1990s, under electricity market deregulation this utility sold off most of its natural gas power plants. The utility retained all of its hydroelectric plants, the Diablo Canyon Power Plant and a few natural gas plants, but the large natural gas plants it sold made up a large portion of its generating capacity. This had the effect of requiring the utility to buy power from the energy generators at fluctuating prices, while being forced to sell the power to consumers at a fixed cost. However, the market for electricity was dominated by the Enron Corporation, which, with help from other corporations, artificially pushed prices for electricity ever higher. This led to the California electricity crisis that began in 2000 on Path 15, a transmission corridor PG&E built.

With a critical power shortage, rolling blackouts began on January 17, 2001.

Bankruptcy

The cause of PG&Es bankruptcy is explained in greater detail in the Wikipedia article: California electricity crisis.

In 1998, a change in the regulation of California's public utilities, including PG&E, began. The California Public Utility Commission (CPUC) set the rates that PG&E could charge customers and required them to provide as much power as the customers wanted at rates set by the CPUC.

In the summer of 2001 a drought in the northwest states and in California reduced the amount of hydroelectric power available. Usually PG&E could buy "cheap" hydroelectric power under long term contracts with the Bonneville Dam, etc. Drought and delays in approval of new power plants and market manipulation decreased available electric power generation capacity that could be generated in state or bought under long term contracts out of state. Hot weather brought on higher usage, rolling blackouts. etc.

With little excess generating capacity of its own PG&E was forced to buy electricity out of state from suppliers without long term contracts. Because PG&E had to buy additional electricity to meet demand some suppliers took advantage of this requirement and manipulated the market by creating artificial shortages and charged very high electrical rates. The CPUC refused to adjust the allowable electric rates. Unable to change rates and sell electricity to consumers for what it cost them on the open market PG&E started hemorrhaging cash.

PG&E Company (the utility, not the holding company) entered Chapter 11 bankruptcy April 6, 2001. The state of California tried to bail out the utility and provide power to PG&E's 5.1 million customers, under the same rules that required the state to buy electricity at market rate high cost to meet demand and sell it at lower fixed price, the state also lost significant amounts of money.

The crisis cost PG&E and the state somewhere between $40 and $45 billion.^[70] There is some evidence that this crisis played an important part in the eventual recall of California Governor Gray Davis.

PG&E Company, the utility, emerged from bankruptcy in April 2004, after paying $10.2 billion to its hundreds of creditors. As part of the reorganization, PG&E's 5.1 million electricity customers will have to pay above-market prices for several years to cancel the debt.

Rates

PG&E Rate Baseline Structure by Territories Rates depend on Territory Baseline, and Season Territories and baselines are set by California Public Utility Commission [71]
	Summer	Winter	Summer	Winter	Summer	Winter
	Tier 1	Tier 1	Tier 1	Tier 1	Tier 1	Tier 1
	Code B	Code B	Code H	Code H
Territory*	Baseline kWh/da	Baseline kW/da	Baseline kWh/da	Baseline kWh/da	Baseline Therms/da	Baseline Therms/da
--------------------------------------------------------------------------------------------------------------------------------
P	15.3	12.7	18.0	33.9	0.49	2.18
Q	7.5	11.7	19.1	19.3	0.69	2.05
R	17.1	11.7	20.9	30.2	0.69	1.79
S	15.3	12.0	18.0	28.6	0.49	1.95
T	7.5	9.1	9.1	16.8	0.69	1.79
V	12.0	13.6	9.4	33.4	0.72	1.72
W	18.5	10.9	23.5	22.8	0.49	1.79
X	11.0	11.7	10.3	19.3	0.62	2.05
Y	11.7	13.2	14.1	30.7	0.88	2.64
Z	7.9	10.6	11.2	22.5	0.88	2.64
Average	12.38	11.72	15.36	25.75	0.66	2.06
--------------------------------------------------------------------------------------------------------------------------------
Notes: All baseline amounts are per day Baselines used on bills are calculated by multiplying territorial base rate by days in billing cycle The territory you are in is determined by a map set by CPUC The territory is the fourth letter/space/number of Rate Schedule on bills; ex.: G1 X=Terr. X Code B refers to regular residential customers Code H refers to customers with electrical heat Summer rates apply from April 1 - October 31 for gas Summer rates apply from May 1 - October 31 for electrical charges Rates as of August 2012 Tier 1 rates apply from 0%-100% Baseline = $0.12845/kWh, Tier 2 charges from 101% - 130% of Baseline = $0.14605/kWh (114% Base.) Tier 3 charges from 131% - 200% of Baseline = $0.29561/kWh (230% Base.) Tier 4 charges apply over 201% of Baseline = $0.33561/kWh (261% Base.) Tier 5 charges now apply over 300% of Baseline (same charges as Tier 4) Electric charges are sum of electrical use in each tier. Tiers based on Terr. baselines. The CARE rates are 68% to 28% of regular electrical rates and 80% of gas rates. All territories with less than average baselines are subsidizing those with above average baselines There are only two tiers for natural gas rates: less than and in excess of baseline Gas rates above baseline usage are charged at 160% of baseline rates See:PG&E map of baseline territories set by CPUC[72] 2013 PG&E electrical rates are:[73] Tier 1 (usage up to baseline amount) $0.13230 kWh; Tier 2 (between 101-130% of baseline amount) $0.15040 kWh; Tier 3 (between 131%-200% of baseline amount) $0.30025 kWh; Tier 4 (over 200% of baseline amount) $0.34025 kWh 2015 PG&E electrical rates are:[74] Tier 1 (usage up to baseline amount) $0.16700 kWh; Tier 2 (between 101-130% of baseline amount) $0.19824 kWh; Tier 3 (between 131%-200% of baseline amount) $0.25200 kWh; Tier 4 (over 200% of baseline amount) $0.32088 kWh

Territory baselines are set according to areas of the state called "climate zones" that have similar climate and energy needs. The California Public Utility Commission (CPUC) must establish a reasonable minimum amount of electricity needed by people for each region, which is called "baseline" and is adjusted according to season and type of heating used (electrical or gas). Electrical charges depend on tier baseline and usage above the baseline(s). The first two lowest tiers are limited by state law not to increase more than 1% above the inflation rate, and never more than 5% per year. Because PG&E's cost of service has increased faster than this formula allows, much of the cost increases of the utility are pushed into the higher tiers 3 and 4. The billing cycle baseline is the number of days in the billing cycle multiplied by the baseline usage per day. The total charge is the usage in each tier multiplied by the rate in each tier. For example, if the billing cycle was 30 days and the tier baseline (BL) for your territory (Q) with a summer baseline of 7.5 kWh/da × 30 = 225 kWh (=BL) for the billing cycle. The first tier applies for usage up to the baseline, the second tier applies from (1.30*BL - BL), the third tier applies from (2.00*BL - 1.30*BL) and fourth (and higher tiers) apply for all usage over 2.0*BL. The electric bill in territory Q for 800 kWh in a 30-day billing cycle would be = $28.901_Tier1 + $9.49185_Tier2 + $69.394_Tier3 + $117.46_Tier4 = $202.78. As can be seen most of the cost is due to usage in Tier 3 and 4 and energy saving practices or more efficient appliances, lighting, etc. should be considered to reduce usage out of these tiers. Gas charges would be calculated similarly except there are only two tiers, usage below the baseline and usage above the baseline.

PG&E profits are not dependent upon sales. PG&E rates are set by the California Public Utilities Commission (CPUC). The profit the CPUC allows PG&E to earn is "decoupled" from the amount of natural gas and electricity it sells and its cost of operations.

The capital investments made in natural gas pipelines, power plants, and electric transmission wires and from incentives earned by achieving energy efficiency targets set by the CPUC determine allowable rates. Shareholders invest in PG&E because the utility is allowed by the CPUC a given rate of return that supports the value of its shares and allows for dividend distributions to share holders. Because PG&E's rate of return is set at 10.4%, well above the real cost of capital and stock market returns for other companies,it has the incentive to make more capital investments than an unregulated company, and incentives for efficiency in areas such as real estate, information technology, and smart grid projects are limited to non-existent.

The CPUC has set up the rates for different territories and types of residential customers. The complicated territory boundaries and "customer definitions" have been in place since the 1980s. Like nearly all regulated utilities PG&E does not have incentives to be more cost efficient, give better service etc., in hopes of getting more customers or lowering the price the customers pay. It is unclear whether their territorial based rate structure really saves in energy use as it subsidizes those with high gas and electrical usage with higher than average baselines. Those with less than average baselines pay for this subsidy. One good result of the tiered charges are that there is strong incentives to use solar panels, etc. to lower the electrical usage out of the top tiers rate structure. Paying $0.34 per kWh makes an investment in solar panels etc. pay off much sooner.

The prices charged relate to the cost of making, transporting electricity plus an allowed return on invested capital and is adjusted at least annually by the CPUC. New or upgrade facilities have to be approved by the CPUC to get incorporated in the allowable rate structure. The average price of natural gas that PG&E has to pay for, the cost of the distribution system and the cost of long term storage systems is reflected in the bill to the customer. Any additional charges are eventually paid for by the consumer—of course.

The average cost of residential electricity for PG&E is about $0.15/kWh (PG&E, 2013). However, this average cost is allocated to customers through a set of complex rate structures, including discount rates for low income customers, and higher rates for customers that use significantly more than average for their climate zone. —the average in the other states is about $0.1151/kWh.^[75] Industrial and Commercial users of electricity pay an average of $0.1377/kWh and Agricultural users pay $0.1327/kWh in California. Residential customers consume 31,234 GWh per year. Commercial users consume 32,989 GWh per year, Industrial users 14,804 GWh per year, Agriculture 5,804 GWh per year with the rest (about 1%) an assortment of miscellaneous categories.^[76]

PG&E has started introducing Prices Per Period (PPP) where the rates vary by the time of day. Usage during peak usage periods costs more and usage at slack periods is at a minimum. This is done to minimize usage during peak usage periods to reduce the cost of adding new peak load generators, brown outs, etc. These plans are well underway with commercial users and will probably soon be introduced to residential customers.

PG&E is currently applying a special economic development electricity rate that would offer California counties who are suffering from high unemployment lower energy bills.^[77]

Upcoming Rate Changes:^[78]

As now approved by the CPUC there are a new set of rates that will have the effect of changing the number of tiers and flattening the rate structure. The current cost ratios for the four tiers in Oct 2015 is: 1:1.27:1.67:2:07. Starting about Nov. 2015 this will change to 1:1.34:1.56:1.94.

In 2016 the number of tiers will be cut to three with a cost ratio for the three tiers of: 1:1.4:1.76. Whether there will be different power ratings on these tiers is not known.

In 2017 there will again be three tiers with a cost ratio for the three tiers with tier 2 costing 1.49 times baseline as much and a new tier 3 of 1.88*base line rate for so called "super users" consuming more than 400% of baseline power.

In 2018 there will again be three tiers with a cost ratio for the three tiers with tier 2 costing 1.44 times baseline as much and a new tier 3 of 1.88*base line rate for so called "super users" consuming more than 400% of baseline power.

In 2019 there will again be three tiers with a cost ratio for the three tiers with tier 2 costing 1.25 times baseline as much and a new tier 3 of 1.88*base line rate for so called "super users" consuming more than 400% of baseline power.

Sometime, in late 2015, minimum monthly bills of $10 will be charged for most customers, and $5 for low-income customers enrolled in the California Alternate Rates for Energy program. This will mainly affect solar power users with battery power options who now use little or no grid generated electricity.

On Jan. 1, 2019, all customers will be automatically enrolled in "time-of-use" electricity rates where rates vary by time of use. The idea is to shift electricity use away from times when demand is highest. This should ease strain on the power grid and limit the need for expensive "peaker" plants now needed for peak user demands.

Generation portfolio

PG&E's utility-owned generation portfolio consists of an extensive hydroelectric system, one operating nuclear power plant, one operating natural gas-fired power plant, and another gas-fired plant under construction. Two other plants owned by the company have been permanently removed from commercial operation: Humboldt Bay Unit 3 (nuclear) and Hunters Point (fossil).

Hydroelectric

PG&E is the largest private owner of hydroelectric facilities in the United States including 174 dams. According to the company's Form 10-K filing for 2011, "The Utility’s hydroelectric system consists of 110 generating units at 68 powerhouses, including the Helms pumped storage facility, with a total generating capacity of 3,896 MW.... The system includes 99 reservoirs, 56 diversions, 174 dams, 172 miles of canals, 43 miles of flumes, 130 miles of tunnels, 54 miles of pipe (penstocks, siphons and low head pipes), and 5 miles of natural waterways."^[79]

The single largest component is the Helms Pumped Storage Plant, located at 37°02′13.78″N 118°57′53.63″W / 37.0371611°N 118.9648972°W / 37.0371611; -118.9648972 (Helms Pumped Storage Plant) near Sawmill Flat in Fresno County, California. Helms consists of three units, each rated at 404 MW, for a total output of 1,212 MW. The facility operates between Courtright and Wishon reservoirs, alternately draining water from Courtright to produce electricity when demand is high, and pumping it back into Courtright from Wishon when demand is low. The Haas Powerhouse is situated more than 1,000 feet (300 m) inside a solid granite mountain.^[80]

Nuclear

The Diablo Canyon Power Plant, located in Avila Beach, California, is the only operating nuclear asset owned by PG&E. The maximum output of this power plant is 2,240 MWe, provided by two equally sized units. As designed and licensed, it could be expanded to four units, at least doubling its generating capacity.^[81] Over a two-week period in 1981, 1,900 activists were arrested at Diablo Canyon Power Plant. It was the largest arrest in the history of the U.S. anti-nuclear movement.^[82]

The company operated the Humboldt Bay Power Plant, Unit 3 in Eureka, California. It is the oldest commercial nuclear plant in California and its maximum output was 65 MWe. The plant operated for 13 years, until 1976 when it was shut down for seismic retrofitting. New regulations enacted after the Three Mile Island accident, however, rendered the plant unprofitable and it was never restarted. Unit 3 is currently in decommissioning phase and scheduled to be fully dismantled in 2015. The spent nuclear fuel is currently stored at the Independent Spent Fuel Storage Installation (ISFSI) on the plant site because of the United States Department of Energy's failure to find a suitable alternative to storing or disposing of the spent fuel.

Pacific Gas & Electric planned to build the first commercially viable nuclear power plant in the United States at Bodega Bay, a fishing village fifty miles north of San Francisco. The proposal was controversial and conflict with local citizens began in 1958.^[83] In 1963, there was a large demonstration at the site of the proposed Bodega Bay Nuclear Power Plant.^[84] The conflict ended in 1964, with the forced abandonment of plans for the power plant.^[83]

Fossil fuels

Built in 1956, there are two conventional fossil fuel (natural gas/fuel oil) units at Humboldt Bay Power Plant that produce 105 MWe of combined output. These units, along with two 15 MWe Mobile Emergency Power Plants (MEPPs), will be retired in the summer of 2010. The Humboldt Bay Generating Station, built on the same site, is set to take the older power plant's place in the summer of 2010. It will be producing 163 MWe using natural gas for fuel and fuel oil for backup on Wärtsilä Diesel engines. It will employ technology to produce 80 percent fewer ozone precursors and 30 percent less CO₂ than the previous facility. The new design will also reduce water use by eliminating the need for "once-through" cooling.

As part of a settlement with Mirant Services LLC for alleged market manipulations during the 2001 California energy crisis, PG&E took ownership of a partially constructed natural gas unit in Antioch, California. The 530 MW unit, known as the Gateway Generating Station, was completed by PG&E and placed into operation in 2009.

On May 15, 2006, after a long and bitter political battle, PG&E shut down its 48-year-old Hunters Point Power Plant in San Francisco.^[85] At the time of closure, the maximum output of the plant was 170 MW. Residents of the impoverished neighborhood had been pushing for more than a decade to close the plant, claiming it contributed to above average rates of asthma and other ailments.

PG&E broke ground in 2008 on a 660 MW natural gas power plant located in Colusa County. It began operation in December 2010, and serves nearly half a million residences using the latest technology and environmental design. The plant will use dry cooling technology to dramatically reduce water usage, and cleaner-burning turbines to reduce CO₂ emissions by 35 percent relative to older plants.^[86]

Solar

On April 1, 2008, PG&E announced contracts to buy three new solar power plants in the Mojave Desert. With an output of 500 MW and options for another 400 MW, the three installations will initially generate enough electricity to power more than 375,000 residences.^[87]

In April 2009, PG&E's Next100 blog reported that PG&E was asking the California Public Utilities Commission to approve a project to deliver 200 megawatts of power to California from space. This method of obtaining electricity from the sun eliminates (mostly) the darkness of night experienced from solar sites on the surface of the earth. According to PG&E spokesman Jonathan Marshall, energy purchase costs are expected to be similar to other renewable energy contracts.^[88]

PG&E and the environment

Beginning in the mid-1970s, regulatory and political developments began to push utilities in California away from a traditional business model. In 1976, the California State Legislature amended the Warren-Alquist Act,^[89] which created and gives legal authority to the California Energy Commission, to effectively prohibit the construction of new nuclear power plants. The Environmental Defense Fund (EDF) filed as an intervenor in PG&E's 1978 General Rate Case (GRC), claiming that the company's requests for rate increases were based on unrealistically high projections of load growth. Furthermore, EDF claimed that PG&E could more cost-effectively encourage industrial co-generation and energy efficiency than build more power plants. As a result of EDF's involvement in PG&E's rate cases, the company was eventually fined $50 million by the California Public Utilities Commission for failing to adequately implement energy efficiency programs.

Since Darbee took control of the PG&E Company in 2004, PG&E has aggressively promoted its environmental image through a variety of programs and campaigns.

In the early first decade of the 21st century, the CEO of PG&E Corporation, Peter Darbee, and then-CEO of Pacific Gas & Electric Company, Tom King, publicly announced their support for California Assembly Bill 32, a measure to cap statewide greenhouse gas emissions and a 25% reduction of emissions by 2020. The bill was signed into law by Governor Arnold Schwarzenegger on September 27, 2006.

Disasters

Groundwater contamination in Hinkley, California

The town of Hinkley, California had its groundwater contaminated with hexavalent chromium from a PG&E natural gas compressor plant resulting in a legal case and 333 million dollar settlement. As a result of the contamination, many had been born with birth defects, including cleft lip and palate, a missing ear, slight retardations and many more. The legal case was portrayed in Erin Brockovich, a drama film released in 2000.

However, a study released in 2010 by the California Cancer Registry showed that cancer rates in Hinkley "remained unremarkable from 1988 to 2008". An epidemiologist involved in the study said that "the 196 cases of cancer reported during the most recent survey of 1996 through 2008 were less than what he would expect based on demographics and the regional rate of cancer."

San Bruno, California explosion

On the evening of September 9, 2010, a suburb of San Francisco, San Bruno, California, was damaged when a 30-inch PG&E gas pipeline burst, killing 8 people, injuring dozens and leaving 6 people missing. The blast created a crater at the epicenter damaging several homes, and was reported by the USGS to have a shock wave similar to a 1.1 magnitude earthquake. Following the event, the company was heavily criticized for ignoring the warnings of a state inspector in 2009 and for failing to provide adequate safety procedures.^[90] The incident then came under investigation by the National Transportation Safety Board (NTSB). On August 30, 2011, the NTSB released its findings, which placed fault for the blast on PG&E. The report stated that the pipeline installed in 1956 that later burst did not even meet standards of that time.^[91] In July 2012, PG&E management initiated an advertising campaign in which the utility's new CEO, Tony Earley—previously head of DTE Energy—acknowledged that PG&E had "lost its way" and needed to regain the trust of its customers.^[92]

Controversies

Metcalf sniper attack

On the morning of April 16, 2013 a team of gunmen opened fire using sniper rifles on the Metcalf Transmission Substation severely damaging 17 transformers.^[93]

Smart meters

In the middle of 2010, PG&E rolled out new electronic meters that replaced traditional analog electric meters. Customers whose meters were replaced with Smart Meters reported seeing their energy bills spike up multiple-folds and accused the company of deliberately inflating their bills, along with questioning the accuracy of the meters. Complaints of PG&E's failing to honor customer's refusal of upgrading their meters also surfaced. Although the contractor that installed the meters would honor these requests, PG&E would eventually come out and replace them despite objections. Subsequently, the California Public Utilities Commission would conduct an investigation^[94] and find that of the 613 Smart Meter field tests, 611 meters were successfully tested and 100% passed Average Registration Accuracy. One meter was found to have serious errors and was malfunctioning on arrival, while another was found to have serious event errors upon installation. These meters were therefore excluded from testing.

Proposition 16

In 2010, PG&E was accused of attempting to stifle competition in Proposition 16, which mandated two-thirds voters approval to start or expand a local utility. Critics argued that this would make it harder for a local governments to create their own power utilities, thus effectively giving PG&E a monopoly. The company was also rebuked for supplying $46 million to support the ballot when opponents raised $100,000 in the campaign. The proposition would eventually be voted down with 52.5% in opposition and 47.5% in favor.^[95]

Tax dodging and lobbying

In December 2011, the non-partisan organization Public Campaign criticized PG&E for spending $79 million on lobbying and not paying any taxes during 2008-2010, instead getting $1 billion in tax rebates, despite making a profit of $4.8 billion and increasing executive pay by 94% to $8.5 million in 2010 for its top 5 executives.^[96]

Restatements

On Feb 28, 2002, after the collapse of Enron, which used dubious accounting and partnerships to hide its debt, PG&E announced to restate results dating back to 1999, to show leases related to power plant construction that had been previously kept off its balance sheet.^[97]

On June 27, 2003, PG&E National Energy Group, a unit of PG&E Corporation revised its 2002 Form 10-K/A to reclassify certain offsetting revenues and expenses, which net to zero. PG&E revised its 2002 Form 10-K/A accordingly to reflect the change.

See also

• Battery-to-grid
• Southern California Edison
• Diablo Canyon Power Plant
• San Diego Gas & Electric
• List of articles associated with nuclear issues in California

References

Bibliography

• Coleman, Charles M. (1952). P. G. And E. of California: The Centennial Story of Pacific Gas and Electric Company, 1852-1952. McGraw-Hill Book Company Inc. OCLC 3920159. 

Further reading

• Coleman, Charles M., PG&E of California; The Centennial Story of the Pacific Gas and Electric Company, 1852 - 1952 (McGraw-Hill Book Company, 1952)
• Roe, David. Dynamos and Virgins. (New York: Random House, 1984)
• "The History of Gas Lighting in San Francisco" Pacific Gas and Electric Magazine Vol. 1 #3 August 1909
• PG&E - A Report on the Companies Environmental Policies and Practices - Council on Economic Priorities - NY April 1994

External links

Wikimedia Commons has media related to Pacific Gas and Electric Company.

• Official website
• PG&E Corporation
• PG&E Clean Air Transportation Program
• Next100 - A Dialogue on the Next Century of Energy
• PG&E: We Can Do This
• PG&E history timeline
• PG&E Currents

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