WEDNESDAY AGGREGATE: Stanpac Transaction Scrutiny; Wildfire Cost Challenge; SDG&E ERRA Dispute
Today's update focuses on:
- Natural Gas Transmission Assets: A joint prehearing conference statement for PG&E’s application to acquire Stanpac’s gas transmission pipeline assets and related interests. Cal Advocates is attempting to reframe the proposed transaction as needing a full reasonableness review under the Public Utilities Code, rather than a narrower approval focused on whether the asset transfer and agreements meet certain statutory requirements.
- Wildfire Mitigation Costs: A Protect Our Communities Foundation application for rehearing of a CPUC decision from January (D.26-01-021), which addressed SDG&E's request to recover wildfire mitigation memorandum account costs. Protect Our Communities Foundation argues the CPUC committed multiple legal and procedural errors that unlawfully allowed recovery of unjustified expenses.
- SDG&E ERRA Compliance: A joint meet-and-confer report in SDG&E’s 2024 Energy Resource Recovery Account compliance application (A.25-06-002), which shows this case moving toward a technical dispute over SDG&E’s Resource Adequacy accounting and cost allocation practices rather than broad procurement prudence challenges.
NATURAL GAS TRANSMISSION
PG&E, Standard Pacific Gas Line Incorporated (Stanpac), Chevron Pipe Line Company, and Cal Advocates filed a joint prehearing conference statement outlining the issues and procedural posture in PG&E’s application to acquire Stanpac’s gas transmission pipeline assets and related interests.
The joint applicants seek CPUC approval for the asset sale, associated transportation and inter-utility service agreements, a future stock purchase arrangement involving Chevron’s minority interest, ratemaking treatment, and confirmation that the transaction is exempt from CEQA review. (PG&E already owns 6/7ths of Stanpac; the transaction consolidates the remaining 1/7th interest currently held by Chevron.)
- While Chevron supports PG&E’s proposed scope, Cal Advocates argues the proceeding must also examine whether the transaction’s valuations, payment structure, long-term arrangements, and ratemaking impacts are just and reasonable for ratepayers under Public Utilities Code Section 451.
- Cal Advocates airs concerns about (i) PG&E paying the full stated value despite already owning most of Stanpac and (ii) its plans to acquire Chevron’s remaining shares for a nominal amount after 20 years.
The parties also differ on whether additional issues (e.g., potential future dissolution of Stanpac or affiliate transaction compliance) belong in the proceeding's scope.
INSTANT ANALYSIS: Cal Advocates is attempting to reframe the proposed transaction as a full reasonableness review under Section 451. Its focus is on (i) PG&E paying the full $150 million valuation despite already owning most of Stanpac and (ii) the plan to acquire Chevron’s remaining shares for $1 after 20 years, a structure that may draw skepticism on ratepayer impacts.
The underlying stakes involve control of aging natural gas infrastructure tied to refinery service obligations and who bears the costs. If the Commission expands the scope, the decision may set a precedent for deeper valuation review and scrutiny of long-horizon utility transactions where ratepayers fund assets serving specific industrial counterparties.
WILDFIRE MITIGATION COSTS
The Protect Our Communities Foundation filed an application for rehearing of a CPUC decision from January (D.26-01-021), which addressed SDG&E's request to recover wildfire mitigation memorandum account costs. (See CRI's coverage here.)
MC
Protect Our Communities Foundation argues the CPUC committed multiple legal and procedural errors that unlawfully allowed recovery of unjustified expenses. Protect Our Communities Foundation contends the CPUC:
- Exceeded the scope of the proceeding by considering costs and issues (such as post-2022 expenditures and securitization) not identified in the scoping memo;
- Applied the wrong legal standard by using a “prudent manager” test instead of the statutory “just and reasonable” requirement;
- Violated due process by making last-minute changes without allowing other parties to respond;
- Improperly approved or deferred review of numerous wildfire mitigation program costs (including drone programs, undergrounding, inspections, and other capital projects) despite finding SDG&E failed to demonstrate their reasonableness or cost-effectiveness; and
- Improperly disregarded an unrefuted independent audit finding (the OEIS Crowe Audit) that SDG&E could not document whether it actually spent $240 million in wildfire mitigation spending the Commission authorized in 2019. PCF contends the Commission justified ignoring the audit at the last minute, without allowing any party other than SDG&E to comment on that justification.
Separately, Protect Our Communities Foundation challenges the CPUC's admission of supplemental SDG&E evidence submitted eight months after the intervenor testimony deadline and four months after briefing closed. It requests rehearing to correct these alleged errors, disallow unsupported costs, and ensure ratepayers are not charged for expenditures the utility did not adequately justify.
INSTANT ANALYSIS: This request reopens legal risk around SDG&E’s approved wildfire mitigation cost recovery by challenging the CPUC’s procedure, scope decisions, and use of a deferential review standard. If entertained, it could constrain how freely the CPUC approves large mitigation spending with incomplete documentation. Near term, refund risk is low, but precedent risk is real: utilities may face tougher scrutiny on future wildfire portfolios, while intervenors gain leverage to challenge track-based GRC decisions and late-stage revisions.
The standard-of-review challenge (prudent manager versus the statutory "just and reasonable" requirement) is the most consequential legal argument here. If courts ultimately take it up, the implications would extend well beyond this docket to how the CPUC evaluates wildfire mitigation cost recovery across all California IOUs.
SDG&E ERRA COMPLIANCE
SDG&E, Cal Advocates, San Diego Community Power, and the Clean Energy Alliance filed a joint meet-and-confer report in SDG&E’s 2024 Energy Resource Recovery Account compliance application (A.25-06-002).
The report summarizes areas of agreement and dispute following rebuttal testimony. The parties report that many compliance issues are uncontested, including SDG&E’s contract administration, least-cost dispatch, Demand Response management, greenhouse gas compliance activities, and the accuracy of numerous balancing and memorandum accounts.
Remaining disputes center on three areas:
- Cal Advocates' proposal to disallow $28,310 in ERRA costs tied to a computer hard drive failure within SDG&E's Continuous Emissions Monitoring System Data Acquisition and Handling System at utility-owned generation;
- SDG&E’s handling and accounting of excess Resource Adequacy capacity during 2024 procurement (including whether buffer capacity should have been classified and valued differently); and
- An alleged error in assigning Power Charge Indifference Adjustment vintages to new customer premises that may have affected cost allocation and billing accuracy. SDG&E has indicated its SAP billing system upgrade to correct the vintaging error is targeted for Q1 2026.
The report indicates the parties have narrowed contested issues and are exploring settlement, but the Clean Energy Alliance and San Diego Community Power may seek evidentiary hearings (particularly on the RA accounting issue) pending discovery responses.
INSTANT ANALYSIS: This filing shows the ERRA compliance case moving toward a technical dispute over SDG&E’s Resource Adequacy accounting and cost allocation practices rather than broad procurement prudence challenges.
The only issues with real financial or precedent risk are: whether SDG&E improperly withheld and zero-valued excess RA capacity instead of treating it as retained compliance capacity and whether PCIA vintaging errors affected cost responsibility for new customers. Both go directly to how procurement costs are allocated between bundled customers and Community Choice Aggregators.
The fact that most operational and dispatch issues are uncontested indicates low likelihood of major disallowances, but the RA buffer treatment could influence future utility incentives around over-procurement and market participation.
If hearings proceed, they will likely focus on whether SDG&E’s RA portfolio management shifted costs or market value away from CCA customers, making this a cost-allocation and transparency fight rather than a reliability or procurement failure case.