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IN THIS ISSUE – “Economic Problems in California Are Much Deeper Than Rest of U.S.”
FISCAL FITNESS
- The Slow U-Turn for California Economy
- Legislature Passes Place-Holder Budget – Tough Decisions in August
- Tax Increases “On the Table,” As Voters Are Doubtful
- Governor, Legislature Rebuilding California’s “Wall of Debt”
- Silicon Valley Doubles Down on Growth During Pandemic
NATURAL RESOURCES
- Wildfire Season Means Blackouts Return…Home Offices Go Dark
- Community Groups Seek Groundwater Plan Changes to Save Private Wells
- Electric Vehicle Sales to Set Record
FOR THE WEEK ENDING JUNE 19, 2020
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.
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The Slow U-Turn for California Economy
Sacramento Bee
California’s economic challenges are greater than every state in the nation except New York, a new study by the Community and Labor Center at UC Merced found.
“The economic problems in California are much deeper than most of the rest of the country,” Edward Orozco Flores, faculty affiliate with the UC Merced Center, told McClatchy.
A big reason for the state’s somber outlook could be that it shut down sooner than most states and has been somewhat slower to reopen, said Flores, who co-wrote the report with Ana Padilla, the center’s executive director.
Among the sectors leading the plunge, and slow to come out of the job downturn, are the arts and entertainment, construction and retail trade industries. Blacks, Asians, Latinos and non-citizen immigrants continue to be affected more by the job losses.
Whether the slow job recovery will persist is unknown, Flores said. During the Spanish flu epidemic of a century ago, research has suggested that states that were quickest to shut down were also the fastest to recover.
“It’s not a bad thing that California ordered residents to stay home during this pandemic,” he said.
The downturn has triggered sharply declining government revenue, notably a $54 billion California state budget deficit that Gov. Gavin Newsom and the Legislature are trying to address.
They want Washington to help, but as other states recover more quickly, that case is getting more difficult to make. The Senate has shown no sign of acting this month and will leave Washington July 2 and does not plan to return until July 20.
Any new legislation, Senate Majority Leader Mitch McConnell said recently, “will be narrowly crafted, designed to help us where we are a month from now, not where we were three months ago.”
The nation has shown small signs of inching back. The unemployment rate in May was 13.3%, down slightly from April but still at an historic high. Retail sales jumped17.7% last month after falling sharply in April. California’s unemployment rate in April was 15.5%, the latest monthly data available.
The UC Merced study paints a more measured picture of where California is now.
The state lost 16.4% of its jobs between February and April, about 3 million jobs, but in May added back about 78,000 jobs, or 0.4%.
Those percentages are worse than national averages. The country lost 15.5% of its jobs between February and April, and last month recovered 2.9%
Seven states have added a smaller percentage of their jobs during the coronavirus crisis recovery. As the economy has slowly begun to recover, so have most of those states.
Only New York, which has regained 0.3% of its jobs, trails California in its ability to bounce back so far.
California’s jobs recovery has been “highly inconsistent,” the researchers found.
The areas of arts, entertainment, recreation, accommodation and food services, construction, retail trade and “other services except public administration” accounted for 29.3% of the state’s jobs in February, before the Covid-19 downturn.
Those sectors have accounted for 54.3% of the state’s job losses through April.
And while the state economy did add 78,391 jobs between April and May, jobs kept declining in some of those vulnerable areas. While some industries and trades added 278,945 jobs, the others lost 200,554.
Job gains and losses were also felt unequally among different racial and gender groups.
Women lost 18.4% of their jobs between February and May. Men lost 13.9%.
White losses were 9.9%. Black losses were 17.8%; Latinos, 22.2% and Asians, 17.2%. Non-citizens were hit particularly hard, losing 29.5% of jobs they had held.
A separate study by the California Policy Lab at UCLA, released last week, found California residents are slowly returning to work in health care, manufacturing, food services and retail trade jobs, but lower-wage workers are often at risk of earning less than they did while receiving unemployment payments.
https://www.sacbee.com/news/politics-government/capitol-alert/article243608437.html?#storylink=cpy
UC Merced study:
https://ssha.ucmerced.edu/sites/ssha.ucmerced.edu/files/documents/persisting_joblessness.pdf
Legislature Passes Place-Holder Budget – Tough Decisions in August
Sacramento Bee
As budget negotiations continue, California lawmakers sent Gov. Gavin Newsom an unfinished spending plan that will allow them to keep getting paid.
The budget vote was largely a formality. Lawmakers have to pass a budget by June 15 to continue receiving their salary, under a 2010 law approved by voters through a ballot initiative.
In the meantime, lawmakers and Newsom are working to hammer out a budget deal. Lawmakers and the governor have proposed competing proposals for how to balance a budget with an estimated $54 billion deficit caused by the coronavirus outbreak.
Democratic legislators are angling to avoid roughly $14 billion in cuts Newsom proposed in May that would be triggered July 1 if Congress does not send states more financial assistance.
They called those proposed cuts “draconian” and laid out what they described as a more “empathetic” approach. The lawmakers argue that deep cuts to programs that help low-income people will cause more Californians to rely on government assistance and become homeless in the future, ultimately costing the state more.
On Monday, they passed their own budget plan, which attempts to avoid slashing education and health care funding by delaying cuts in anticipation of future economic relief, even as they acknowledged that they will need to make changes as negotiations continue. Their plan contains about $7 billion in cuts that would be triggered Oct. 1 if more revenue doesn’t come through.
Assemblyman Phil Ting, a San Francisco Democrat and chair of the Assembly Budget Committee, said the plan preserves supportive services and maintains education funding at a time when Californians need safety nets “more than ever.”
“This budget tries to continue to help those people in need while at the same time being fiscally sound, fiscally balanced,” Ting said. “Yes, we do borrow from other parts of the state budget. Yes, we do defer some payments to schools. But we’d rather do that than start the school year in cuts. We’d rather do that than through cuts in health care.”
Senate Budget Chair Holly Mitchell noted that the plan lawmakers passed Monday was dramatically different from what they anticipated at the start of the year, when fiscal analysts were predicting a budget surplus.
“This budget is the best we can do to make sure we don’t cause extra, undue harm onto those who have already been victimized either economically or as the result of the virus,” the Los Angeles Democrat said. “This is not where we thought we would be in January, but it’s where we are today.”
Lawmakers have acknowledged that they will have to make changes to what they pass as negotiations with the governor continue and the state’s economic situation becomes clearer.
But even as Assembly Democrats advocated for more money during floor speeches, Republicans said spending cuts are necessary.
Assemblyman Jay Obernolte, R-Big Bear Lake, called the Legislature’s budget “structurally irresponsible” because it closes a $54 billion deficit “through what can only be charitably be described as budgetary gimmicks.”
“I know it’s difficult to have a conversation about cutting funding. It’s difficult to talk about what funds we should reduce spending on,” he said. “But we are the adults in the room. It is our responsibility to have those discussions.”
A senior Newsom administration official who declined to speak on the record said Monday that lawmakers and executive branch officials have made good progress toward a deal, and that the administration has agreed to not cut childcare programs and in-home supportive services that aim to keep adults out of nursing homes, both areas Newsom had initially proposed cutting in his revised May budget plan.
The administration has also agreed to continue a planned expansion of Medi-Cal eligibility to low-income seniors that was agreed to in the budget passed last year but had not yet been implemented, the official said.
Both Newsom and lawmakers are lobbying the federal government for more aid, which they argue states desperately need during the COVID-19 pandemic.
“I remain confident that something will happen at the federal level to mitigate the impact at the state level,” Newsom said at a Monday news conference.
They are also waiting on revenue from income taxes that has been delayed this year because of the pandemic. Normally, officials would have much clearer picture of the state’s fiscal outlook, but the delayed tax deadline means lawmakers and Newsom won’t have a clear picture of how much money is available before the next fiscal year starts July 1.
Andrew Acosta, a Sacramento-based Democratic strategist, said because there’s a Democratic supermajority, the process is unlikely to mirror the “ugly” fiscal disagreements during past budget impasses.
“It is a little different than the budget food fights we had in the past,” he said. “At least in the current environment they seem to be talking.”
Newsom will have until the end of the month to sign or veto the proposal.
https://www.sacbee.com/news/politics-government/capitol-alert/article243547632.html#storylink=cpy
Tax Increases “On the Table,” As Voters Are Doubtful
Sacramento Bee
As California lawmakers come to grips with a projected deficit running into the tens of billions of dollars, calls for more taxes targeted at high-earners are beginning to emerge among certain unions and advocates for social services.
“All revenue options should be on the table, because we cannot cut our way to safely and equitably reopening schools,” said Jeff Freitas, president of the California Federation of Teachers.
So far, top Democratic lawmakers have maintained that they’re not interested in considering taxes that would affect middle-class Californians, although some have suggested they’re open to new charges for corporations and wealthy households.
The dynamic echoes how the Legislature approached the last recession, when Democrats advocated for more revenue to save services while Republicans held up budget votes to protest new fees.
Since then, California has added several new taxes and fees that stopped the financial bleeding at the end of the Great Recession and set the state on track to accumulate billions of dollars in reserves that lawmakers expect to use now.
The taxes and fees, which include a newly increased gas tax, also provide the state with more resources to keep programs funded than lawmakers and then-Gov. Arnold Schwarzenegger had in the free-fall of 2008.
“Clearly we have a lot of revenue,” said Jon Coupal of the Howard Jarvis Taxpayers Association — which advocates against tax hikes — noting that California has the country’s highest income, sales and gas taxes. “[But] we’re simply not getting the services that we’re paying for.”
Here’s a look at the primary taxes and fees California adopted since it last faced a deficit on the scale of the one brought on by the coronavirus outbreak.
TAX ON HIGH EARNERS
Gov. Jerry Brown in 2012 bet on an initiative asking Californians to raise income taxes on wealthy households and adopt a temporary sales tax increase. If the initiative, Proposition 30, failed, he pledged to cut billions of dollars in spending for schools and other services.
Voters passed the initiative, staving off cuts that year and giving Brown financial breathing room in subsequent state budgets.
Voters passed a similar initiative in 2016, extending the tax on wealthy households through 2030. It brings in about $4 billion to $9 billion a year, depending on economic conditions.
Who pays?
The top 1.5% of California earners pay a progressive personal income tax of 10.3, 11.3 or 12.3% depending on their bracket, according to the Legislative Analyst’s Office.
How is the money spent?
The money goes into the state general fund, where it’s use for schools, health care and other services.
GAS TAX
What happened?
California took first place in 2018 — for how much its drivers pay at the pump. The gas tax rate rate jumped by 12 cents per gallon in 2017 after the Legislature passed Senate Bill 1, a tax and fee increase that aims to raise about $5 billion a year for transportation projects.
This year, the tax and fee increase probably won’t deliver the kind of revenue then-Gov. Brown’s office projected when he urged lawmakers to pass it because people are driving less and buying less gas. Gov. Gavin Newsom’s administration projects fuel tax revenue cumulatively will come in $1.8 below expectations through 2024.
Who pays?
Anyone who drives a gas-powered car.
How is the money spent?
Gas tax money — rather than funneling into the general fund — is reserved for transportation projects. This means that as California lawmakers scramble to reallocate the general fund amid this year’s cuts, projects like road repairs are safer from the chopping block.
ONLINE SALES TAX
What happened?
A decade ago, Californians didn’t pay any sales taxes on online purchases from retailers not headquartered in the state. Purchases on Amazon, headquartered in Seattle, were not taxed.
That changed in 2012, when Brown signed a law requiring online retailers to collect sales tax if they had a physical presence in the state, such as a warehouse.
Two years ago, a Supreme Court decision paved the way for legislators to further tighten California’s collection of tax on internet sales. Now, California can tax online purchases no matter where the seller is based or if it has any a physical presence in the state.
As of last April, sites like Amazon and eBay that allow independent businesses to sell products on their platforms also have to collect taxes on behalf of their larger third-party partners.
Who pays?
Anyone who shops online.
How is the money spent?
It goes into the state general fund.
GREENHOUSE GAS REDUCTION FUND
What happened?
California lawmakers in 2006 created the state’s landmark climate change program, cap and trade, with the goal of reducing greenhouse gas emissions to 1990 levels by 2020. It requires businesses to reduce carbon emissions gradually. Those that don’t participate in auctions where they can purchase pollution credits.
Although the law predates the Great Recession, the cap-and-trade auctions did not begin raising revenue for the state until 2013. Through February of this year, auction proceeds have totaled $13.1 billion.
Who pays?
About 450 major manufacturers, oil and gas companies and other businesses buy and sell the rights to emit greenhouse gases each quarter, according to the California Air Resources Board.
How is the money spent?
The money funds a mix of transportation, fire prevention and development programs such as High-Speed Rail..
MARIJUANA
What happened?
California began taxing cannabis in 2018, just over one year after voters legalized recreational marijuana with a ballot initiative. As of the first quarter of this year, excise, sales and cultivation taxes have brought $1.17 billion into California coffers according to the California Department of Tax and Fee Registration.
Who pays?
Those who grow marijuana and those who buy it. Cannabis farmers pay a weight-based cultivation tax that varies based on the plant. Tax rates increased on Jan. 1 with the introduction of an inflation-adjustment requirement.
All marijuana sales are subject to state and local sales taxes as well as a 15 percent excise tax. Arm’s length transactions — in which buyers and sellers act independently without influencing another — are subject to an 80 percent mark-up, up from an original 60 percent.
How is the money spent?
Most of the money from marijuana goes back into marijuana. Cannabis regulation was a $44.5 million effort this year — up from $28 million in 2019, The Mercury News reported.
The initiative that legalized marijuana also earmarked revenues for several grant recipients: university researchers, California Highway Patrol, local health departments and community organizations. The remaining funds go into a discretionary pool intended for youth education. But according to the Mercury News, both grant and discretionary funds have run dry.
https://www.sacbee.com/news/politics-government/capitol-alert/article243245016.html?#storylink=cpy
Governor, Legislature Rebuilding California’s “Wall of Debt”
CalMatters Commentary
When Jerry Brown returned to the governorship in 2011, he pledged that fixing a deficit-ridden state budget would be his highest priority.
A big piece of Brown’s fix was taking down what he called “a wall of debt,” more than $30 billion in various kinds of loans that predecessor Arnold Schwarzenegger and the Legislature had taken out to cover revenue shortfalls during the Great Recession.
Brown coupled his budget maneuvers — including a hefty increase in sales and income taxes — and paying off the debts with annual warnings that another recession would inevitably strike. He persuaded voters to create a “rainy day fund” to cushion the impact.
That rainy day, more like a monsoon, is hitting the state hard, due to personal and business shutdowns ordered to fight the COVID-19 pandemic, and once again the state budget is awash in red ink. Gov. Gavin Newsom and legislators are dickering over a fiscal plan for the current fiscal year that ends June 30, the 2020-21 fiscal year that begins on July 1 and, inferentially, two or three years beyond that.
Newsom pegs the multi-year deficit at $54 billion and his budget proposes to bite the bullet and make steep spending cuts that would be rescinded if the federal government provides a big state and local government relief appropriation. The Legislature’s budget would maintain spending more or less at pre-recession levels and make cuts later only if federal aid doesn’t materialize.
What no one is talking about, at least publicly, is that both Newsom and the Legislature want to run up many billions of dollars in new debt. They want to raid state special funds for “loans” that would have to be repaid later, make “deferrals” in state aid to schools that would have to be repaid later, and impose temporary ceilings on corporate tax breaks that businesses could recoup later.
The new wall of debt would be at least $20 billion over several years, the biggest chunk of it in deferrals of constitutionally required aid to K-12 schools and community colleges.
Newsom’s revised education budget would defer “approximately $13 billion” in this fiscal year and next with the promise to repay it slowly beginning in 2021-22 and in doing so, raise the schools’ share of state revenues. The Legislature takes a different approach but still counts on education deferrals to balance its budget on paper.
The caps on business tax breaks would, both budgets assume, generate $9 billion over two years, but corporations could accumulate unclaimed deductions and take them after the caps are lifted. So in reality, they are loans that would have to be repaid.
Budget documents detail dozens of raids on special funds that would have to be repaid, ranging from under $1 million to $300 million from the Public Utilities Commission’s program that provides discounts on telephone service for low-income Californians and $551 million from the Underground Storage Tank Cleanup Fund.
The biggest single raid, however, is on something close to home for politicians — replacement of the state Capitol’s west wing, which houses the governor’s and lieutenant governor’s suites, legislators’ offices and hearing rooms. The nearly 70-year-old annex has been deemed to be antiquated and money had been set aside for a $755 million replacement.
Newsom’s budget would grab $734 million of that special fund and, instead, finance construction with “lease-revenue bonds,” a sneaky device the state uses to run up debt while evading the state constitution’s requirement that any debt of more than $300,000 have voter approval.
It’s fitting, in a sense, that the new wall of debt would include a loan to build fancy new offices for the Capitol’s politicians.
https://calmatters.org/commentary/california-billions-budget-debt-negotiated-newsom/
Silicon Valley Doubles Down on Growth During Pandemic
New York Times
Even as Facebook grappled this month with an internal revolt and a cascade of criticism over its refusal to take action on President Trump’s inflammatory posts, the social network was actively making other bets behind the scenes.
Late one Tuesday, as attention was focused on how Facebook might handle Mr. Trump, the Silicon Valley company said in a brief blog post that it had invested in Gojek, a “super app” in Southeast Asia. The deal, which gave Facebook a bigger foothold in the rapidly growing region, followed a $5.7 billion investment it recently pumped into Reliance Jio, a telecom giant in India.
The moves were part of a spending spree by the social network, which also shelled out $400 million last month to buy an animated GIF company and which is spending millions of dollars to build a nearly 23,000-mile undersea fiber-optic cable encircling Africa. On Thursday, Facebook confirmed that it was also developing a venture capital fund to invest in promising start-ups.
Other technology giants are engaging in similar behavior. Apple has bought at least four companies this year and released a new iPhone. Microsoft has purchased three cloud computing businesses. Amazon is in talks to acquire an autonomous vehicle start-up, has leased more airplanes for delivery and has hired an additional 175,000 people since March. Google has unveiled new messaging and video features.
Even with the global economy reeling from a pandemic-induced recession and dozens of businesses filing for bankruptcy, tech’s largest companies — still wildly profitable and flush with billions of dollars from years of corporate dominance — are deliberately laying the groundwork for a future where they will be bigger and more powerful than ever.
Amazon, Apple, Facebook, Google and Microsoft are aggressively placing new bets as the coronavirus pandemic has made them near-essential services, with people turning to them to shop online, entertain themselves and stay in touch with loved ones. The skyrocketing use has given the companies new fuel to invest as other industries retrench.
The expansion is unfolding as lawmakers and regulators in Washington and Europe are sounding the alarm over the tech giants’ concentration of power and how that may have hurt competitors and led to other issues, such as spreading disinformation. This week, European Union officials were preparing antitrust charges against Amazon for using its e-commerce dominance to box out smaller rivals, while Britain began an inquiry into Facebook’s purchase of the GIF company.
Some of the tech behemoths have made little secret of their intention to forge ahead in a recession that has put more than 44 million Americans out of work and that officials warn will be protracted.
“I’ve always believed that in times of economic downturn, the right thing to do is keep investing in building the future,” Mark Zuckerberg, Facebook’s chief executive, said in an investor call last month. “When the world changes quickly, people have new needs, and that means there are more new things to build.”
In doubling down on growth in a time of economic pain, the largest tech companies are continuing a pattern. In previous recessions, those that invested while the economy was at its most vulnerable often emerged stronger. In the 1990s, IBM used a recession to reorient itself from a hardware company into a software and services company. Google and Facebook both rose out of the dot-com bust about 20 years ago.
Apple, whose iPhones now dominate computing, doubled its research and development budget for two years during the downturn in the early 2000s. That led the company, which nearly went bankrupt in the late 1990s, to create its iPod music player and iTunes music store — and eventually the iPhone, the App Store and an unbridled growth streak, said Jenny Chatman, a professor at the Haas School of Business at the University of California, Berkeley.
Ranjan Roy, a tech commentator for The Margins, an internet industry blog, said it was clear the tech behemoths were unafraid to get more aggressive now and that the power they were accruing should give people pause.
“Without any pushback from regulators, big tech companies would almost unquestionably come out of the pandemic more powerful,” he said. “So many additional parts of our daily lives are becoming dependent on their products, or they could just buy or copy the services they don’t yet deliver.”
Still, the companies are taking risks by spending in an uncertain period, said John Paul Rollert, a professor at the University of Chicago Booth School of Business.
“To double and even triple down when the casino is on fire is a remarkable move, because they may not even be able to cash in their chips later on,” he said.
Amazon, Apple, Facebook, Google and Microsoft, which declined to or did not respond to requests for comment, have plenty of cash. Combined, they are sitting atop about $557 billion, enabling them to maintain a pace of acquisitions and investments similar to last year’s, when the economy was humming, according to a tally of financial disclosures. They have been among the top corporate spenders on research and development for most of the last decade, according to PwC, the big accounting firm.
The companies have ramped up their activity since March, when shelter-in-place orders began. As Amazon, Facebook and others adapted to their employees working from home, they experienced a spike in use. Messaging and other teleconferencing software soared in popularity.
That created opportunities. Microsoft, for one, started promoting its Teams videoconferencing service, which allows people to talk and collaborate online. Microsoft also snapped up three cloud computing companies in the last few months — Affirmed Networks, Metaswitch Networks and Softomotive — to offer more technology to businesses.
Google, too, updated products that people can use to work from home. In April, it said that its video chat service, Google Meet, would be easily available inside people’s Gmail windows and free to anyone with a Google account. It also said it would start making listings in its shopping search results mostly free, instead of having merchants pay for all their products to appear in the results, to bolster e-commerce searches.
Amazon was initially overwhelmed with a surge of online orders and safety concerns over its warehouse workers. In response, the company added more than 175,000 jobs to keep up with demand.
Amazon has since invested further. While aviation all but ground to a halt in the pandemic, the company said this month that it was adding 12 Boeing 767s to its fleet of more than 70 delivery planes. It also discussed buying Zoox, an autonomous vehicle start-up valued at $2.7 billion, according to a person with knowledge of the talks. The discussions were earlier reported by The Wall Street Journal.
Apple, with $193 billion in cash and debt, went on its own buying spree. This year, it bought DarkSky, a popular weather smartphone app; NextVR, a virtual reality company; Voysis, a digital assistant and speech recognition software company; and Xnor.ai, an artificial intelligence start-up.
The company will soon hold a developer conference virtually and is managing a surge in activity on FaceTime and iMessage as people use those services to communicate in quarantine.
Facebook’s activity has been the most pronounced. When the coronavirus swept through the United States in March, the social network was inundated with people flocking to its apps to use voice and video chat services. Mr. Zuckerberg said Facebook was “just trying to keep the lights on.”
But the company soon capitalized on the momentum. Mr. Zuckerberg accelerated the building of some products, introducing Messenger Rooms, a group video chat service, in April.
That same month, Facebook said it was taking a $5.7 billion stake in India’s Reliance Jio. It was the company’s largest investment in an outside company, giving it more access to one of the world’s fastest-growing digital markets.
“We are committed to connecting more people in India together with Jio,” Facebook said of the deal, noting that Jio had brought more than 388 million people online in less than four years.
Last month, Facebook bought the GIF company Giphy for an estimated $400 million. Giphy is to be integrated with Instagram, the photo-sharing app owned by Facebook. And last week, the social network invested millions in Gojek. Based in Jakarta, Indonesia, Gojek makes an app for digital payments, transportation and other services that is used by more than 170 million people in Southeast Asia.
Facebook is now working on the new venture fund, which will help it spot new popular apps. The fund was reported earlier by Axios.
In driving the activity, Mr. Zuckerberg may be taking a cue from a Facebook board member, the venture capitalist Marc Andreessen. In April, Mr. Andreessen wrote a blog post titled “It’s Time To Build” and said, “We need to demand more of our political leaders, of our CEOs, our entrepreneurs, our investors.”
Less than two weeks later, Mr. Zuckerberg said on the investor call that he was doing exactly that: building.
He said he felt “a responsibility and duty to invest” and added, “We’re in a fortunate position to be able to do this.”
Wildfire Season Means Blackouts Return…All Those New Home Offices Go Dark
Bloomberg
Blackouts that hit millions of Californians in 2019 could be doubly calamitous this year with tech giants Google, Twitter Inc. and Facebook Inc. among the many companies keeping offices closed until the fall or later in response to the global Covid-19 pandemic.
If utilities cut power again, home offices set up during the pandemic could go dark and stay dark for days, and they’ll have no corporate offices to flee to for power. In October 2019, more than 3 million people were affected by a series of rolling blackouts over more than a week as PG&E Corp.and Edison International tried to prevent live wires from sparking wildfires.
Call it a collision of crises. Blackouts could limit California’s push to revive an economy largely paralyzed by stay-at-home orders this spring. The state, utilities and individual companies are all seeking ways to deal with blackouts before a wildfire season forecast to be worse than normal. Hewlett Packard Enterprise Co., for one, has “long contemplated this type of scenario,” according to spokesman Adam Bauer.
The San Jose-based tech company is building in geographic redundancies, he said, with “the ability to shift work among distributed teams to maintain service to our customers and partners.”
Neither Google, Twitter nor Facebook would comment on their plans. The state’s utilities and government officials, though, have said they’re working to minimize the threat.
California regulators last month adopted new shutoff rules that will require the companies to restore electricity within 24 hours after the weather clears, although the state’s wind storms can last several days. PG&E, the state’s largest utility, has set its own goal of 12 daylight hours after the winds ease, and has nearly doubled the number of helicopters it will use to look for downed lines.
Still, there are troublesome signs leading into this year’s wildfire season. A year ago at this time, the state was drought free. Now, almost 50% of California is gripped by drought, with the driest areas occurring across the northern part of the state, according to a June 2 assessment by the U.S. Drought Monitor.
The result: an “above normal significant large fire potential,” according to the National Interagency Fire Center in Boise, Idaho. Already this year, more than 6,600 acres have been burned in the state. Small blazes are already cropping up on an almost daily basis
At the same time, the coronavirus has killed more than 4,900 people in California, forcing companies to allow employees to work at home, closing schools and restricting travel.
“The reality is Mother Nature hasn’t changed her mind with respect to wildfires because of covid,” said Don Daigler, director of business resiliency for Edison’s Southern California Edison utility. “We still face the same fire risk as communities as we did last year.”
“We’re going to have people sheltered in place and without power,” said Carl Guardino, chief executive officer of the Silicon Valley Leadership Group lobbying organization, which represents many of the region’s biggest companies.
Guardino’s own home lost electricity for 5 days last year, he said. He ended up moving his family into a hotel. he said. Now, though, even that solution is unlikely given the coronavirus shutdowns.
To be sure, many Californians have already turned to back-up power generators. Generac Holdings Inc. saw its sales in the state surge 300%, its chief executive officer told Bloomberg a month after the blackouts. And this spring, the Silicon Valley Leadership Group successfully lobbied state officials to let solar installers return to work months before many other businesses opened.
But solar panels with a battery to store the power, can cost $30,000 to buy the hardware for a robust home system and have it installed, so it’s not for everyone.
The utilities, whose use of intentional blackouts last year provoked fierce criticism, are aware of the issue. But they don’t want the number of people working from home to affect their decision to shut off power, if weather conditions demand it.
Those conditions — high winds, hot temperatures, low humidity and dry vegetation — should still be the determining factors, the utilities say.
“The approach we take is different, but the calculus really hasn’t changed,” Edison’s Daigler said. Instead, they’re trying to reduce the need for shutoffs, and ensure that when they occur they are smaller and shorter than last year’s.
“We want to reduce the impact of public safety power shutoffs on customers whether they are working from home or not,” said Matt Pender, director of the community wildfire safety program at PG&E.
PG&E, which was forced into bankruptcy last year after its equipment sparked deadly fires, is installing switches and other devices to isolate power cuts, making them more targeted than last year’s mass blackouts. The company has also secured mobile diesel generators that can be located at as many as 48 substations.
Both PG&E and Edison are also hardening their field equipment, running some lines underground and installing stronger poles. Edison, for example, is installing 600 miles of power lines with coating that prevents sparks when touched by tree branches.
PG&E estimates these steps should cut the number of customers affected in each potential blackout by one-third.
Both companies are also planning to open more pop-up community resource centers during blackouts to allow for more social distancing between people who show up to cool down and charge phones and other devices.
They’ll send vans equipped with charging stations into darkened neighborhoods to help customers who don’t go to the centers, potentially a large number of people at a time when gathering with strangers brings risks.
Some county governments, along with the city of San Jose, asked state utility regulators in April to impose new rules on the shutoff program. The commission, though, said the final decision should stay with the utilities.
“Based on these rules and standards, it is appropriate for the utilities to have the final say over shutting down power and for the CPUC to hold them accountable,” spokeswoman Terrie Prosper said.
Community Groups Seek Groundwater Plan Changes to Save Private Wells
Public Radio
The goal of the Sustainable Groundwater Management Act, or SGMA, is to better regulate the state’s water reserves. But as the law rolls out, a new study predicts tens of thousands of people could lose their drinking water.
Under current SGMA proposals, known as groundwater sustainability plans, the study estimates that as many as 12,000 domestic wells could run dry by the year 2040. Commissioned by the Water Foundation and put together by a group of drinking water advocacy organizations, the study estimates that as many as 127,000 residents could lose their water, and that the costs of repairing these wells could run up hundreds of millions of dollars.
These totals are likely an undercount, since the report focused on a region of the San Joaquin Valley representing only 26 of the state’s nearly 300 local water governments known as groundwater sustainability agencies.
“What is clear to us is that there will be, unless changes are made to these groundwater sustainability plans, real negative impacts to community access to drinking water,” says Jonathan Nelson of the Visalia-based Community Water Center, one of the groups that authored the report.
The cause is falling groundwater levels. Under SGMA, each groundwater sustainability agency determines how low its water table can be reasonably allowed to fall. Nelson says those levels might be appropriate for deep agricultural wells—especially since most stakeholders involved in SGMA decision-making represent agricultural interests—but too deep for the more shallow wells serving homes in many rural, unincorporated communities.
“These numbers aren’t meant to scare, but…this is enough to tell us that the problem is urgent, severe, and that it needs to be responded to,” says Nelson. He says his organization supports SGMA and efforts to increase California’s groundwater accountability, but he hopes officials with the Department of Water Resources will look closely at groundwater levels when they review each local sustainability plan in the coming months.
Electric Vehicle Sales to Set Record
SPGlobal
The International Energy Agency said it expects electric vehicle sales to set a new market share record in 2020.
For the first four months of 2020, the IEA estimates that the passenger car market will have contracted by 15% year over year, while sales of electric passenger and commercial light-duty vehicles will remain close to 2019 levels. The IEA estimates electric vehicle sales will account for 3% of global car sales in 2020, surpassing the 2019 record of 2.6%.
According to the IEA, EVs reduced oil consumption by almost 600,000 barrels per day in 2019, and the intergovernmental organization projects the global EV fleet will displace approximately 2.5 million barrels per day of oil consumption in 2030. If governments place more emphasis on sustainable development policies, one of the key long-term uncertainties facing the global oil market as it emerges from the COVID-19 pandemic, electric vehicles could displace the consumption of 4.2 million bbl/d of gasoline and diesel by 2030, the IEA projects.
“In 2019, indications of a continuing shift from direct subsidies to policy approaches that rely more on regulatory and other structural measures — including zero-emission vehicles mandates and fuel economy standards — have set clear, long-term signals to the auto industry and consumers that support the transition in an economically sustainable manner for governments,” the IEA said.
According to the IEA, 17,000 electric cars were on the world’s roads in 2010. In 2019, electric car sales reached 2.1 million, bringing the total number of electric vehicles on the world’s roads to 7.2 million. 2019’s 6% growth in electric vehicle sales is far below the more than 30% growth seen over the previous three years due to contractions in key growth automobile markets such as China and India as well as the reduction of electric vehicle subsidies in China and the U.S.
“With 90% of global electric car sales concentrated in China, Europe and the United States, this affected global sales and overshadowed the notable 50% sales increase in Europe in 2019, thus slowing the growth trend,” the IEA said.
But the IEA said pent-up demand may be another factor driving the 2019 lull in EV sales.
“Today’s consumer profile in the electric car market is evolving from early adopters and technophile purchases to mass adoption,” the IEA said. “The 2018-19 versions of some common electric car models display a battery energy density that is 20-100% higher than were their counterparts in 2012. Further battery costs have decreased by more than 85% since 2010. The delivery of new mass-market models such as the Tesla Model 3 caused a spike in sales in 2018 in key markets such as the United States. … For the next five years, automakers have announced plans to release another 200 electric car models, many of which are in the popular sport utility market vehicle segment. As improvements in technical performance and cost reductions continue, consumers are placed in the position of being attracted to a product but wondering if it would be wise to wait for the ‘latest and greatest model.'”