CPUC Issues Funding Rule Change for Undergrounding Power Lines
Prohibitions and Other Requirements on Rule 20A Program
The California Public Utilities Commission issued a decision that significantly revised the rules, established over 50 years ago, for funding the conversion of overhead power lines and other equipment to underground facilities at the request of cities and counties. Under the prior program, billions of dollars were collected from electricity ratepayers to be used for “undergrounding” at locations identified by cities and counties. This is commonly known as the Rule 20A program. Statewide, there is an estimated $1.56 billion in funds collected by utilities, but not yet designated for Rule 20A projects.
The June 7 decision prohibits ratepayer funding for new projects after Dec. 31, 2022. In addition, it clarifies project eligibility criteria, bans the trading of Rule 20A work credits in secondary markets, and enhances Electric Rule 20A program oversight. Electric utilities are also directed to develop new Guidebooks, in collaboration with local governments and others, to govern undergrounding programs.
Inequitable Usage of Ratepayer Funds
While the CPUC found a handful of communities have completed ratepayer-funded projects worth hundreds of millions of dollars, it also discovered that 82 out of 503 communities did not complete a single project since 2005.
Outdated Program Eligibility Criteria
Electric Rule 20A was originally enacted for aesthetic purposes, which, according to the CPUC, is no longer the major concern of numerous communities. Many communities would like the Rule 20A program to factor in wildfire mitigation as well as other community safety needs in the project eligibility consideration. The decision deferred action on this issue to a future phase of the proceeding.
Flawed Work Credit System
The CPUC has identified several issues relating to the allocation of ratepayer-funded work credits to communities. Many communities never start projects due to insufficient credits and the ever-increasing project cost estimates. Additionally, the CPUC identified 58 communities that completed undergrounding projects using credits borrowed beyond the tariff-specified 5-year forward limit, effectively placing those communities in “work credit debt.” Lastly, the CPUC has found that some communities are selling, trading and donating their unused work credits to other communities using an unsanctioned secondary credit marketplace.
High Project Costs and Project Delays
One of the driving forces behind the rule change is that many communities have reported instances where project costs exceeded design cost estimates, as well as project timelines that span seven years or longer, which exceeds the Rule 20A five-year rule. Additionally, project costs have increased substantially.
An audit report found that PG&E improperly reallocated Rule 20A funds away from the program without documenting where the funds were spent. The audit report also found that, between 2007 and 2016, PG&E underspent $123 million of Rule 20A-authorized budgets and that underspending resulted in project delays, which increased project costs. As a result, the CPUC is requiring all utilities to establish one-way balancing accounts specifically for Rule 20A program funding. The CPUC believes this will ensure that Rule 20A program funding is not used for any other purpose.
This decision only involves Phase 1 of the process of revising the Rule 20A program. In Phase 2, the CPUC will consider: Whether to include wildfire safety and other emergency-related undergrounding in Rule 20A project eligibility criteria, whether to modify Rule 20A to support projects in underserved communities and whether to take additional steps to support the completion of active Rule 20A projects.
Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts, facts specific to your situation or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.