state regulator

State regulators ordered Southern California Edison to identify fire risks on its unused transmission lines like the century-old equipment suspected of igniting the devastating Eaton wildfire.

Edison also must tell regulators how its 355 miles of out-of-service transmission lines located in areas of high fire risk will be used in the future, according to a document issued by the Office of Energy Infrastructure Safety on Dec. 23.

State regulations require utilities to remove abandoned lines so they don’t become a public hazard. Edison executives said they did not remove the Eaton Canyon line because they believed it would be used in the future. It last carried power in 1971.

The Office of Energy Infrastructure Safety said Edison must determine which unused transmission lines are most at risk of igniting fires and create a plan to decrease that risk. In some cases that might mean removing the equipment entirely.

While the OEIS report focuses on Edison, the agency said it also will require the state’s other electric companies to take similar actions with their idle transmission lines.

Scott Johnson, an Edison spokesman, said Monday that the company already had been reviewing idle lines and planned to respond to the regulators’ requests. He said Edison often keeps idle lines in place “to support long-term system needs, such as future electrification, backup capacity or regional growth.”

“If idle lines are identified to have no future use, they are removed,” he said.

Johnson said that since 2018, Edison has removed idle lines that no longer had a purpose seven times and provided a list of those projects.

The investigation into the cause of the Eaton wildfire by state and local fire officials has not yet been released. Edison has said the leading theory is that the dormant transmission line in Eaton Canyon briefly reenergized on the night of Jan. 7, sparking the fire.

Unused lines can become energized from electrified lines running parallel to them through a process called induction.

The Eaton wildfire killed at least 19 people and destroyed more than 9,000 homes and structures in Altadena.

After the fires, Edison said it had added more grounding equipment to its old transmission lines no longer in service. The added devices give any unexpected electricity on the line more places to disperse into the ground, making them less likely to spark a fire.

The OEIS issued its latest directives after Edison executives informed the agency they had no plans to remove any out-of-service lines between now and 2028, the report said.

State regulators and the utilities have long known that old transmission lines can ignite wildfires.

The Times reported how Edison and other utilities defeated a state regulatory plan, introduced in 2001, which would’ve forced the companies to remove abandoned lines unless they could prove they would use them again.

In its report the OEIS noted it would require Edison and other electric companies to provide details of how often each idle line was inspected and how long it took to fix problems found in those inspections.

Edison has said it inspected the unused line in Eaton Canyon annually before the fire — just as often as it inspects live lines. The company declined to provide The Times with documentation of those inspections.

In the OEIS report, energy safety regulators said they expect to to approve Edison’s wildfire mitigation plan for the next three years despite the problems they found with the approach.

For example, the report noted that Edison is behind in replacing or reinforcing aging and deteriorating transmission and distribution poles. The regulators said the backlog “includes many work orders on [Edison’s] riskiest circuits.” A circuit is a line or other infrastructure that provides a pathway for electricity.

Officials said the company must work on reducing that backlog. They also criticized Edison executives for not incorporating any lessons they learned from the Jan. 7 wildfires into the company’s fire prevention plans.

Johnson, Edison’s spokesperson, said the company already improved the backlog of pole replacements. He said the company also planned to tell regulators more about the lessons it learned after the Eaton fire.

Under state law, the OEIS must approve a utility’s wildfire mitigation plan before it can issue the company a safety certificate that protects the company from liability if its equipment ignites a catastrophic fire.

The OEIS issued Edison’s last safety certificate less than a month before the Eaton fire — despite the company having had thousands of open work orders, including some on the transmission lines above Altadena, at the time.

Edison is offering to pay for damages suffered by Eaton fire victims and a handful already accepted its offers. The utility says that because it held a safety certificate at the time of the fire it expects to be reimbursed for most or all of the payments by a $21-billion state wildfire fund.

If that fund doesn’t cover the damages, a law passed this year enables Edison to raise its electric rates to make up the difference.

Gov. Gavin Newsom and state lawmakers passed laws to create the state fund and safety certificate program to protect utilities from bankruptcy if their equipment starts costly wildfires. Critics say the laws have gone too far, potentially leaving utilities financially unharmed from fires caused by their negligence.

Edison is fighting hundreds of lawsuits filed by victims of the Eaton fire. The company says it acted prudently in maintaining the safety of its system before the fire.

Pedro Pizarro, chief executive of Edison International, the utility’s parent company, told The Times this month that he believed the company had been “a reasonable operator” of its system before the fire.

“Accidents can happen,” Pizarro said. “Perfection is not something you can achieve, but prudency is a standard to which we’re held.”

Despite complaints from customers about rising electric bills, the California Public Utilities Commission voted 4 to 1 on Thursday to keep profits at Southern California Edison and the state’s other big investor-owned utilities at a level that consumer groups say has long been inflated.

The commission vote will slightly decrease the profit margins of Edison and three other big utilities beginning next year. Edison’s rate will fall to 10.03% from 10.3%.

Customers will see little impact in their bills from the decision. Because the utilities are continuing to spend more on wires and other infrastructure — capital costs that they earn profit on — that portion of customer bills is expected to continue to rise.

The vote angered consumer groups that had detailed in filings and hearings at the commission how the utilities’ return on equity — which sets the profit rate that the companies’ shareholders receive — had long been too high.

Among those testifying on behalf of consumers was Mark Ellis, the former chief economist for Sempra, the parent company of San Diego Gas & Electric and Southern California Gas. Ellis estimated that the companies’ profit margin should be closer to 6%.

He argued in a filing that the California commission had for years authorized the utilities to earn an excessive return on equity, resulting in an “unnecessary and unearned wealth transfer” from customers to the companies.

Cutting the return on equity to a little more than 6% would give Edison, Pacific Gas & Electric, SDG&E and SoCalGas a fair return, Ellis said, while saving their customers $6.1 billion a year.

The four commissioners who voted to keep the return on equity at about 10% — the percentage varies slightly for each company — said they believed they had found a balance between the 11% or higher rate that the four utilities had requested and the affordability concerns of utility customers.

Alice Reynolds, the commission’s president, said before the vote that she believed the decision “accurately reflects the evidence.”

Commissioner Darcie Houck disagreed and voted against the proposal. In her remarks, she detailed how California ratepayers were struggling to pay their bills.

“We have a duty to consider the consumer interest in determining what is a just and reasonable rate,” she said.

Consumer groups criticized the commission’s vote.

“For too long, utility companies have been extracting unreasonable profits from Californians just trying to heat or cool their homes or keep the lights on,” said Jenn Engstrom at CALPIRG. “As long as CPUC allows such lofty rates of return, it incentivizes power companies to overspend, increasing energy bills for everyone.”

California now has the nation’s second-highest electric rates after Hawaii.

Edison’s electric rates have risen by more than 40% in the last three years, according to a November analysis by the commission’s Public Advocates Office. More than 830,000 Edison customers are behind in paying their electric bills, the office said, each owing a balance of $835 on average.

The commission’s vote Thursday was in response to a March request from Edison and the three other big for-profit utilities. The companies pointed to the January wildfires in Los Angeles County, saying they needed to provide their shareholders with more profit to get them to continue to invest in their stock because of the threat of utility-caused fires in California.

In its filing, Edison asked for a return on equity of 11.75%, saying that it faced “elevated business risks,” including “the risk of extreme wildfires.”

The company told the commission that its stock had declined after the Jan. 7 Eaton fire and it needed the higher return on equity to attract investors to provide it with money for “wildfire mitigation and supporting California’s clean energy transition.”

Edison is facing hundreds of lawsuits filed by victims of the fire, which killed 19 people and destroyed thousands of homes in Altadena. The company has said the fire may have been sparked by its 100-year-old transmission line in Eaton Canyon, which it kept in place even though it hadn’t served customers since 1971.

Return on equity is crucial for utilities because it determines how much they and their shareholders earn each year on the electric lines, substations, pipelines and the rest of the system they build to serve customers.

Under the state’s system for setting electric rates, investors provide part of the money needed to build the infrastructure and then earn an annual return on that investment over the assets’ life, which can be 30 or 40 years.

In a January report, state legislative analyst Gabriel Petek detailed how electric rates at Edison and the state’s two other biggest investor-owned electric utilities were more than 60% higher than those charged by public utilities such as the Los Angeles Department of Water and Power. The public utilities don’t have investors or charge customers extra for profit.

Before the vote, dozens of utility customers from across the state wrote to the commission’s five members, who were appointed by Gov. Gavin Newsom, asking them to lower the utilities’ return on equity.

“A profit margin of 10% on infrastructure improvements is far too high and will only continue to increase the cost of living in California,” wrote James Ward, a Rancho Santa Margarita resident. “I just wish I could get a guaranteed profit margin of 10% on my investments.”