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IN THIS ISSUE – “Until We Get Serious, This State Will Continue to Lose Middle Class”
- New Governor Unveils $200-Billion Budget & Love for the Legislature
- Newsom’s Proposed Water Tax “Very Tough Lift” for Lawmakers
- “Not Policy Problems…These Are Moral Imperatives” – Newsom Sets Tone At Inauguration
- New CalEPA Secretary A Longtime Environmentalist
- Food & Ag Secretary Continues Her Service
WATER & POWER
- The Gordian Knot of California Water
- SF Joins Valley Farmers’ Lawsuit Against River Flow Limits
- PG&E Faces Uncertain Future
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
READ ALL ABOUT IT!!
FOR THE WEEK ENDING JAN. 11, 2019
Gov. Gavin Newsom unveiled his first California budget proposal on Thursday with a plan to pour hundreds of millions of dollars into housing and homelessness, a start on fulfilling one of his major campaign promises.
He said he wants to cut red tape to spur housing construction, too, by waiving environmental reviews for certain projects and reviewing the state’s developer impact fees.
“We have a supply and demand imbalance in this state,” he said. “Until we get serious about it, the state will continue to lose its middle class….If we continue down this path, the state is going to be a vestige of itself.”
The Democratic governor announced the plan at a sprawling two-hour press conference where he alternately touted expensive new investments in education and health care while cautioning against overspending.
His 2019-20 budget proposal includes a $144 billion general fund, a 4 percent increase over the spending plan former Gov. Jerry Brown signed in June.
The total proposal — including money earmarked for special purpose funds — tops $209 billion. That’s about $8 billion more than Brown’s final budget.
Newsom stressed that much of the increased spending would go to one-time projects, such as lump payments toward the state’s public employee pension debts and grants for special programs.
They won’t lock in state spending if a recession hits and crimps tax revenue. He plans to continue setting aside money in reserves, too.
“The message we are advancing here is discipline, building a strong foundation,” he said.
His housing plan contains one-time funding for cities and counties, including $250 million to help communities plan for more housing. An additional $500 million will go to communities that reach their housing production goals and can be used for general purposes.
“This is a crisis,” Newsom said. “We’re simply not developing enough housing units.”
Newsom also wants to restructure the way California sets housing goals to make them “more realistic and more nuanced.”
He proposed giving the state’s housing department more power to create and enforce those plans. After several years, Newsom’s plan calls for taking away some transportation funding from communities that aren’t producing housing fast enough.
His budget includes $500 million in grant funding to address homelessness. Part of that money is intended for shelters, which Newsom said should be exempted from some environmental review because of the severity of the state’s homelessness crisis.
The budget slates more money for developer loans to building moderate-income housing and an expansion of the state’s housing tax credit program. Newsom also promised an inventory of state property to assess where housing can be built.
Newsom during his campaign promised progressive policies with big price tags, but has also pledged to build up the “largest fiscal reserve of any state in American history.”
He took office with a strong economy that has filled state budget reserves with a projected $16 billion that could help him navigate a recession. The Legislative Analyst’s Office projects the state will have an additional $14.8 billion surplus that lawmakers and Newsom could use on practically anything.
Newsom’s own team estimates that the surplus will be even greater: more than $21 billion.
The Thursday announcement built on details his office had released over several weeks, including nearly $2 billion for early learning programs and a sweeping health plan.
To fund health insurance subsidies for middle-income families, Newsom proposed reinstating the individual mandate, which requires people to have health insurance or pay a penalty. And he wants to let young immigrants without legal status enroll in Medi-Cal, the state’s health insurance program for low-income people, until age 26.
While they disagreed with some of his priorities, particularly the expansion of Medi-Cal eligibility to undocumented immigrants, Republican lawmakers said they were encouraged by Newsom’s emphasis on fiscal responsibility and one-time spending.
Assemblyman Jay Obernolte of Big Bear Lake, the Republican vice chair of the budget committee, praised Newsom for proposing to pay down budget debts and unfunded pension liabilities.
“This governor seems very committed to limiting the growth of ongoing state spending, which is very wise because no one can say for sure when a recession might come,” Obernolte said.
Working families would see tax credits under the plan. Newsom wants to double California’s earned-income tax credit and offer it to hundreds of thousands of more households. He’d also increase the value of Calworks grants for low-income families.
Assemblyman Phil Ting, a San Francisco Democrat, said he was pleased that Newsom had engaged early with lawmakers and accounted for their priorities in his budget plan. He said negotiations in the coming months would largely be over the details of shared priorities like housing, homelessness and health care.
“On the big issues, we absolutely agree,” said Ting, who leads the Assembly Budget Committee.
Newsom’s budget plan represents his opening proposal in budget negotiations that will continue through June, the deadline for the governor and the Legislature to reach a deal. Lawmakers have already proposed more than $40 billion in new spending, which Newsom has said needs to be “whittled down.”
Newsom also wants to provide six months of paid leave for parents after the birth of a child. That would be the most expansive offering of any state in the country, but Newsom doesn’t yet have a plan to finance it.
California’s current system, with up to six weeks of partial pay, is funded by a payroll tax on employees, and raising that tax would require a two-thirds vote of the Legislature.
Newsom characterized his proposal as a cost-effective investment in families, arguing children are better off when they have more time with their parents.
“It’s a no damn brainer,” he said. “I’m hoping the Legislature feels the same because it’s going to cost some money.”
But on Thursday, he was enthusiastic about the conversations he’s had with lawmakers.
“I love this Legislature,” he said. “You wanna ask how we’re working together? We are working together. This budget reflects that.”
Tackling what promises to be a controversial issue, Gov. Gavin Newsom proposed a tax on drinking water Thursday to help disadvantaged communities clean up contaminated water systems.
Newsom’s plan for a “safe and affordable drinking water fund,” included in the new governor’s first budget proposal, attempts to revive an idea that died in the Legislature last year.
A McClatchy investigation last year showed that at least 360,000 Californians rely on water that does not meet state standards for toxins. McClatchy also found that 6 million Californians have water providers that have violated state standards at some point since 2012.
“That is a disgrace,” Newsom told reporters at a budget press conference, citing a figure of 1 million people without access to safe drinking water.
Newsom said he also wants to earmark $25 million for safe drinking water, to jump-start the effort. His proposal was immediately hailed by safe drinking water advocates.
“These are our fellow Californians, and it’s past time to get this crisis resolved,” said Jonathan Nelson, policy director at a nonprofit advocacy group, the Community Water Center.
But Jon Coupal of the Howard Jarvis Taxpayer Association said he thinks improvements for water systems shouldn’t be addressed with a new tax when the state is sitting on a $14.8 billion budget surplus.
Coupal called Newsom’s proposal an example “of California’s knee-jerk reaction to default to a new tax whenever there’s a new problem.”
Details of Newsom’s plan weren’t immediately available, and state Sen. Bill Monning, D-Carmel, who spearheaded the tax proposal last year, said it could take several weeks to figure out the specifics.
Last year’s proposal would have taxed residential customers 95 cents a month, to raise about $110 million a year. Most of the Californians with unsafe drinking water resources live in the Southern San Joaquin Valley and the Mojave Desert, McClatchy found.
Dairy producers and feedlot operators would have contributed about $30 million in fees, for a total annual fund of $140 million. The dairy industry largely supported the bill, which provided some relief from disciplinary action as long as dairies followed “best practices” to limit toxins such as nitrate from cattle manure from leaching into drinking water.
“We’re excited,” said Anja Raudabaugh, CEO of Western United Dairymen. “We appreciate Gov. Newsom’s commitment to providing long-term solutions to drinking water in our communities, and we’re looking forward to providing a solution that includes certainty for our dairy producers.”
The Legislature scrapped the idea after protests from some segments of the agricultural community and the Association of California Water Agencies, which represents more than 400 water districts. It became clear that the proposal would have trouble it was proving increasingly difficult to secure the two-thirds super-majority needed to impose a new tax. Former Gov. Jerry Brown tried to resurrect the program last fall as a voluntary tax, but that died in the Legislature as well.
Cindy Tuck, a deputy executive director at the water agency association, said her group still has major concerns about the proposal.
“We think the problem can be solved without a tax,” she said.
Democrats’ success in the November elections means the tax could have a better chance of passing this year. Democrats now hold super-majorities in both houses of the Legislature, unlike last year.
But it’s no sure thing the proposed tax will make it through the Legislature even with Democrats firmly in charge. In November, California voters rejected the $8.9 billion Proposition 3 water bond that promised $500 million to clean up drinking water.
And within hours of Newsom’s announcement, some Democrats were expressing anxiety about a new tax.
Assemblyman Phil Ting, a San Francisco Democrat, said it would be a “very tough lift” in the Legislature to tax all Californians, most of whom have clean drinking water, to pay to fix pollution in a “very specific area.”
“It really comes down to how much time he and his staff are going to put toward it,” Ting said. “One of Gov. Brown’s strengths was really having a very narrow list of things to work on and get done, and because of that, he was able to get them done.”
Gavin Newsom was sworn in Monday as the 40th governor of California, ending the era of Jerry Brown with a broad promise of a more aggressive government that would turn its attention to the sharp economic disparities that have plagued this state.
Mr. Newsom stepped into the national spotlight as he took the oath just before noon from Tani Cantil-Sakauye, the state’s chief justice. He pledged that California, the nation’s most populous state, would act as a barrier to policies being pushed by Republicans in Washington that he described as a threat to the state’s — and the nation’s — well-being.
“People’s lives, freedom, security, the water we drink, the air we breathe — they all hang in the balance,” Mr. Newsom told thousands of people sitting in tents that had been set up after the state capital was whipped by drenching rain and high winds. “The country is watching us. The world is waiting on us. The future depends on us. And we will seize this moment.”
Mr. Newsom did not mention President Trump by name in his 25-minute speech, but said that California would “offer an alternative to the corruption and incompetence in the White House.”
The new governor spoke, often vaguely, of the problems his state faced even during a time of prosperity. He pledged to start a “Marshall Plan” to combat the state’s housing and homelessness epidemic; to implement some sort of single-payer health care system; and to resolve issues of economic and educational inequality. He said these “serious challenges” had often been “deferred for too long.”
“Even in a booming economy, there is a disquieting sense that things are not as predictable as they once were,” he said. “That we must now run faster just to stay in place. Stagnant wages. Costs that keep rising — rent, utilities, visiting the doctor — the basics are increasingly out of reach. We face a gulf between the rich and everyone else — and it’s not just inequality of wealth, it’s inequality of opportunity.
“These aren’t merely policy problems,” he said. “They are moral imperatives. So long as they persist, we are all diminished.”
Mr. Newsom signaled the tone of his new administration moments after the ceremony concluded, as his office announced that he would sign an executive order to change how prescription drugs are purchased, consolidating Medi-Cal drug purchases and negotiations under the Department of Health Care Services. The administration said the intended goal was to give the state more bargaining power on behalf of Medi-Cal users.
The new governor also said he would propose in his new budget, due out later this week, mandating that all Californians obtain health care insurance, in direct response to the Republican tax bill last year that removed the mandate from the Affordable Care Act. Such a mandate in California would require approval of the Legislature, which is far from assured.
His office also announced that he would create a surgeon general position for the state by executive order. His aides said the governor’s first budget would seek to expand Medi-Cal coverage to undocumented youths up to age 26.
Mr. Newsom, 51, had been the state’s lieutenant governor — largely a ceremonial position — for eight years under Mr. Brown. Before that, he served as mayor of San Francisco, where he positioned himself, for the most part, on the liberal side of the spectrum. He was an early promoter of same-sex marriage and the legalization of recreational marijuana.
On Monday, he used his speech to laud Mr. Brown’s tenure; the mention of his predecessor’s name drew a standing ovation. But Mr. Newsom left little doubt that he had a broader view of government than the moderate Mr. Brown. The departing governor inherited a $28 billion deficit and left Mr. Newsom a $14 billion surplus; he also created an $18 billion so-called rainy day fund to help the state get through what is widely viewed as an inevitable coming recession.
Mr. Brown’s insistence on holding onto state revenues was a source of continued friction with Democratic allies in the Legislature, who wanted to use the money to restore spending cuts that had been in place during the Great Recession.
Mr. Newsom’s agenda is likely to be costly, and thus likely to face obstacles as the new governor prepares to offer a new budget. Mr. Brown, among others, has warned that California is heading into a recession, and there are concerns in the business community and among some moderate Democrats that the former San Francisco mayor might take a decidedly different approach to spending than Mr. Brown.
Anthony Rendon, the Democratic speaker of the State Assembly, said in an interview Monday morning that while he supported some of Mr. Newsom’s initiatives, he had strong reservations about raising taxes to pay for them, as Mr. Newsom’s aides have suggested.
“I’m not sure that folks are necessarily ready to run out and raise taxes again, particularly when we have an $18 billion budget reserve and things are going well,” he said. “So I’m not sure folks are all that excited about it.”
Mr. Rendon signaled his thoughts on how the political environment would change with a new governor in town, saying the $14 billion surplus that Mr. Brown had squirreled away should be spent “particularly on programs that make a difference in the long term.”
Mr. Newsom’s inauguration stood in sharp contrast to Mr. Brown’s inauguration. The state is in far better shape than it was at the time. Mr. Newsom’s speech was longer — Mr. Brown always made a point of keeping his inaugural speeches short.
The room on Monday was more energetic and spirited, powered along by a gospel choir that started the proceedings. And the crowd burst into laughter as Mr. Newsom’s youngest son, Dutch, 2, bounded onto the stage and leapt into his father’s arms.
It was a reminder of how life was going to change in Sacramento after the tenure of Mr. Brown, 80, who got married in 2005 and never had any children. Now, four children — Brooklyn, Hunter, Montana, and the now-famous Dutch — will have their run of the stairways and chambers in the governor’s mansion, the home in which Mr. Brown spent time when his own father, Pat, was governor.
Full text of Newsom inaugural address:
California Gov. Gavin Newsom has named Jared Blumenfeld, a former Obama administration official and longtime environmental advocate as the new secretary of the California Environmental Protection Agency.
Blumenfeld, 49, of San Francisco, will run the agency, known as Cal-EPA, which oversees a broad range of environmental and public health regulations statewide, on topics that include air pollution, water pollution, toxics regulation, pesticides and recycling. The agency this year has a $4.6 billion budget and 5,700 employees.
Blumenfeld, who was sworn in Monday, is well known in California to environmentalists and industry. He was appointed by former President Obama as administrator of the regional office of the U.S. Environmental Protection Agency in San Francisco from 2009 to 2016.
In that job, he supervised federal environmental policy in California, Nevada, Arizona, Hawaii and the Pacific islands. He focused on improving air quality in the Central Valley, stepping up enforcement efforts against toxic polluters and cleaning up abandoned uranium mines on Navajo land. In 2014, he wrote a letter to the administration of Gov. Jerry Brown saying that its controversial $17 billion Delta tunnels plan had not been given adequate environmental study, and could harm water quality in San Francisco Bay and endangered fish.
After leaving that job near the end of Obama’s presidency, Blumenfeld hiked the Pacific Crest Trail, a 2,650-mile route that stretches from the U.S.-Mexico border to the U.S.-Canada border.
Prior to that, he served as director of San Francisco’s Department of the Environment from 2001 to 2009 under former Mayor Willie Brown, and during Newsom’s tenure as mayor.
Environmentalists on Tuesday cheered the news.
“I think he’s an excellent choice,” said David Lewis, executive director of Save the Bay, based in Oakland. “I’ve worked with him for two decades and he’s bold and smart on a wide range of environmental issues.”
Lewis called Blumenfeld “a visionary force, even in a big federal bureaucracy,” who is “great at communicating what’s important and urgent and possible.”
Karen Ross of Sacramento has been reappointed Secretary of the California Department of Food and Agriculture (CDFA), the state cabinet-level department established in 1919 to promote and protect a safe, healthy food supply, local and global agricultural trade, and environmental stewardship.
Ross successfully served as CDFA Secretary under Governor Edmund G. Brown Jr. for 8 years. She has unmatched leadership experience in agricultural issues nationally, internationally, and here in California.
Prior to joining CDFA, Ross was chief of staff to U.S. Agriculture Secretary Tom Vilsack, a position she accepted in 2009. Prior to that appointment, she served as President of the California Association of Winegrape Growers from 1996 to 2009,and as Vice-President of the Agricultural Council of California from 1989 to 1996.
Before moving to California, Secretary Ross served as Director of Government Relations for the Nebraska Rural Electric Association and as Field Representative for U.S.Senator Edward Zorinsky. Ross grew up as a 4-H kid on a farm in Western Nebraska. She and her husband, Barry, own 800 acres of the family farm where her younger brother, a fourth-generation farmer, grows dryland wheat, feed grains, and cattle. She earned a Bachelor of Arts degree from the University of Nebraska-Lincoln and is a graduate of the Nebraska Ag Leadership Program. This position requires Senate confirmation and the compensation is $209,943. Ross is a Democrat.
As his term as governor drew to a close, Jerry Brown brokered a historic agreement among farms and cities to surrender billions of gallons of water to help ailing fish species. He also made two big water deals with the Trump administration — one to shore up support for his struggling Delta tunnels project, the other to transfer some of urban California’s water to Central Valley farmers whom the White House supports.
It added up to a dizzying display of deal-making over an issue that confounded Brown during much of his four terms in Sacramento. His top aides said the agreements represented a bold attempt to calm California’s notorious water wars and inject a dose of common sense into a system traditionally ruled by strife and paralysis.
“We rise together, we fall together,” Fish and Wildlife Director Chuck Bonham said in rolling out Brown’s plan for the fish. “I see a future that can help us bring all parties together.”
Yet as Gavin Newsom takes over as governor, the state of water in California seems as unsettled as ever.
The centerpiece agreement Brown made — a giant compromise on reallocating water to help the fish — ran into immediate trouble. The State Water Resources Control Board, a powerful agency governed by Brown appointees, essentially shelved the plan hours after it was unveiled Dec. 12.
The board agreed to reconsider the compromise in the coming months, but opposition to Brown’s plan was instantaneous. Environmental groups — always a powerful voice in California water — say they’ll do what’s necessary to kill the compromise for good. They say the Brown plan is a sham, part of a broader sellout of environmental concerns to appease Donald Trump.
Environmental attorney Doug Obegi, of the Natural Resources Defense Council, said Brown’s various deals are likely to produce “a whole bunch of headaches rather than a grand bargain.”
On the other side of the spectrum, the Merced Irrigation District, representing 2,000 Valley farmers who haven’t agreed to surrender any water, sued the state board to block what it called an illegal “water grab.” The district is one of several in the San Joaquin Valley that so far have refused to sign on to Brown’s water-sharing compromise. The Trump administration, which has been aggressively pushing for more water for agriculture, also has threatened to sue — even as it made peace with California officials on other water issues.
Newsom has talked about scaling back the Delta tunnels project but otherwise has said little about water. He barely mentioned the topic in his inaugural speech Monday.
Like practically everything in California water, the agreements revolve around the rivers that flow into the Sacramento-San Joaquin Delta. The estuary is the hub of the state’s network of dams and canals that supply water to the farms and cities that belong to the State Water Project, built by Brown’s father Gov. Pat Brown in the 1960s, and the U.S. government’s Central Valley Project, begun by Franklin Roosevelt during the New Deal.
Water users and environmentalists have fought over the Delta for decades — how much flows in, how much reaches the ocean and how much gets pumped south.
State scientists say farms and cities take as much as 90 percent of the natural flows on some of the tributaries, leaving salmon, steelhead and Delta smelt on the brink of extinction. To revive the species, scientists say more water needs to follow its natural flow to the Pacific.
Since 2016 the state water board has been working on a proposal to re-divide the Sacramento and San Joaquin rivers and their tributaries and allow more water to rush through the Delta. The state proposed leaving almost 300,000 extra acre-feet of water in the San Joaquin watershed, plus anywhere from 1.1 million to 3.1 million acre-feet in the Sacramento and its tributaries. By comparison, Folsom Lake can hold around 1 million acre-feet.
The plan would mean substantially less water for farms and cities that draw from those rivers — including the city of San Francisco and several Bay Area suburbs, which rely heavily on the Tuolumne River, a tributary of the San Joaquin, to serve 2.6 million people.
The state board’s proposal would also spell trouble for numerous water agencies that don’t feed directly from those rivers but count on lots of water being available for pumping out of the Delta. Among them: the giant irrigation districts controlled by San Joaquin Valley farmers, and the 19 million customers of the Metropolitan Water District of Southern California.
Already struggling with frequent shortages, water agencies began negotiating with environmental groups over alternatives to the state board’s proposal.
The talks intensified last summer. That’s when the board’s staff finalized its proposal for the San Joaquin watershed — and Ryan Zinke, who was then Trump’s Interior secretary, jumped into the fray.
The U.S. Bureau of Reclamation, which runs the Central Valley Project, threatened to sue the state if it took water from farmers. Zinke and his deputy David Bernhardt, a former water lobbyist for Valley farmers, began pressuring California to find more water for agriculture, not less.
Environmentalists say Zinke’s team also threatened to fight the Delta tunnels project, Brown’s controversial plan to re-route the estuary’s water flows in an effort to improve conditions for fish. Losing the feds would send the project back to square one after ten years and $200 million worth of planning.
Zinke’s initiatives “really changed the dynamic,” said Rachel Zwillinger of Defenders of Wildlife, one of the environmental groups at the negotiating table. “There were more pieces of the puzzle being negotiated.”
The puzzle began taking shape in early December. First Brown endorsed a proposal in Congress to extend a 2016 law signed by former President Barack Obama that relaxes some of the environmental restrictions on Delta pumping. The proposed extension, backed by Democratic Sen. Dianne Feinstein and House Minority Leader Kevin McCarthy, R-Bakersfield, is still pending.
Then came a series of agreements unveiled Dec. 12.
In one deal, the Trump administration pledged to continue working on Brown’s Delta tunnels project. In return, the state guaranteed that Valley farmers wouldn’t lose any water to the project. Farmers had feared they could wind up with less water because they’ve refused to contribute money to the tunnels project.
Brown also agreed to renegotiate the “coordinated operating agreement,” an arcane rulebook that governs the Delta pumps.
The rewrite is a concession to the Trump administration. It allows the feds’ Central Valley Project and its mostly agricultural customers to take a bigger share of the Delta’s waters — as much as 200,000 acre-feet a year — from the mainly urban customers of the State Water Project. An acre-foot is 326,000 gallons, a year’s supply for one to two households.
The extra water proved critical to securing agriculture’s support for the biggest deal revealed that day: Brown’s settlement plans for the rivers. Jeff Kightlinger, whose Metropolitan Water District of Southern California is the State Water Project’s biggest customer, said the state had to give farmers additional water from the Delta so they’d be willing to surrender a portion of their supplies to help Brown’s plan for the fish.
“You have to have the Central Valley part of it,” he said last month.
Brown’s people described the compromise as a breakthrough. San Francisco would take less from the Tuolumne. Water agencies from greater Sacramento would take less from the American. Many of the Central Valley’s farming districts kicked in water, too, with some agreeing to idle land.
The new water for fish would total at least 740,000 acre-feet a year, for 15 years. It could grow to 1 million if scientific studies proved more was needed for the fish.
While this was less than the volume sought by the state board, the offer included a sweetener. The water districts promised $800 million over 15 years, and the Brown administration pledged $900 million in bond funds, to revive fish populations through other means: spawning grounds, nutrient-rich floodplains and other habitat projects. Some of the cash would compensate water districts for coughing up water, particularly the agricultural districts where farmers have agreed to fallow land.
Brown’s administration saluted the willingness to surrender water.
“There’s a touch of courage here,” Karla Nemeth, director of the Department of Water Resources, told the state water board.
But as Nemeth spoke, environmentalists and fishing groups were fuming. They said the water wasn’t nearly enough, and the habitat projects were inadequate.
Zwillinger of Defenders of Wildlife said environmentalists were essentially frozen out of the negotiations in recent weeks, and the deal “really did not reflect input from the conservation community.”
And, as environmental groups went through the details of the settlements, they were troubled by what they saw: Many of the habitat projects have been on the drawing board for years and would likely get completed anyway, they said. Some are already underway.
For instance, almost all of the habitat projects proposed for the Tuolumne had already been promised by regional water districts to secure a new federal license for New Don Pedro Dam. An official with the dam’s part-owner, the Turlock Irrigation District, acknowledged as much in an interview with the Sacramento Bee, though he said the proposed deal would speed up the process to getting them done.
“We hope we can start making progress on the river sooner rather than later,” said Steve Boyd, the Turlock district’s water resources director.
Board members promised to continue studying the settlement plans in the meantime. Chairwoman Felicia Marcus called them “intriguing” but also hinted she was disappointed that environmentalists had been cut out of the talks.
“I would encourage … that the process become more open, and more players be involved,” she said in a reference to environmentalists.
Whatever the state board decides, however, the courts will probably have the last word.
There’s “going to be litigation anyway, right? It’s a given,”
said water policy expert Jeff Mount of the Public Policy Institute of
California. “Hardly anything happens in water without litigation; that’s just
what we do here in California.”
The liberal city of San Francisco and conservative farmers in the San Joaquin Valley don’t have much in common politically. But they do agree on one thing: California regulators are going to take too much of their water and give it to endangered fish.
On Thursday, San Francisco joined a cadre of irrigation districts that pull water from the tributaries that flow into the Lower San Joaquin River in filing a lawsuit against a plan by the State Water Resources Control Board to take billions of gallons of their water.
Last month, the water board voted 4-1 to go ahead with a proposal that would require that the “unimpaired flows” of the lower San Joaquin River and its tributaries increase substantially. The board shelved, for the time being, an alternative plan proposed by San Francisco and the irrigation districts that would surrender less water while making investments in spawning grounds and other habitats to help Chinook salmon and other fish populations improve.
The board’s vote would reduce the amount of water available to farms and cities, including San Francisco, by 14 percent in a typical year and twice as much in a dry year. The board’s leaders did pledge to re-examine the alternative plan, championed by top officials in former Gov. Jerry Brown’s administration, in the coming months.
San Francisco and the agricultural districts, however, weren’t willing to wait. Their lawsuit, filed in Tuolumne County Superior Court, says the state board’s vote will mean “substantial adverse impacts on irrigated agriculture.” As for the city of San Francisco, the suit predicted “increased rationing throughout the service area.”
The litigation spells more trouble for a grand compromise plan brokered by Brown’s administration in December in an effort to calm the state’s longstanding water wars. Brown’s successor, Gov. Gavin Newsom, said Thursday he plans to scrutinize the compromise plans as well as conduct a reassessment of the membership of the state board. The five members of the board are all gubernatorial appointees.
A water board spokesman declined comment on the litigation.
San Francisco’s Public Utilities Commission has been fighting the plan and, along with farm-irrigation districts in Modesto and Turlock that have called the board’s plan a blatant “water grab,” arguing that their alternative proposal makes more sense for helping fish.
“The state water board started the legal clock ticking and forced us to make this move,” said John Cote, spokesman for the San Francisco city attorney’s office, in a prepared statement. “San Francisco proposed a deal that struck the right balance, but unfortunately the plan the state approved on December 12 would result in severe water rationing in drought years.”
San Francisco and many of its suburbs get 85 percent of their water from Hetch Hetchy Reservoir, in the northwest corner of Yosemite National Park about 148 miles east of the city. The water that doesn’t get piped to the Bay Area flows through the Tuolumne River, one of the San Joaquin’s main tributaries and home to struggling salmon and steelhead populations. Some years as little as 11 percent of the Tuolumne’s flow stays in the river, and the state water board says it must increase that figure to stave off an “ecological crisis.”
State scientists say farms and cities take as much as 90 percent of the natural flows on some of the tributaries, leaving salmon, steelhead and Delta smelt on the brink of extinction. To revive the species, scientists say more water needs to follow its natural flow to the Pacific.
California’s largest power company faces an existential crisis as it confronts the looming possibility of tens of billions of dollars in wildfire liability.
Shares of PG&E Corp. — which owns Pacific Gas & Electric Co. — sank 22.3% to $18.95 on Monday after reports that the utility could face at least $30 billion in liability related to fires and has considered filing for bankruptcy protection or unloading its natural gas operations.
The consequences of bankruptcy or an asset sale could ripple far beyond the utility’s shareholders, some experts say, affecting 16 million Californians who depend on PG&E for energy and potentially threatening the state’s ability to meet its climate-change goals.
The utility has faced tremendous scrutiny over the last decade, starting with a 2010 gas explosion that killed eight people in San Bruno and continuing with among the deadliest and most destructive fires in state history, some of which may have been sparked by PG&E’s infrastructure. The California Public Utilities Commission is considering breaking up the company as part of an investigation into PG&E’s safety culture.
Some PG&E critics have called for a government takeover or for the massive company to be replaced by smaller, municipal utilities. But it’s far from clear that local governments across Northern and Central California have the ability or the desire to take control of PG&E’s infrastructure, and to assume the huge liabilities that running the power grid entails. And state officials aren’t likely to support a takeover because then the utility’s problems would become Sacramento’s problems instead.
“For the state to take over every bit of the wildfire liabilities is just insane,” said Mike Gatto, a former state lawmaker who led the Assembly’s utilities committee.
PG&E declined to comment on specific steps it may be considering. In an emailed statement, spokesman Andy Castagnola said the company is “reviewing structural options to best position PG&E to implement necessary changes.”
“Safety is and will continue to be our top priority as we work to determine the best path forward for all of our stakeholders. PG&E remains fully committed to helping our customers and the affected communities recover and rebuild — and to doing everything we can to reduce the risk of future wildfires,” Castagnola said.
The fundamental challenge is that PG&E isn’t like most private companies. It’s the only entity authorized to deliver electricity to 5.4 million homes and businesses, and gas for home heating and cooking to 4.3 million customers. The company’s geographic reach spans nearly half the state, from Eureka to Bakersfield.
Mark Toney, executive director of the Utility Reform Network, a ratepayer watchdog group, has a different worry. He’s afraid PG&E might play up the risk of bankruptcy as a scare tactic, to persuade state lawmakers to shield the company’s shareholders from huge potential liability from Northern California’s 2017 Tubbs fire, which killed 22 people, and the 2018 Camp fire, which killed 86 people.
He pointed to the Legislature’s approval last year of Senate Bill 901, which allows PG&E and other investor-owned utilities to charge ratepayers for some of the costs they may incur from 2017’s deadly fires.
“PG&E threatened bankruptcy last year and got their bailout. And they are threatening bankruptcy again and are asking for another bailout. That’s not sustainable,” Toney said.
Toney described bankruptcy as a “bad option” but still better than business as usual at California’s biggest utility. He said dramatic changes are needed to transform PG&E.
“There needs to be some sort of fundamental reorganization. Whether that will be accomplished through a new board of directors, new management, or someone else coming in to run the franchise, or the company being broken up into different components, we don’t know what the real proposals are out there,” Toney said.
A sale of PG&E’s gas business, the possibility of which was reported last week by National Public Radio, wouldn’t fix the utility’s safety problems. But it could help the company pay down billions of dollars in wildfire-related costs.
For now, it’s unclear how realistic such a sale would be. PG&E’s guaranteed customer base and its nearly 50 million miles of natural gas pipelines would almost certainly attract potential buyers. But a sale would need to be approved by the Public Utilities Commission, which could require any buyer to take steps to protect ratepayers.
Another obstacle is organized labor, a politically powerful group that is already objecting to a potential sale. The International Brotherhood of Electrical Workers represents more than 12,000 PG&E employees, roughly 3,000 of whom work on the gas side of the business. Tom Dalzell, business manager for IBEW Local 1245, said a sale of PG&E’s gas assets would be “a long and complicated process with many opportunities for our members to lose something,” from retirement benefits to career options.
Ratepayer advocates would scrutinize a sale too. One key question: Would the buyer be a utility with a strong safety record or a hedge fund looking for a quick profit?
“We certainly don’t want to exchange one bad actor for another bad actor,” Toney said.
Another complicating factor: Selling natural gas in California is a business that may have a limited lifespan. The state has set a target of reducing greenhouse gas emissions 80% below 1990 levels by 2050. The burning of natural gas for electricity and heating accounts for a significant chunk of those planet- warming emissions.
(Lorena Iñiguez Elebee / Los Angeles Times)
The Public Utilities Commission is eager to avoid a Bankruptcy Court proceeding, in which a federal judge would control the company’s fate and the interests of creditors would be placed above those of ratepayers. Commission President Michael Picker has said California won’t let PG&E go bankrupt. He compared the process of reforming the troubled company to “repairing a jetliner while it’s in flight.”
“Crashing a plane to make it safer isn’t good for the passengers,” Picker said in a statement last month.
For one thing, a bankruptcy could lead to higher rates for PG&E customers.
The company filed for bankruptcy once before, in the midst of the early-2000s energy crisis that stemmed from a failed deregulation scheme and led to rolling power outages in much of the state.
The crisis made California a riskier place to invest, which led to higher borrowing costs for PG&E and the state’s second-largest investor-owned utility, Southern California Edison. Those costs were passed on to utility customers in the form of higher rates, said Michael Colvin, a former top official at the Public Utilities Commission.
“It probably took 5 to 10 years for California to shake that risk premium that happened after the energy crisis,” said Colvin, who now works as a senior manager for the Environmental Defense Fund, a nonprofit advocacy group.
Renewable energy developers, meanwhile, are worried a bankruptcy filing would make it more difficult for California to meet its environmental goals.
California law requires the state to get 60% of its electricity from climate-friendly sources by 2030 and 100% by 2045. Developers say meeting those targets depends on financially viable utility companies that can sign long-term contracts to buy electricity from solar and wind farms or from other clean energy facilities. Those long-term utility contracts allow developers to secure financing to get their projects built.
“We have tens of billions of dollars worth of contracts with PG&E to meet the state’s climate change goals and its renewable energy goals. A bankruptcy would be very disruptive, basically put those contracts potentially in danger, and would send potentially a very negative signal in terms of future development in California,” said Jan Smutny-Jones, chief executive of the Independent Energy Producers Assn., a trade group that represents renewable energy and natural gas developers.https://www.latimes.com/business/la-fi-pge-wildfires-bankruptcy-sale-20190108-story.html