SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 584 (Moorlach) - Electricity: undergrounding of electrical wires

Bill Summary:

This bill would make changes to programs that help fund conversion projects to replace overhead electrical infrastructure with underground electrical infrastructure in specified areas of the service territory of investor-owned electric utilities.

Fiscal Impact:

• Ongoing special fund costs (PUC Utilities Reimbursement Account) of around $800,000 annually for the California Public Utilities Commission (CPUC) to expand the existing underground program as proposed in this bill.
• Unknown, likely significant special fund costs (Greenhouse Gas Reduction Fund) for the Department of Forestry and Fire Protection (CalFire) to provide grants to local jurisdictions.

Background:

Undergrounding is the process of replacing overhead lines that provide services such as electricity or communications with lines located underground. Undergrounding is typically done for aesthetic or safety purposes in order to remove the visible overhead lines and poles or to reduce the risk of damage or fire from being exposed to the elements. Undergrounding is generally much more expensive relative to overhead infrastructure – on the order of ten times or more. However, operating costs may be less assuming the underground results in a reduced need to repair damaged lines. Nonetheless, the costs for undergrounding lines can vary depending on the location of the lines, rural, urban, or suburban communities.

The CPUC requires electrical corporations to allocate a certain amount of ratepayer funds each year for undergrounding conversion projects. The electric utility annually allocates funds via credits under Electric Tariff Rule 20 to communities, either cities or unincorporated areas of counties, to convert overhead electric lines to underground facilities. The local jurisdiction may either accumulate their allocated credits, or borrow future undergrounding allocations for up to five years. Tariff Rule 20 provides three levels (A, B, and C) of progressively diminishing ratepayer funding for the projects, based on specified criteria. Once a project is completed, the electric utility records its costs in its electric plant account for recovery through the utility’s rate base. The CPUC authorizes the utility to recover the costs from ratepayers until the project is fully depreciated. Since ratepayers contribute the bulk of the costs of Rule 20A programs through utility rates, the projects must be in the public interest, meeting specified criteria. The CPUC instituted the current undergrounding program in 1967 and has made mostly slight adjustments to the program over the 50 years.

In 2014, the CPUC authorized SDG&E the ability to consider wildfires when converting electric facilities to underground. The CPUC agreed with SDG&E that undergrounding could mitigate the risks of wildfires in the more fire-prone areas of SDG&E’s service territory. The CPUC approved a SDG&E specific version of Rule 20D that is modeled on Rule 20A, but targeted to the most fire-prone areas. Under Rule 20D, the governing body has determined that undergrounding will occur in the SDG&E Fire Threat Zone, as identified, and SDG&E has determined that undergrounding is a preferred method to reduce fire risk and enhance the reliability of the facilities to be undergrounded.

CPUC’s efforts to map high-fire threat stem from the catastrophic wildfires caused by utility infrastructure in San Diego County in the 2000s. The CPUC mapping efforts combine the Tree Mortality Taskforce Map with CPUC/CalFIRE Tier 2 and Tier 3 designations. Tier 2 fire-threat areas depict areas where there is an elevated risk (including likelihood and potential impacts on people and property) from utility associated wildfires. Tier 3 fire-threat areas depict areas where there is an extreme risk (including likelihood and potential impacts on people and property) from utility associated wildfires.

SB 901 (Dodd, Chapter 626, Statutes of 2018) required electric utilities to file wildfire mitigation plans with specified information. In the recently filed plans, some of the electric utilities considered the potential to underground some lines as part of their wildfire mitigation efforts. However, in most instances, the electric utilities’ wildfire mitigation plans included the potential to underground lines but recommended an assessment to identify what electric lines made sense to underground. As one plan noted: “While underground systems can help reduce the risk of wildfires and increase reliability during high winds and storms, they also take longer and costs much more to construct, maintain, and repair – particularly in mountainous regions and those with steep terrain.”

Existing law, the California Global Warming Solutions Act of 2006, designates the California Air Resources Board (ARB) as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases (GHG). The act authorizes the ARB to include the use of market-based compliance mechanisms in regulating those emissions. Requires all moneys, except for fines and penalties, collected by the ARB as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund (GGRF) and to be available for appropriation.

Proposed Law:

This bill would:

1. Require the CPUC to require electrical corporations, by July 1, 2020, to develop and administer a program to provide matching funds to local jurisdictions for conversion projects, consistent with Electric Tariff Rule 20 allocations, to replace overhead electrical infrastructure with underground electrical infrastructure in a Tier 3 High Fire-Threat Districts.
   1. Require a local jurisdiction to adopt a conversion program and establish an underground utility district to qualify for funding.
   2. Require the program to require an electrical corporation to provide matching funds, equaling 50 percent of the total project costs, to a local jurisdiction upon approval of an application for an eligible project. A project shall be eligible only if the CPUC has determined that replacing overhead electrical infrastructure with underground electrical infrastructure in the project area is feasible, is a preferred method to reduce the risk of wildfires in that area, and would enhance electrical reliability.
   3. Authorize a local jurisdiction to use credits provided by Rule 20A and to borrow up to five years of future credit allocations to that program to fund its share of the total project costs.
   4. Require the CPUC to authorize electrical corporations to recover the costs incurred pursuant to this section from their ratepayers on a nonbypassable basis.
2. Authorize the CPUC to require electrical corporations to replace overhead electrical infrastructure with underground electrical infrastructure in a Tier 3 High Fire-Threat District that is destroyed as a result of a fire caused by overhead electrical infrastructure, if the CPUC has determined that replacing overhead electrical infrastructure with underground electrical infrastructure in the project area is feasible, is a preferred method to reduce the risk of wildfires in that area, and would enhance electrical reliability. Require the CPUC to authorize an electrical corporation to recover the costs incurred for this effort from its ratepayers on a nonbypassable basis.
3. Require the CPUC to direct electrical corporations to reallocate credits provided to a jurisdiction under the Rule 20A program for purposes of conversion projects in Tier 3 High Fire-Threat Districts, if the CPUC has determined that the inactive jurisdiction does not plan to use the unused credits.
4. Appropriate, beginning with the 2019–20 fiscal year and ending with the 2023–24 fiscal year, an unspecified amount annually from the GGRF to CalFire to provide grants to local jurisdictions undertaking conversion projects to move electrical infrastructure underground.
   1. Limits the moneys provided to a local jurisdiction to no more than 15 percent of a project’s total costs.
   2. Requires CalFIRE to give preferences to projects based on fire risk determined by assessing specified criteria.

Staff Comments:

According to CPUC, the existing Rule 20 undergrounding program is an aesthetic program and staff does not make individual project determinations. In contrast, the new undergrounding program in this bill is driven by safety and reliability and CPUC will be approving projects which is a significant increase in workload. As such, CPUC estimates the need for four additional staff to conduct this work.

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SENATE COMMITTEE ON NATURAL RESOURCES AND WATER

Senator Henry Stern, Chair

2019 - 2020 Regular

Bill No: SB 584 Hearing Date: April 23, 2019

Subject: Electricity: undergrounding of electrical wires

BACKGROUND AND EXISTING LAW

Existing law:

1. Establishes the California Department of Forestry and Fire Protection (CalFIRE), whose mission is to serve and safeguard the people and protect the property and resources of California. (Public Resources Code §701)
2. Requires the State Board of Forestry and Fire Protection to determine areas of the state, known as state responsibility areas (SRAs), in which the state has the financial responsibility of preventing and suppressing fires. SRAs are generally lands that are largely covered by trees, brush, and grass and other undeveloped lands. All other lands are primarily the financial responsibility of local (local responsibility areas, or LRAs) or federal agencies. (Public Resources Code §4102)
3. Requires the director of CalFIRE to classify all SRAs into fire hazard severity zones, based on fuel loading, slope, fire weather, and other relevant factors. (Public Resources Code §4203)
4. Requires the director of CalFIRE to identify LRAs in the state as very high fire hazard severity (VHFHS) zones based on consistent statewide criteria and based on the severity of fire hazard that is expected to prevail in those areas. Local agencies have the discretion to alter these zones for more effective fire protection. (Government Code §51178)
5. Establishes the California Public Utilities Commission (CPUC), whose mission is to regulate service and utilities, protect consumers, safeguard the environment, and assure Californians’ access to safe and reliable utility infrastructure. The CPUC has regulatory authority over public utilities, including electric companies. (California Constitution, Article 3 and 4)
6. Declares that it is the policy of the state to achieve, whenever feasible and not inconsistent with sound environmental planning, the undergrounding of all future electric and communication distribution facilities which are proposed to be erected in proximity to any highway designated a state scenic highway pursuant to Streets and Highway Code §260, and which would be visible from such scenic highways if erected above ground. (Public Utilities Code §320)
7. Requires the CPUC to develop formal procedures to consider safety in general rate case proceedings that address an electrical or gas corporation’s costs of operating and maintenance. (Public Utilities Code §750)
8. Requires electrical corporations to construct, maintain, and operate their electrical lines and equipment in a manner that will minimize the risk of catastrophic wildfire posed by those electrical lines and equipment, and to annually prepare and submit a wildlife mitigation plan to the CPUC for review and approval. (Public Utilities Code §8386)
9. Establishes the California Emergency Services Act, which tasks the state with the responsibility to mitigate the effects of natural, manmade, or war-caused emergencies that result in conditions of disaster or in extreme peril to life, property, and the resources of the state, and requires the Governor to provide state assistance and emergency programs. (Government Code §8550)
10. Establishes the California Global Warming Solutions Act of 2006, which designates the California Air Resources Board (ARB) as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases (GHGs). Under the act, the ARB is authorized to include the use of market-based compliance mechanisms in regulating GHG emissions. Moneys collected pursuant to the act, except for fines and penalties, are required to be deposited into the Greenhouse Gas Reduction Fund (GGRF) and to be available for appropriation.

Undergrounding of electric facilities. As set forth by the Senate Energy, Utilities and Communications Committee, which heard this bill on April 10^th, undergrounding is the process of replacing overhead lines that provide services such as electricity or communications with lines located underground. Undergrounding is typically done for aesthetic or safety purposes in order to remove the visible overhead lines and poles or to reduce the risk of damage or fire from being exposed to the elements. Undergrounding is generally much more expensive relative to overhead infrastructure – on the order of ten times or more. However, operating costs may be less assuming the underground results in a reduced need to repair damaged lines. Nonetheless, the costs for undergrounding lines can vary depending on the location of the lines, rural, urban, or suburban communities.

CPUC High Fire-Threat District. The CPUC’s efforts to map high-fire threat stem from the catastrophic wildfires caused by utility infrastructure in San Diego County in the 2000s. The CPUC mapping efforts combine the Tree Mortality Taskforce Map with CPUC/CalFIRE Tier 2 and Tier 3 designations. Tier 2 fire-threat areas depict areas where there is an elevated risk (including likelihood and potential impacts on people and property) from utility associated wildfires. Tier 3 fire-threat areas depict areas where there is an extreme risk (including likelihood and potential impacts on people and property) from utility associated wildfires.

SB 901 (Dodd, Chapter 626, Statutes of 2018). As a requirement of the SB 901, electric utilities must file wildfire mitigation plans with specified information. In the recently filed plans, some of the electric utilities considered the potential to underground some lines as part of their wildfire mitigation efforts. However, in most instances, the electric utilities’ wildfire mitigation plans included the potential to underground lines but recommended an assessment to identify what electric lines made sense to underground. As one plan noted: “While underground systems can help reduce the risk of wildfires and increase reliability during high winds and storms, they also take longer and costs much more to construct, maintain, and repair – particularly in mountainous regions and those with steep terrain.”

Laguna’s experience with wildfire. On Friday, July 3, 2015, a portion of Laguna Canyon area experienced a fire when falling trees hit a power line on Arroyo Drive and sparked a fire on a brush-covered hillside along Laguna Canyon Road. With light winds and air support, the fire was knocked down after burning about 15 acres. Five aircraft and 150 firefighters were deployed. Based on a local news story, the brush fire prompted the Mayor to call for an all-out effort to underground utilities citywide. According to the same Laguna Beach Indy newspaper story, residents, motivated by improving views and lowering fire risk, themselves have footed the bill to bury utility lines in their own neighborhoods in 40 percent of the city, the public works department estimates. According to a city statement, since 2007, at least four fires have been attributed to above-ground electric utilities and have been involved in 46 accidents along Laguna Canyon Road, the city statement says. Laguna Beach has also experienced one of the nation’s then-costliest fires. In 1993 an arsonist-caused fire burned 16,000 acres and destroyed or severely damaged over 400 homes and caused $528 million dollars in damage.

PROPOSED LAW

This urgency bill, as agreed to be amended in the Senate Energy, Utilities and Communications Committee, see amendments below), would:

Require the CPUC to require electrical corporations, by July 1, 2020, to develop and administer a program to provide matching funds to local jurisdictions for conversion projects, consistent with Electric Tariff Rule 20 allocations, to replace overhead electrical infrastructure with underground electrical infrastructure in a Tier 3 High Fire-Threat Districts.

• 1. Require a local jurisdiction to adopt a conversion program and establish an underground utility district to qualify for funding.
  2. Require the program to require an electrical corporation to provide matching funds, equaling 50 percent of the total project costs, to a local jurisdiction upon approval of an application for an eligible project. A project shall be eligible only if the CPUC has determined that replacing overhead electrical infrastructure with underground electrical infrastructure in the project area is feasible, is a preferred method to reduce the risk of wildfires in that area, and would enhance electrical reliability.
  3. Authorize a local jurisdiction to use credits provided by Rule 20A and to borrow up to five years of future credit allocations to that program to fund its share of the total project costs.
  4. Require the CPUC to authorize electrical corporations to recover the costs incurred pursuant to this section from their ratepayers on a nonbypassable basis.

Authorize the CPUC to require electrical corporations to replace overhead electrical infrastructure with underground electrical infrastructure in a Tier 3 High Fire-Threat District that is destroyed as a result of a fire caused by overhead electrical infrastructure, if the CPUC has determined that replacing overhead electrical infrastructure with underground electrical infrastructure in the project area is feasible, is a preferred method to reduce the risk of wildfires in that area, and would enhance electrical reliability. Require the CPUC to authorize an electrical corporation to recover the costs incurred for this effort from its ratepayers on a nonbypassable basis.

Require the CPUC to direct electrical corporations to reallocate credits provided to a jurisdiction under the Rule 20A program for purposes of conversion projects in Tier 3 High Fire-Threat Districts, if the CPUC has determined that the inactive jurisdiction does not plan to use the unused credits.

Appropriate, beginning with the 2019–20 fiscal year and ending with the 2023–24 fiscal year, an unspecified amount annually from the GGRF to CalFire to provide grants to local jurisdictions undertaking conversion projects to move electrical infrastructure underground.

• 1. Limits the moneys provided to a local jurisdiction to no more than 15 percent of a project’s total costs.
  2. Requires CalFIRE to give preferences to projects based on fire risk determined by assessing specified criteria.

ARGUMENTS IN SUPPORT

According to the author, “[s]eeing large sections of California burn down in recent wildfires has been shocking. Many of the fires were caused by sparks from downed power lines that could have been prevented. I authored two bills in 2016 and 2018, both numbered Senate Bill 1463, to mitigate wildfires by hardening power lines and to use cap-and-trade funds for undergrounding to reduce the causes of wildfires. Neither bill became law, but SB 1463 in 2016 reached Governor Brown’s desk where it was subsequently vetoed.”

“In the last legislative session, the cap-and-trade idea was incorporated into SB 901 by Sen. Bill Dodd (D-Napa) which I supported. It included $200 million in cap-and-trade funds for mitigating wildfires. Other funding resources, including Rule 20A, have proven to be effective methods for financing undergrounding projects. SB 584 works to extend this idea by using cap-and-trade funds and other revenue streams not being properly utilized, for the purpose of undergrounding overhead utility lines in an effort to prevent future disastrous fires.”

“Use of the cap-and-trade funds is crucial because the 2018 wildfires generated greenhouse gases equivalent to that of a year’s worth of electricity, according to a recent study by the U.S. Department of the Interior.”

“The opportunity to move forward in a collaborative fashion between cities and utilities to prevent these devastating fires is clear and present. We need to start using our funds wisely to work together to save lives and property.”

The sponsor of the bill, City of Laguna Beach, notes that “utility-caused fires have become a statewide concern as electrical infrastructure has ignited an increasing number of wildfires across the State. These wildfires have led to the loss of life and property throughout the State, displacing entire communities.”

“SB 584 will take significant steps forward to provide a program that will facilitate the conversion projects to replace overhead electrical infrastructure in tier three fire-threat districts… [t]his legislation will help wildfire prone communities modernize their electric infrastructure in the aim of reducing the risk of wildfires in their area.”

ARGUMENTS IN OPPOSITION

None received.

COMMENTS

Narrowed scope. Amendments taken in the Senate Energy, Utilities and Communications Committee have narrowed the scope of the bill and reduced content within this Committee’s jurisdiction. These amendments are discussed below.

Conversion program eligibility. The amendments narrow eligibility for the ratepayer funded conversion program to Tier 3 fire-threat areas, eliminating wildfire urban interface areas (WUIs) as eligible project areas. This change limits the application of the bill to forestry practices. This amendment also adds a requirement for the utility to determine that undergrounding is a preferred and feasible method.

Project preference criteria for grants. In addition removing specific reference to a dollar amount of GGRF funding, the amendments include additional criteria that CalFIRE is to consider in giving preference to projects seeking grant funding. In total, these criteria include the presence of the following attributes:

1. The project area has a history of wildfires.
2. The project area has a high population density.
3. The project area has fuel conditions that create an increased risk of wildfires.
4. The project area has limited ingress and egress routes.
5. The local jurisdiction has demonstrated efforts to mitigate its wildfire risks, including by imposing and enforcing rules intended to reduce flammable vegetation and other fuel sources.
6. The local jurisdiction has adopted a local assessment to fund the replacement of overhead electrical infrastructure with underground electrical infrastructure.
7. The local jurisdiction has demonstrated its financial need, as defined by the department.
8. The CPUC has determined that replacing overhead electrical infrastructure with underground electrical infrastructure in the project area is a preferred method to reduce the risk of wildfires to that area and would enhance electrical reliability.

Items (c) and (e) are particularly significant in the context of this Committee’s jurisdiction. Vegetation management is an important tool in reducing surface and ladder fuel from high fire risk areas, which will reduce both the likelihood and intensity of a wildfire.

Rule 20A credit reallocation: The amendments require the CPUC to confirm that a local jurisdiction has not taken steps or plans to use Rule 20A credits before reallocating them.

Energy and utility law. Energy and utility law, described in the background section above, are provided in this analysis only for context and completeness.

Should GGRF moneys be used for purposes that eliminate a source of GHG emissions, rather than purposes that reduce GHG emissions? Reducing the risk of ignition from electrical infrastructure may help to eliminate wildfires as source of GHG emissions. However, the elimination of an emission source is an indirect, rather than direct, approach to furthering the objectives of the California Global Warming Solutions Act.

GHG emissions from wildfires. According to the US Geological Survey (USGS), the 2018 wildfire season in California is estimated to have released GHG emissions equivalent to approximately 68 million tons of carbon dioxide. This number equates to about 15 percent of all California emissions, or alternatively, the annual emissions that would be produced by generating enough electricity to power the state for a year.

Should certain infrastructure projects be prioritized over others? In a letter to the author, San Diego Gas & Electric (SDG&E) noted that distribution and secondary lines are associated with the greatest risk of fire ignition, and that destroyed overhead equipment may not have been ignited where it burned. Within Tier 3 fire-threat areas, it may make sense to establish criteria to prioritize infrastructure projects based on the risk of ignition, rather than replacing all infrastructure outright.

No one-size-fits-all solution. Reducing ignition risks from electrical infrastructure through undergrounding efforts may help the state in mitigating wildfires. However, solutions to the problem are likely to require a holistic approach that also include home/building hardening, vegetation management, and prescribed burning, among other strategies.

Related prior legislation.

SB 1463 (Moorlach, 2016) would have required the CPUC, in consultation with

CalFIRE, to prioritize mitigation measure areas that are subject to hazards from overhead electrical lines and equipment. This bill was vetoed by the governor.

SB 1028 (Hill, Chapter 598, Statutes of 2016) required electric CPUC-regulated utilities to file annual wildfire mitigation plans and requires the CPUC to review and comment on those plans.

SB 901 (Dodd, Chapter 626, Statutes of 2018) addressed numerous issues concerning wildfire prevention, response and recovery, including funding for mutual aid, fuel reduction and forestry policies, wildfire mitigation plans by electric utilities, and cost recovery by electric corporations of wildfire-related damages.

SUPPORT

City of Laguna Beach (Sponsor)

City of Agoura Hills

City of Malibu

City of Mission Viejo

City of Thousand Oaks

Laguna Canyon Foundation

Town of Tiburon

OPPOSITION

None Received

AMENDMENTS THAT WERE AGEED TO IN THE SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE ARE BELOW:

The people of the State of California do enact as follows:

SECTION 1.   Section 718 is added to the Public Resources Code, to read:

718.   (a) For the 2019–20 fiscal year to the 2023–24 fiscal year, inclusive, four hundred million _____ dollars ($400,000,000) ($_____) is hereby appropriated annually to the department from the Greenhouse Gas Reduction Fund to provide grants to local jurisdictions undertaking conversion projects in Tier 3 High Fire-Threat Districts, as determined by the Public Utilities Commission, pursuant to Section 764.5 of the Public Utilities Code.

(b) Moneys provided to a local jurisdiction for a project pursuant to this section shall not exceed 15 percent of a the project’s total costs.

(c) In awarding grants pursuant to this section, the department shall give preferences to projects based on fire risk determined by assessing the following factors within the project area: the presence of the following attributes:

(1) History of fire. The project area has a history of wildfires.

(2) Population size. The project area has a high population density.

(3) Vegetation. The project area has fuel conditions that create an increased risk of wildfires.

(4) Limited The project area has limited ingress and egress routes.

(5) The local jurisdiction has demonstrated efforts to mitigate its wildfire risks, including by imposing and enforcing rules intended to reduce flammable vegetation and other fuel sources.

(6) The local jurisdiction has demonstrated efforts to improve ingress and egress routes.

(7) The local jurisdiction has demonstrated efforts to prepare for emergencies, including preparatory efforts relating to evacuation procedures, communications, first responders, and critical infrastructure.

(8) The local jurisdiction has adopted a local assessment to fund the replacement of overhead electrical infrastructure with underground electrical infrastructure.

(9) The local jurisdiction has demonstrated its financial need, as defined by the department.

(10) The Public Utilities Commission has determined that replacing overhead electrical infrastructure with underground electrical infrastructure in the project area is a preferred method to reduce the risk of wildfires to that area and would enhance electrical reliability.

SEC. 2.   Section 764.5 is added to the Public Utilities Code, to read:

764.5.   (a) (1) The commission, in a new or existing proceeding, shall require each electrical corporation, by July 1, 2020, to develop and administer programs a program to provide matching funds to local jurisdictions for conversion projects projects, consistent with Electric Tariff Rule 20 allocations, to replace overhead electrical infrastructure with underground electrical infrastructure in a Tier 3 High Fire-Threat District or wildland urban interface area, District, as determined by the commission.

(2) Programs developed and administered pursuant to this subdivision shall require a local jurisdiction to adopt a conversion program and establish an underground utility district to qualify for funding.

(b) (1) (A) The program shall require an electrical corporation to provide matching funds, equaling 50 percent of the total project costs, to a local jurisdiction upon approval of an application by the local jurisdiction for an eligible project. A project shall be eligible only if the commission has determined that replacing overhead electrical infrastructure with underground electrical infrastructure in the project area is feasible, is a preferred method to reduce the risk of wildfires in that area, and would enhance electrical reliability.

(B) A local jurisdiction may use credits provided pursuant to the California Overhead Conservation Program, Rule 20A, and may borrow up to five years of future credit allocations pursuant to that program to fund its share of the total project costs.

(2) Upon completion of the project, the local jurisdiction shall authorize the electrical corporation to access and shall have use of the infrastructure for the provision of electrical services to the electrical corporation’s customers.

(3) The program of each electrical corporation shall authorize the use of design-build authority consistent with the general intent and requirements applicable to design-build authority under that electrical corporation’s Rule 15 program.

(c) The commission shall authorize electrical corporations to recover the costs incurred pursuant to this section from their ratepayers on a nonbypassable basis.

SEC. 3.   Section 764.7 is added to the Public Utilities Code, to read:

764.7.   (a) The commission may require an electrical corporation to replace overhead electrical infrastructure in a Tier 3 High Fire-Threat District or wildland urban interface area, District, as determined by the commission, that is destroyed as a result of a fire caused by overhead electrical infrastructure with underground electrical infrastructure. infrastructure if the commission has determined that doing so is feasible, is a preferred method to reduce the risk of wildfires, and would enhance electrical reliability.

(b) The commission may authorize the use of temporary overhead electrical infrastructure during the construction of the underground electrical infrastructure required pursuant to subdivision (a).

(c) The commission shall authorize an electrical corporation to recover the costs incurred pursuant to this section from its ratepayers on a nonbypassable basis.

SEC. 4.   Section 764.9 is added to the Public Utilities Code, to read:

764.9.   (a) For purposes of this section, the following definitions apply:

(1) “Active jurisdiction” means a jurisdiction that is actively participating in the program developed pursuant to Section 764.5.

(2) “Inactive jurisdiction” means a jurisdiction that has not undertaken or completed a project under the California Overhead Conversion Program, Rule 20A, since 2010 and is not actively participating in the program developed pursuant to Section 764.5.

(b) Within two years of the development of programs pursuant to Section 764.5, the commission shall direct an electrical corporation to reallocate unused credits provided under the California Overhead Conversion Program, Rule 20A, from an inactive jurisdiction to an active jurisdiction. jurisdiction only if the commission has confirmed that the inactive jurisdiction does not plan to use the unused credits.

SEC. 5.   No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.

SEC. 6.   This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:

To expedite the process of replacing overhead electrical infrastructure with underground electrical infrastructure in a Tier 3 High Fire-Threat District or wildland urban interface area, District, thereby reducing the risks of wildfire caused by that infrastructure, it is necessary for this measure to take effect immediately.

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SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2019 - 2020 Regular

Bill No: SB 584 Hearing Date: 4/10/2019

SUBJECT: Electricity: undergrounding of electrical wires

DIGEST: This bill would make changes to programs that help fund conversion projects to replace overhead electrical infrastructure with underground electrical infrastructure in specified areas of the service territory of investor-owned electric utilities.

ANALYSIS:

Existing law:

1. Provides that the California Public Utilities Commission (CPUC) has regulatory authority over public utilities, including electrical corporations. (California Constitution, Article 12)
2. Declares that it is the policy of the state to achieve, whenever feasible and not inconsistent with sound environmental planning, the undergrounding of all future electric and communication distribution facilities which are proposed to be erected in proximity to any highway designated a state scenic highway and which would be visible from such scenic highways if erected above ground. (Public Utilities Code §320)
3. Under its existing authority, the CPUC requires electrical corporations to implement the California Overhead Conversion Program, Rule 20A, to provide financial assistance to local governments to facilitate projects that are in the public interest and that remove overhead infrastructure, replacing it with infrastructure in underground trenches.
4. Requires the CPUC to develop formal procedures to incorporate safety in a rate case application by an electrical corporation or gas corporations. (Public Utilities Code §750)
5. Requires each electrical corporation to construct, maintain, and operate its electrical lines and equipment in a manner that will minimize the risk of catastrophic wildfire posed by those electrical lines and equipment. Requires each electrical corporation to annually prepare and submit a wildfire mitigation plan to the CPUC for review and approval. Requires those wildfire mitigation plans to include specified information, including protocols for disabling reclosers and deenergizing portions of the electrical distribution system that consider the associated impacts on public safety, as well as protocols related to mitigating the public safety impacts of those protocols, including impacts on critical first responders and on health and communication infrastructure. (Public Utilities Code §8386)
6. Existing law, the California Global Warming Solutions Act of 2006, designates the California Air Resources Board (ARB) as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases (GHG). The act authorizes the ARB to include the use of market-based compliance mechanisms in regulating those emissions. Requires all moneys, except for fines and penalties, collected by the ARB as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund (GGRF) and to be available for appropriation. (Health and Safety Code §§38500 et seq., 39710 et seq.)

This bill:

Requires the CPUC to require electrical corporations, by July 1, 2020, to develop and administer programs to provide matching funds to local jurisdictions for conversion projects to replace overhead electrical infrastructure with underground electrical infrastructure in Tier 3 Fire-Threat Districts or wildland urban interface area.

• 1. Requires a local jurisdiction to adopt a conversion program and establish an underground utility district to qualify for funding.
  2. Requires the program to require an electrical corporation to provide matching funds, equaling 50 percent of the total project costs, to a local jurisdiction upon approval of an application for an eligible project.
  3. Authorizes a local jurisdiction to use credits provided by Rule 20A and to borrow up to five years of future credit allocations to that program to fund its share of the total project costs.
  4. Requires the CPUC to authorize electrical corporations to recover the costs incurred pursuant to this section from their ratepayers on a nonbypassable basis.

Authorizes the CPUC to require electrical corporations to replace overhead electrical infrastructure with underground electrical infrastructure in a Tier 3 High Fire-Threat District or wildland urban interface area that is destroyed as a result of a fire caused by overhead electrical infrastructure. Requires the CPUC to authorize an electrical corporation to recover the costs incurred for this effort from its ratepayers on a nonbypassable basis.

Requires the CPUC to direct electrical corporations to reallocate credits provided to a jurisdiction under the Rule 20A program for purposes of conversion projects in Tier 3 High Fire-Threat Districts and wildland urban interface areas, as specified.

Appropriates, beginning with the 2019–20 fiscal year and ending with the 2023–24 fiscal year, $400,000,000 annually from the GGRF to the Department of Forestry and Fire Protection (CalFIRE) to provide grants to local jurisdictions undertaking conversion projects to move electrical infrastructure underground.

• 1. Limits the moneys provided to a local jurisdiction to no more than 15 percent of a project’s total costs.
  2. Requires CalFIRE to give preferences to projects based on fire risk determined by assessing specified criteria.

Declares that it is to take effect immediately as an urgency statute.

Background

Undergrounding of electric facilities. Undergrounding is the process of replacing overhead lines that provide services such as electricity or communications with lines located underground. Undergrounding is typically done for aesthetic or safety purposes in order to remove the visible overhead lines and poles or to reduce the risk of damage or fire from being exposed to the elements. Undergrounding is generally much more expensive relative to overhead infrastructure – on the order of ten times or more. However, operating costs may be less assuming the underground results in a reduced need to repair damaged lines. Nonetheless, the costs for undergrounding lines can vary depending on the location of the lines, rural, urban, or suburban communities.

California Overhead Conversion Program, Rule 20. The CPUC requires electrical corporations to allocate a certain amount of ratepayer funds each year for undergrounding conversion projects. The electric utility annually allocates funds via credits under Electric Tariff Rule 20 to communities, either cities or unincorporated areas of counties, to convert overhead electric lines to underground facilities. The local jurisdiction may either accumulate their allocated credits, or borrow future undergrounding allocations for up to five years. Tariff Rule 20 provides three levels (A, B, and C) of progressively diminishing ratepayer funding for the projects, based on specified criteria. Once a project is completed, the electric utility records its costs in its electric plant account for recovery through the utility’s rate base. The CPUC authorizes the utility to recover the costs from ratepayers until the project is fully depreciated. Since ratepayers contribute the bulk of the costs of Rule 20A programs through utility rates, the projects must be in the public interest, meeting specified criteria. The CPUC instituted the current undergrounding program in 1967 and has made mostly slight adjustments to the program over the 50 years.

San Diego Gas & Electric (SDG&E) Rule 20D. In 2014, the CPUC authorized SDG&E the ability to consider wildfires when converting electric facilities to underground. The CPUC agreed with SDG&E that undergrounding could mitigate the risks of wildfires in the more fire-prone areas of SDG&E’s service territory. The CPUC approved a SDG&E specific version of Rule 20D that is modeled on Rule 20A, but targeted to the most fire-prone areas. Under Rule 20D, the governing body has determined that undergrounding will occur in the SDG&E Fire Threat Zone, as identified, and SDG&E has determined that undergrounding is a preferred method to reduce fire risk and enhance the reliability of the facilities to be undergrounded.

The table below notes the Electric Tariff Rule 20 programs and the ratepayer contribution for each:

CPUC Rule 20A staff report. In November 2016, the CPUC’s Policy and Planning Division authored a staff report reviewing Rule 20A entitled, “Program Review: California Overhead Conversion Program, Rule 20A for Years 2011-2015.” The staff report noted that there is a large balance of unclaimed credits of the Rule 20A allocations. According to the report, there are over a billion dollars of credits that have been allocated to local communities but had not yet been redeemed. The report made a number of recommendations, including a recommendation to have the electric utility suspend accounts for local jurisdictions that do not meet program criteria and do not plan to pursue any conversion projects in the next five to ten years.

The Improvement Act of 1911. Under the Improvement Act (Act), cities, counties and other municipal governments are authorized to designate areas within which public agencies officials and individual property owners may enter into contractual assessments to finance a wide range of public infrastructure projects. An assessment district is formed as an alternative method for financing public improvements by a sponsoring local government agency. One type of assessment district that the Act authorizes is an underground utility district (UUD), which is formed for the purposes of converting above ground infrastructure to below ground. UUDs are formed via petition or by a determination of the legislative body. Current law requires a legislative body to determine that the city or a public utility has voluntarily agreed to pay over 50 percent of all costs of conversion, excluding costs of users' connections to underground electric or communication facilities in order to initiate proceedings.

CPUC High Fire-Threat District. The CPUC’s efforts to map high-fire threat stem from the catastrophic wildfires caused by utility infrastructure in San Diego County in the 2000s. The CPUC mapping efforts combine the Tree Mortality Taskforce Map with CPUC/CalFIRE Tier 2 and Tier 3 designations. Tier 2 fire-threat areas depict areas where there is an elevated risk (including likelihood and potential impacts on people and property) from utility associated wildfires.  Tier 3 fire-threat areas depict areas where there is an extreme risk (including likelihood and potential impacts on people and property) from utility associated wildfires.

SB 901. As a requirement of the SB 901, electric utilities must file wildfire mitigation plans with specified information. In the recently filed plans, some of the electric utilities considered the potential to underground some lines as part of their wildfire mitigation efforts. However, in most instances, the electric utilities’ wildfire mitigation plans included the potential to underground lines but recommended an assessment to identify what electric lines made sense to underground. As one plan noted: “While underground systems can help reduce the risk of wildfires and increase reliability during high winds and storms, they also take longer and costs much more to construct, maintain, and repair – particularly in mountainous regions and those with steep terrain.”

This bill. This bill proposes to establish a grant program to support the local match for underground conversion projects with $400 million annually appropriated for five years from the GGRF. Additionally, this bill proposes to create a Rule 20D-like program across the service territories of all electrical corporations to address wildfire risks with ratepayers funding at least 50 percent of the costs for projects in Tier 3 High Fire-Threat District or wildland urban interface area. Moreover, this bill would require the CPUC to direct credit allocations to fund underground conversion projects from “inactive” jurisdictions (as defined) to benefit “active” jurisdictions. This bill would additionally authorize the CPUC to require an electrical corporation to replace overhead electrical infrastructure in a Tier 3 Fire-Threat District or wildland urban interface area funded by ratepayers through a nonbyapassable charge. Lastly, this bill requires the CPUC to direct an electrical corporation to reallocate unused credits provide under the Rule 20A program.

Need for amendments. As noted above, the costs to underground electrical facilities can be substantially more than maintaining overhead lines. Nonetheless, with the growing threats posed by wildfires, electric utilities are required to adopt wildfire mitigation plans, which include hardening the electrical system. Such strategies can include conductor covers, the replacement of wooden poles with composite or steel poles, as well as, undergrounding of lines, where it is feasible and preferable to other strategies. To help better target undergrounding conversion projects, the author and committee may wish to amend this bill to:

• Relevant to the grant program: Consistent with previous bills related to GGRF appropriations, remove reference to specific dollar amount; include additional criteria for preference to projects where the local jurisdiction has taken action to address their wildfire risks and undergrounding is a feasible and preferred method to reduce fire risks.
• Relevant to the new ratepayer funded conversion program and wildfire replacement program: narrow the project eligibility to Tier 3 areas, which pose the greatest risk for utility infrastructure ignitions and require a determination by the utility that undergrounding is a preferred and feasible method.
• Relevant to the reallocation of Rule 20A credits: authorize the CPUC to direct an electrical corporation to reallocate unused credits but confirm the local jurisdiction has not taken steps or plans to use the credits before reallocating them.

Double referral. Should this bill be approved by this committee, it will be re-referred to the Senate Committees on Natural Resources and Water for their consideration.

Prior/Related Legislation

SB 1463 (Moorlach, 2016) would have required the CPUC, in consultation with the CalFIRE, to prioritize areas where communities are subject to conditions that increase fire hazards associated with overhead utility facilities when determining areas which it will require enhanced mitigation measures for wildfire hazards posed by overhead electrical lines and equipment. The bill was vetoed.

SB 901 (Dodd, Chapter 626, Statutes of 2018) addressed numerous issues concerning wildfire prevention, response and recovery, including funding for mutual aid, fuel reduction and forestry policies, wildfire mitigation plans by electric utilities, and cost recovery by electric corporations of wildfire-related damages.

SB 1028 (Hill, Chapter 598, Statutes of 2016) required electric CPUC-regulated utilities to file annual wildfire mitigation plans and requires the CPUC to review and comment on those plans.

FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: Yes

SUPPORT:

City of Laguna (Sponsor)

City of Mission Viejo

Laguna Canyon Foundation

Town of Tiburon

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the author:

“Seeing large sections of California burn down in recent wildfires has been shocking. Many of the fires were caused by sparks from downed power lines that could have been prevented. I authored two bills in 2016 and 2018, both numbered SB 1463, to mitigate wildfires by hardening power lines and to use cap-and-trade funds for undergrounding to reduce the causes of wildfires. Neither bill became law, but SB 1463 in 2016 reached Governor Brown’s desk where it was subsequently vetoed.

In the last legislative session, the cap-and-trade idea was incorporated into SB 901 by Sen. Bill Dodd (D-Napa) which I supported. It included $200 million in cap-and-trade funds for mitigating wildfires. Other funding resources, including Rule 20A, have proven to be effective methods for financing undergrounding projects. SB 584 works to extend this idea by using cap-and-trade funds and other revenue streams not being properly utilized, for the purpose of undergrounding overhead utility lines in an effort to prevent future disastrous fires.”

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