For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “As Stewards of the State’s Remarkable Natural Resources….”
WATER & POWER
- Newsom Challenges Trump Administration’s Delta Water Ruling
- Governor Halts Petroleum Fracking; Requires Scientific Review
- Does Banning Fracking Make Sense?
- Angry Legislators Tell PG&E: “This Was A Big ‘Screw You’ ”
FOR THE WEEK ENDING NOV. 22, 2019
NOTE: CN&N WILL NOT PUBLISH THANKSGIVING WEEK
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!!
Sacramento Bee & Legislative Analyst’s Office
California’s long economic expansion is projected to continue into next year, giving Gov. Gavin Newsom and lawmakers another surplus as they map out a new state budget.
Legislative Analyst Gabriel Petek released a report projecting the state will bring in a $7 billion surplus in the 2020-21 budget year.
As much $3 billion could be available for ongoing expenses, while the rest could dry up in an economic downturn, according to the report.
The analyst’s office recommends the Legislature allocate no more than $1 billion of the surplus to ongoing expenses to avoid having to make cuts to programs during a recession.
Analysts also found the state has enough saved in reserves to weather a typical recession, but recommend the state use much of the projected surplus to pay debts and boost the state’s reserves.
Last year, lawmakers approved a $215 billion budget boosted by record surpluses that accommodated new spending on health care, early childhood programs and housing construction. Lawmakers also socked away billions of dollars in reserves, giving the state $19 billion in separate savings accounts.
Newsom has warned that next year’s budget likely won’t be so flush.
In October, Newsom told reporters he’s seeing a slowdown in state tax revenue, indicating a recession is on the horizon after a decade of economic growth.
But the analyst’s office painted a positive picture of the upcoming year in its report, projecting the economy will continue to grow in coming years, although at a slowing pace. The analyst’s office predicts California will continue adding jobs and that the housing market will improve somewhat after declining in 2019.
“With more than a decade of economic expansion, coupled with deliberate legislative action to put the budget on better footing, the California budget is in good condition,” analysts wrote, although they noted that the prospect of a recession still looms.
Newsom boasted about the positive outlook Wednesday.
“Our state is now doing more than ever before to provide opportunity for all California families, especially those who are not equally sharing in our nation’s prosperity. We are taking important steps so that growth is broadly shared, doing it all while saving record amounts for a rainy day,” he said in a written statement. “As our state and nation face uncertain economic headwinds, the federal government would be wise to look to California as a model for how to get its fiscal house in order.”
Newsom must propose a plan for the 2020-21 budget in January, kicking off negotiations with the Legislature, which must approve a final plan by June 15 in time for the July 1 start of the state’s fiscal year.
Legislative Analyst’s report:
State Dept. of Finance
State tax receipts for October were $211 million below the 2019-20 Budget Act forecast of $9.150 billion. California’s rate of approving new housing permits jumped in September after slumping for much of this year, the state Department of Finance announced Thursday. The number of permits increased 21.9 percent from August to September, according to the Department of Finance. That reflects a 47-percent increase in multi-family building permits like apartment complexes and a 2.3-percent decrease in single-family units.
Personal income tax cash receipts to the General Fund for the first four months of the fiscal year were $622 million below forecast. Total personal income tax cash receipts for October were $202 million below the month’s forecast of $6.677 billion. Withholding receipts were $309 million above the forecast of $5.876 billion. Other receipts were $231 million higher than the forecast of $1.894 billion. Refunds issued in October were $745 million higher than the expected $973 million. Proposition 63 requires that 1.76 percent of total monthly personal income tax collections be transferred to the Mental Health Services Fund (MHSF). The amount transferred to the MHSF in October was $4 million lower than the forecast of $98 million.
n General Fund sales and use tax cash receipts for the first four months of the fiscal year were $151 million below forecast. General Fund sales tax cash receipts for October were $74 million below the month’s forecast of $2.107 billion. October represents the final payment for third quarter taxable sales.
n Corporation tax cash receipts for the first four months of the fiscal year were $688 million above forecast. Cash receipts for October were $6 million above the month’s forecast of $195 million. Estimated payments were
$25 million below the forecast of $207 million, and other payments were $46 million higher than the $258 million forecast. Total refunds for the month were $14 million higher than the forecast of $270 million.
California’s residential housing units authorized by building permits totaled 142,000 units in September, a 21.9-percent increase from August and a 41.3-percent increase from a year ago. Multi-family units increased by 47 percent to 84,000 units, while single-family units fell by 2.3 percent to 58,000 units. The average for the first three quarters of 2019 is 111,000 compared to 122,000 for the same period in 2018.
n The state’s nonresidential building permits’ annualized valuation in September was $18.7 billion, down 23.8 percent from a month ago and down 41.9 percent from a year ago. The average nonresidential valuation for the first three quarters of 2019 is $32 billion, down 4 percent compared to the same period in 2018.
n Statewide sales of existing single-family homes totaled 404,000 in September on a seasonally adjusted annualized basis, down 0.5 percent from August but up 5.8 percent from the same period last year—a third consecutive year- over-year sales increase and the largest increase in 2 1⁄2 years. California’s median home price decreased
1.9 percent on a year-over-year basis in September to $605,680. The 30-year, fixed-mortgage rate averaged
Sacramento Bee & Official Statement
Gov. Gavin Newsom’s administration said it will sue the Trump administration over its efforts to push more water through the Sacramento-San Joaquin Delta, saying the federal plan would harm the sprawling estuary and the fragile fish populations that live there.
In a 610-page environmental report, Newsom’s administration sketched out its own plan for managing water flows through the Delta, while issuing a separate statement that blasted the Trump plan, which is designed to increase water supplies for San Joaquin Valley farmers, the president’s political allies.
“As stewards of this state’s remarkable natural resources, we must do everything in our power to protect them,” Newsom said in a prepared statement.
Environmental groups said it was welcome news that Newsom was pushing back on Trump’s water plan, given widespread support for the changes from the powerful farm and urban water agencies that pump water from the Delta. But they argued that the state’s alternative proposal for operating the Delta doesn’t go nearly far enough to stave off extinction for fish and other species.
“They’re not even as protective as what’s in place today,” said Doug Obegi, an attorney with the Natural Resources Defense Council.
The Delta is the hub of California’s enormously complicated north-to-south water delivery network. Dual pumping stations at the south end of the estuary — one run by the federal Central Valley Project, the other by the State Water Project — pull water from the Delta and make deliveries through canals to farms and cities in the southern half of the state. Scientists say decades of over pumping have contributed to the precipitous decline in native Delta fish populations.
The state said it will sue the federal government “protect those species and to protect the state’s interests.” Although the Newsom administration did not mention it on Thursday, one major state interest is the State Water Project and its customer, the giant Metropolitan Water District in Southern California. Newsom’s office has said that increased Delta pumping by the federal government would reduce water deliveries to the project and Metropolitan’s 19 million customers.
Metropolitan officials said there’s room for common ground between the Trump and Newsom plans.
“The state and federal governments have more in common than differences in terms of approaches to managing these projects,” said Jeff Kightlinger, the Los Angeles-based agency’s general manager. “Finding that common ground is more important today than ever, or real progress in water policy in California will be simply impossible.”
Although Newsom has sparred with Trump over everything from greenhouse gases to immigration, the governor’s sharp rebuke to Trump’s plan for the Delta — one of the largest environmental issues facing the state — wasn’t a foregone conclusion.
Newsom has tried to reach out to Valley farmers on water issues, and in September he infuriated environmentalists by vetoing Senate Bill 1, which would have used state law in an attempt to block every environmental initiative launched by the federal government since Jan. 20, 2017 — the day President Donald Trump took office.
Newsom’s rationale: SB 1 threatened to undermine a set of tentative compromises, hammered out by his predecessor Jerry Brown, over how the waters flowing through the Delta are allocated between fish and farms. Irrigation districts had threatened to scrap the compromises if SB 1 became law. Most environmental groups, meanwhile, believe the compromises don’t go nearly far enough to help endangered salmon and other fish species that ply the Sacramento and San Joaquin rivers.
Newsom’s administration on Thursday reiterated its commitment to the voluntary settlement agreements. “The effort is a potential game changer in that it combines (river) flows with a broader suite of tools,” the administration said.
Federal water and wildlife officials couldn’t immediately be reached for comment Thursday.
The federal plan for the Delta, unveiled a month ago by the Trump administration, is designed to push a lot more water through the Delta, fulfilling a pledge Trump made to San Joaquin Valley farmers while campaigning in Fresno three years ago. The plan, developed by the U.S. Fish and Wildlife Service and National Marine Fisheries Service, would overhaul the rules governing the Delta to allow more water to be pumped south.
Environmentalists want more water to run its natural course through the Delta and out to the ocean to support Delta smelt and other fish populations facing extinction. Trump administration officials said their plan, based on new scientific findings, allows both fish and farms to prosper.
The plan “will not jeopardize threatened or endangered species or adversely modify their critical habitat,” the administration said last month. Among other things, the feds are proposing that the state and federal government spend a combined $1.5 billion on expanded fish hatcheries and other projects.
In August, The Sacramento Bee and other media outlets reported that after federal scientists concluded that the plan would bring the salmon and killer whales closer to extinction, their superiors ordered them to redo their study to downplay the impact on fish.
Trump administration officials said their final version of the plan was done by “career conservation professionals” acting fairly and in the best interest of fish and water users.
Environmentalists have long been wary of Trump’s plans for the Delta.
David Bernhardt, who has been Interior secretary since April, is a former chief lobbyist for Westlands Water District, a politically influential irrigation district serving farmers across much of the west side of the San Joaquin Valley.
“The grab-all-you-can Trump/Bernhardt/Westlands approach to seizing northern California’s waters is so egregious that the state really had no choice but to challenge it,” John McManus of the Golden State Salmon Association said in an emailed statement.
Op-ed from CalEPA and Resources leaders:
LA Times & Official Statement
In a victory for critics of California’s oil drilling industry, Gov. Gavin Newsom stopped the approval of new hydraulic fracturing in the state until the permits for those projects can be reviewed by an independent panel of scientists.
Newsom also imposed a moratorium on new permits for steam-injected oil drilling in California, another extraction method opposed by environmentalists that was linked to a massive petroleum spill in Kern County over the summer.
“These are necessary steps to strengthen oversight of oil and gas extraction as we phase out our dependence on fossil fuels and focus on clean energy sources,” Newsom said in a statement released Tuesday morning. “This transition cannot happen overnight; it must advance in a deliberate way to protect people, our environment, and our economy.”
Along with halting the oil extraction methods, the Newsom administration plans to study the possible adoption of buffer zones around oil wells in or near residential neighborhoods, schools, hospitals and other facilities that could be exposed to hazardous fumes.
The actions come just weeks after Newsom signed a new law revising the primary mission of a state agency that regulates the oil industry, now called the Geologic Energy Management Division, to include protecting public health and safety and environmental quality.
Since taking office, Newsom has faced pressure from politically influential environmental groups to ban new oil and gas drilling and completely phase out fossil fuel extraction in California, one of the nation’s top petroleum-producing states.
The Democratic governor pushed back on that pressure, however, promising to take a more measured approach that addressed the effects on oil workers and California cities and counties that are economically dependent on the petroleum industry.
During his campaign for governor in 2018, Newsom vowed to tighten state oversight of hydraulic fracturing, or fracking, and oil extraction in California.
In July, Newsom fired California’s top oil industry regulator after news reports showed that the new governor’s administration was issuing permits for hydraulic fracturing permits at twice the rate of his predecessor, former Gov. Jerry Brown. Newsom at the time said he did not have the legal authority to impose a state moratorium on fracking.
Newsom on Tuesday halted all pending fracking permits currently under review by state regulators until they can be reviewed by independent experts from the Lawrence Livermore National Laboratory.
He also ordered the state’s process for issuing fracking permits to be audited by the state Department of Finance to determine if the process complies with state law and to recommend ways to strengthen the permitting process.
The steam-based, oil-extraction method halted by Newsom on Tuesday is different than fracking.
Cyclic steam injection pumps super-heated steam into wells to loosen and liquefy viscous crude oil. Hydraulic fracking involves shooting a high-pressure mix of water, sand and chemicals deep underground to extract oil and natural gas.
Steam injection was suspected to be a factor in one of California’s largest oil spills in decades.
More than 900,000 gallons of oil and brine oozed from a Chevron Corp. facility this summer in McKittrick, a tiny town in oil-rich Kern County. California regulators have fined Chevron $2.7 million for violations at the oil field.
The process also is considered hazardous for oil workers. In 2011, Chevron engineer David Taylor died while he was inspecting a steam-injected well near Taft. The soil caved in beneath him and he fell into a cavity that contained 190-degree water and hydrogen sulfide.
Much like Newsom, Brown was pressured by environmentalists to curtail oil extraction in California and was criticized when he rebuffed them, despite the fact the he and the Legislature in 2018 adopted an ambitious goal to convert California to a 100%, zero-carbon electrical supply by 2045.
A 2016 poll by the nonpartisan Public Policy Institute of California found that most likely voters in the state opposed fracking and increased oil drilling off the coast. A vast majority also favored stricter emission limits on power plants in an effort to address climate change.
Still, California is home to 26 million vehicles with internal-combustion engines, and the oil industry helps support close to 368,000 blue-collar jobs in the state, according to the Western States Petroleum Assn.
California is home to 72,000 oil-producing wells that last year produced 165.3 million barrels of oil from onshore and offshore facilities, according to the California Department of Conservation. California also consumes more gasoline than any other state — 366 million barrels in 2017, according to the U.S. Energy Information Administration.
Does Banning Fracking Make Sense?
Pro & Con from the Wall Street Journal, 11/20, no link
A Democratic presidential-campaign proposal to ban fracking to extract fossil fuels has oil-and-gas companies worried and environmental groups hopeful.
Candidates including Sens. Elizabeth Warren and Bernie Sanders have signaled their willingness to bar the practice—which involves pumping a mixture of water, sand and chemicals into subterranean rock formations such as shale to release reserves of oil and gas. Other Democratic hopefuls have stopped short of supporting a ban but endorse policies that would curb U.S. oil production.
The U.S. shale-oil revolution has pushed the country to become the largest oil producer in the world. The oil industry now pumps about 12 million barrels a day overall, and shale-oil companies account for about 8 million barrels of that total—roughly 8% to 10% of the global supply of oil.
The Wall Street Journal hosted a conversation by email about these issues with Kassie Siegel, director of the Climate Law Institute at the nonprofit Center for Biological Diversity, and Sam Ori, executive director of the Energy Policy Institute at the University of Chicago. An edited transcript follows.
WSJ: What would happen if the next U.S. president significantly restricted fracking?
- SIEGEL:Banning fracking is one of the most important steps the next president can take to protect our country. The scientific reality is that fracking is enabling the extraction of oil and gas that we cannot afford to burn.
A landmark report from the world’s leading scientists on the difference between limiting temperature rise to 1.5 degrees Celsius and allowing even small additional warming shows the gut-wrenching choices we face. Failure to implement a rational climate policy means we are in for ever-greater climate-fueled superstorms, heat waves and fires like those in California, sea-level rise that inundates some of the world’s largest cities and mass species extinction. The damages will be so profound it is difficult to wrap our minds around them.
Banning fracking is a key step to protect against the economic losses from climate disruption. We are facing massive economic losses due to climate disruption, driven by fossil-fuel extraction and use. The Stern Review on the Economics of Climate Change pegged those climate damages at 20% of global GDP. That’s a global estimate, but local communities are suffering the harms right now—when homes are destroyed by climate change-fueled superstorms or fires like those in California, when crops fail due to drought and heat waves, and for so many other reasons. Banning fracking would help to diversify fossil fuel-dependent communities and improve the health and well-being of their residents. Fracking is an ultrahazardous extraction method that poisons the air we breathe and the water we drink and makes people terribly sick. Fracking should be banned due to its direct health harms alone.
- ORI:It’s worth starting with some context just to have a sense of the stakes here.
I think many Americans would be surprised to learn just how important oil from hydraulically fractured wells has become for the U.S. and global economies. Oil from fracked U.S. wells now accounts for about 8% of total global oil supplies. That is massive.
So, the first question is, what would be the implications of a ban—both in the near term and the long term. To get at the near-term question, I asked a few of our research assistants to run a little model on the impacts of halting all new drilling in the major U.S. shale plays. Remember that shale wells have very steep decline rates. On average, these plays decline by a couple percent per month. One year after the implementation of a ban, shale-oil production would be down by more than a third. After two years, production would be down 55%. You’re talking about triple-digit oil prices and a possible global economic shock.
- SIEGEL:I think an oil-price prediction is largely a red herring, because I am not talking about banning fracking in a vacuum. My organization and others propose a fracking ban along with other smartly designed programs to speed the development and deployment of clean technologies, support local communities, and offset oil and gas price increases. Government policies that drive a rapid just transition to clean-energy technology can create the largest economic stimulus since World War II.
I’m talking about policies like accelerated clean car and truck standards that rapidly decrease oil consumption in the transport sector and moving the power sector to 100% renewable energy. Other policies like reinstating the crude-oil export ban would also counteract price increases from banning fracking and restricting the supply of oil and gas.
Well-designed government policy in other areas, like tobacco and asbestos, addresses both supply and demand. Climate policy must do the same. The barrier to this is opposition from the fossil-fuel industry, not any insurmountable economic or policy problem.
And don’t you think we need to be a little bit skeptical of anyone’s ability to accurately predict oil prices?
- ORI:The time scale for turning over the global automotive fleet is going to be measured in decades, whereas the production drop from a fracking ban would happen almost immediately. It is a hard truth that I think advocates of a ban have to own up to.
WSJ: What do you see as the trade-offs between immediate economic repercussions from a ban versus the prospects for a transition to less-carbon-intensive energy sources?
- SIEGEL:Any immediate economic repercussions to the economy can be offset if oil-and-gas companies are made to pay their fair share and if we overcome political opposition from the fossil-fuel lobby and implement well-designed policies.
The fossil-fuel industry reaps huge benefits from direct taxpayer subsidies, estimated at roughly $20 billion per year. All of that support should be reallocated to a just transition to clean energy.
Fossil-fuel companies have been deceiving the public and shareholders for generations about the true costs and consequences of climate change. These polluters have never paid for the health, climate and economic damage they cause.
The prospects for a transition to a clean-energy economy are bright. Clean renewable energy solutions are available, and they are becoming more affordable all the time. It is now cheaper to install new wind power than to run existing gas plants. Recent analysis indicates that due to a rapid decline in the cost of renewables, the cost of clean-energy generation is likely to be lower than the cost of new gas plants for 90% of the proposed construction in the U.S. Clean-energy jobs provide stable, long-term careers. Workers put down roots, raise families, pay taxes and are invested in the future of their communities. There are examples across the country of former coal towns that have transitioned to clean, sustainable economies, from a sprawling solar-panel development company in West Virginia to the organic-agriculture hub of Colorado’s North Fork Valley.
- ORI:In the near term, there would no doubt be significant pain. First, U.S. consumers would likely see sharp increases in their energy bills. Remember also that the fracking boom has provided significant benefits to the communities where drilling takes place. One recentstudy by my colleague Michael Greenstone found that the average household in U.S. shale plays benefits by as much as $1,900 per year, taking into account both the costs and benefits of fracking. But I also think it is important to look globally. The U.S. also produces massive amounts of natural gas from fracking, which we are now beginning to export in ever-larger quantities. So, A large drop in U.S. shale-gas production would also affect natural-gas markets around the world, likely increasing prices for global consumers.
Everyone acknowledges that, in order to reduce carbon emissions at the magnitude required to avert devastating climate change, China, India and other developing countries will need to make huge investments in clean energy. But I think it will be much harder for them to do that in a near-term environment of deep economic uncertainty and possibly even turbulence that could arise out of a strict fracking ban.
Those countries need cheap energy for growth.
WSJ: It seems like you both agree there would be an economic impact on areas and communities where there is oil and natural-gas production and the jobs that stem from it. How significant would that impact be on large producing states? And what can or should be done to mitigate any lost economic activity?
- ORI:Those benefits include overall increases in income, employment and even government revenue. We are talking about tens of thousands of jobs, and the industry has brought significant benefits to the communities where drilling is taking place. And the U.S. record with retraining workers in similar industries is not encouraging—think of the record with coal communities.
As much as we promise job training and other assistance, policy has historically failed.
In light of these and other costs, the question then becomes, are there long-term climate benefits from a fracking ban that could outweigh the near-term costs?
I should say that I am more firmly coming around to the view that fracking is a net negative for carbon emissions. I think there is really no question when it comes to oil. Fracking has unlocked so much cheap oil that it has badly delayed a much-needed transition to cleaner transportation, globally. That is a serious problem for the climate.
But I am also becoming persuaded that the common rejoinder that natural gas from fracking has been good for carbon emissions by displacing coal is too one-dimensional. A paper from my colleague Ryan Kellogg suggests that while natural gas from fracking has had some real benefits for the U.S. economy, especially for consumers, it could very plausibly lead to increased carbon emissions. That is because there is so much potential demand for cheap gas in the U.S. economy that it could overwhelm the benefits from coal displacement.
It is not that I am unconcerned with the impacts of fracking on the climate. It is just that I think a ban will do much more harm than good. Why not pursue a policy that incentivizes a transition from fossil fuels more broadly in ways that are more predictable for the economy?
- SIEGEL:Government should absolutely provide support to states, communities and workers that are impacted by this boom-and-bust industry and by the necessary transition.
But shouldn’t we be asking the fracking industry what is its plan to support workers and economies? Coal is a cautionary tale. None of the fossil-fuel industry’s professed concern for its workers’ well-being has ever translated into actual financial commitments.
We can keep what happened to coal miners from happening to people who work in the fracking industry if we muster the political will to make the necessary policy changes, force these corporations to meet their obligations and invest in a just transition to clean energy.
Samuel, you ask “Why not pursue a policy that incentivizes a transition from fossil fuels more broadly in ways that are more predictable for the economy?” I am eager to hear the specifics of your proposal. But we cannot delay any longer. Industry has delayed action for decades in part through clever-sounding arguments against whatever policy is on the table. Don’t fall into that trap.
- ORI:It is true that the costs of climate impacts are rising. We do need to act.
The question is whether a fracking ban is an effective policy choice for which the benefits will outweigh the costs. I am extremely doubtful of that. It would impose large and sudden costs on the global economy that could perversely slow down the very investments we need in clean energy. It would hurt U.S. consumers overall and especially households in states where the industry is large.
And what would we get in return?
The oil market would eventually rebalance. Large producers like Saudi Arabia and Russia would step in to replace lost U.S. supplies. The net impact on global carbon emissions would be negligible. They might even rise in the short term, because production in those countries is much dirtier than in the U.S. Global prices would be somewhat higher—suggesting there might be a good price signal to consumers to invest in more-efficient vehicles—but would also be quite a bit more volatile, which could undermine that benefit.
- SIEGEL:Banning fracking is an essential policy step for all the reasons we’ve discussed, and many others that we didn’t have time to delve into, like the crushing blows to home values that can happen when the fracking rigs move in next door. We also didn’t get to talk about the many important things that cannot be quantified, like the pain of watching your loved one suffer or the extinction trajectory for thousands of species from the polar bear to the sage grouse. Nobody is talking about ending all oil and gas extraction immediately. There needs to be a just transition over several decades, as we also slash our consumption of oil and gas. But banning fracking is an essential step.
We do not need to choose between a carbon tax and a fracking ban. Society does not solve enormous, complex problems with one silver-bullet policy solution. We urgently need a suite of well-designed climate policies. A well-designed carbon tax could be part of that, but not if it comes at the cost of gutting existing environmental laws or granting legal immunity to fossil-fuel polluters, as proposed by some of the world’s largest polluters themselves.
be much more effective.
Associated Press & Legislative Analyst
The head of Pacific Gas & Electric Corp. told angry California lawmakers that the nation’s largest electric utility wasn’t fully prepared for the effects of its unprecedented outages last month even as it plans to shut off power to more than half a million people again this week to prevent wildfires.
Lawmakers wanted answers from Bill Johnson and executives from the state’s other two investor-owned utilities about the shutoffs last month that caused life-saving medication to spoil, businesses to lose money and communications networks to go dark.
PG&E CEO Bill Johnson blamed his company’s poor response to the blackouts affecting millions of people partly on a sense of complacency after a much smaller outage went well earlier this year.
“We weren’t as well prepared as we thought, and we needed to give a little more attention — a lot more attention — to impacts after we shut the power off,” Johnson said. “I do think as things went on, we got better at each one of these.”
Lawmakers were skeptical, venting residents’ pent-up frustration at the company that is trying to emerge from bankruptcy after its outdated equipment has sparked devastating wildfires in recent years.
Democratic state Sen. Scott Wiener said he believed PG&E had “forfeited its right to operate as an investor-owned utility.”
State Sen. Bill Dodd told Johnson that an Oct. 9 shutoff was “a big ‘screw you’ to your customers.”
“That has really created among the Legislature and among your customers a real trust issue,” Dodd said.
Meanwhile, people in Northern California were bracing for more outages. PG&E has started notifying customers in parts of 22 counties that it may turn off electricity Wednesday because of strong winds that could spark wildfires.
The blackout is expected to affect 660,000 people in the San Francisco suburbs, Sierra Nevada foothills, wine country and elsewhere.
Johnson said PG&E has struggled to respond to the growing threat of wildfires over its coverage area of more than 70,000 square miles (181,299 square kilometers). In 2012, he said less than 15% of its power lines traversed areas at high risk for wildfires. Just seven years later, that’s grown to more than 50%.
The state’s two other investor-owned utilities — San Diego Gas & Electric and Southern California Edison — also have turned off power this year. But their shutoffs have affected far fewer people and been much shorter.
Caroline Winn, San Diego Gas & Electric chief operating officer, said the company’s power outages have averaged about 24 hours, in part because it has upgraded its equipment to more narrowly tailor shutoffs.
Johnson told lawmakers that PG&E has spent $30 billion over the last 10 years improving its electrical network. He also said the company recently inspected its vast network of power lines and other equipment for repairs and replacement. The company has plans to install “microgrids,” or backup power sources, for isolated areas to help keep power running during a shutoff.
“We do not expect an annual repeat of what we went through this October,” Johnson said. “That just cannot happen again.”
But lawmakers were skeptical. Democratic Sen. Bill Monning noted the company is facing potential damages of up to $30 billion for a series of wildfires in 2017 and 2018, including the most devastating wildfire in state history that destroyed roughly 19,000 buildings and killed 85 people.
Monning said PG&E has not buried its power lines in fire-prone areas to “save money for shareholders.” He did note that if the company decided to bury one-quarter of its power lines in wildfire-prone areas, it would cost roughly $15 billion.
“I think you will see us undergrounding considerably more of our system,” Johnson said. “Not so much because of the liability, but because it’s the right thing to do given the circumstances.”
Preemptive power shutoffs are not new to California, but the scope of those by PG&E this year have been unprecedented. The company has more than 5 million customers in Northern California.
Lawmakers have set a June 30 deadline for PG&E to emerge from bankruptcy or else forfeit participation in a fund designed to help cover damages from future wildfires. But negotiations have bogged down as shareholders and creditors battle in bankruptcy court over the future of the company.
A federal bankruptcy judge has appointed a mediator to try to resolve the case. But Democratic Gov. Gavin Newsom has threatened to intervene if the company can’t reach an agreement by June 30, including a potential state takeover.
Legislative Analyst’s briefing:
A year and a half ago, Gavin Newsom was in the same place as Elizabeth Warren and Bernie Sanders, running in a tough Democratic primary and vowing “it’s about time” for a single-payer health care system while dismissing his critics as “can’t-do Democrats” who refuse to think big.
Now he’s in a different place.
The sleek businessman with the wavy pompadour has changed his rhetoric and slowed his pace. “These things take time,” he acknowledged after his primary victory.
As governor, Newsom’s health care program has been more incremental than promised, annoying some allies in the single-payer movement while winning some unexpected praise from industry groups. But he also may have found something larger than his own agenda: A health-care path that builds on past successes, enacts fresh reforms and may eventually lead to a single-payer system – without the political earthquake that so many predict under Sanders’ complicated bill or Warren’s financing plan.
Newsom’s is by far the most relevant — and revelatory — experiential test of the Democratic health care ideas that will be so hotly debated on the Atlanta debate stage Wednesday night. And it offers something for everyone in the race to chew on: A testament to the power that a promise of a single-payer system can have in galvanizing the party’s base; the unforgiving realities that make a quick conversion to single-payer practically, and probably politically, impossible; and a way for a leader to win broader support for incremental steps that — if pursued diligently enough — could lead to universal coverage.
“This is the signature issue of the progressive left, and it’s absolutely driven by what’s happening in California,” said Doug Herman, a Democratic strategist based in Los Angeles, who attests to the appeal of single-payer as an issue. “Medicare for All could help Bernie and Elizabeth in the Democratic primary the same way it helped Gavin Newsom win the primary in California. But the deeper you go, the harder it is to explain how you’re going to pay for it.”
Newsom’s alternative steps include a return of the individual mandate requiring people to buy insurance or pay a tax penalty; stricter coverage requirements on mental-health parity; expanded subsidies to help low- and middle-income people purchase coverage; more Medicaid spending to cover undocumented immigrants; and the creation of a much larger state-operated group-purchasing plan to drive down prescription-drug costs.
These will be followed, if Newsom sticks to his intentions, by additional reforms generated by a 2020 commission of stakeholders that could lead to a much more highly regulated system. And that, some health experts believe, can put him on the doorstep of the Democrats’ Holy Grail: a universal, single-payer system.
“The governor continues to insist that we move forward towards system that will cover everyone, that will be more affordable and that will be high quality. Single-payer is one point on the horizon to help to get us there,” top Newsom adviser Daniel Zingale told POLITICO. “Folks who are die-hard proponents of single-payer should not despair – that continues to be a guiding beacon for where we’re trying to go.”
Speaking to a home state crowd of more than 4,000 liberal activists in San Diego in early 2018, Newsom, the dynamic former San Francisco mayor who had spent eight years as lieutenant governor waiting for his chance at the top job, took a shot at his chief primary opponent, former Los Angeles Mayor Antonio Villaraigosa, who was on a crusade to convince voters that single-payer was too expensive and impossible to achieve in California.
“My opponents, they call it snake oil. I call it single-payer,” Newsom said, borrowing a phrase Villaraigosa had employed to criticize Newsom’s lack of specifics in his health care agenda.
“It’s about access, it’s about affordability — it’s about time, Democrats,” Newsom said, buoyed by an electric, cheering crowd a few months before the primary election. “If these can’t-do Democrats were in charge, we would have never had Medicare and Social Security.”
Newsom’s early embrace, both of Sanders’ Medicare for All proposal and a $400 billion single-payer health care bill propped up in the state Legislature by the influential California Nurses Association, earned Newsom highly coveted backing from Sanders supporters and other skeptics on the left who worried he was too moderate.
He has long cultivated an image as a political risk-taker willing to battle his own party, in earlier eras pushing gay marriage and legalization of marijuana to the forefront of the Democratic agenda in California.
Newsom said his single-payer message was about “more than a political campaign,” it was about “Democrats acting like Democrats” in a battle for the soul of America against “a president that doesn’t have one.”
“Democrats do not succeed by playing it safe,” Newsom said in the campaign. He went on to defeat Villaraigosa by more than 20 points, and barely flinched at the general election challenge from Republican real estate investor John Cox.
“It was an ideological purity test, and Newsom won it,” said Mike Madrid, a Sacramento-based Republican strategist who led Villaraigosa’s campaign. “Health care is something that has defined the Democratic Party since at least the 1970s, but this was new. I was shocked to see the desire Democratic primary voters had to be lied to.”
After the primary, Newsom largely ignored his Republican opponent, instead pouring time and resources into helping down-ticket Democratic candidates beat Republicans in House and state legislative districts. Democrats ended up unseating six Republicans in the Legislature, solidifying its Democratic supermajority, and flipping seven Republican-held battleground seats in the U.S. House.
Andrew Acosta, a Sacramento-based political consultant, said disdain for President Donald Trump fueled those races, but that Newsom did help fire up the Democratic base in traditional Republican strongholds, including in the Central Valley and Orange County.
“I don’t think he was ever in any trouble with Cox, so he was able to do other things,” Acosta told POLITICO.
Newsom’s fiercest allies, meanwhile, were focused on keeping him committed to single-payer. The California Nurses Association and others on the left were growing increasingly anxious that he’d moved too far to the middle, even as they pumped money into a campaign bus with the slogan: “Nurses trust Newsom.”
“He did not run on being an incrementalist governor,” said Stephanie Roberson, chief lobbyist for the California Nurses Association in Sacramento. “If he bit off more than he can chew, he should say that.”
She referenced a series of single-payer campaign promises Newsom had made in seeking their support early in his campaign. “I’m a Californian. I don’t like waiting,” Newsom said early-on. “When I’m governor, I will not wait for federal action … I’m tired of politicians saying they support single-payer but that it’s too soon, too expensive or someone else’s problem.”
Newsom later began to shift his message away from single-payer, instead brandishing his reputation as the former two-term San Francisco mayor who took on the city’s business elite, passing a universal health care program for city residents regardless of their immigration status or ability to pay, funded in part by fees on employers.
Newsom remained firm on his goal of adopting a universal-care system for California. But single-payer would take much, much longer, if it was even possible. Weeks before the 2018 election, he argued that it was “lazy” for supporters to interpret his single-payer campaign pledge as a promise that was “achievable overnight.”
“It was always about universal health care. That’s the goal,” Newsom said. “I’ve always believed that single-payer financing is the most effective, efficient way to achieve it.”
But, he said, he’d “deeply discovered” that “single-payer financing means a million different things to a million different people.”
Democratic and Republican strategists told POLITICO that the way single-payer played out in the Newsom-Villaraigosa contest is exactly how they see the fight between the liberal presidential candidates touting Medicare for All and the moderates vowing to improve Obamacare: First, promise Medicare for All. Win the primary. Then move to the middle to pick up more middle-of-the-road voters, and start explaining how you were misunderstood all along.
“In this Trump era and a time of immense tribalism, once you start to question numbers and math, you become a heretic,” said Madrid, the Republican strategist. “We saw that in the 2018 California Democratic primary and that’s what’s on full display in the 2020 presidential fight with Bernie Sanders and Elizabeth Warren.”
“People didn’t want a centrist,” he said, recalling the Newsom-Villaraigosa fight. “They wanted an ideological warrior.”
Between presidential forums, pep rallies and networking, delegates of California’s largest political party also spent part of their convention in Long Beach this past weekend deciding which 2020 candidates deserve the Democratic endorsement.
There were few surprises. Divided races in the East Bay suburbs and Orange County were deadlocked, meaning the party will stay neutral before the March 3 primary.
In the race to replace retiring San Diego Rep. Susan Davis, the party gave its imprimatur to Georgette Gomez, San Diego’s city council president and the candidate with the backing of most of the party establishment. And a handful of long-shot progressive challenges to incumbent Democrats fizzled.
The one bit of drama: Bobby Bliatout, a businessman who largely self-funded an unsuccessful challenge to Tulare GOP Rep. Devin Nunes last year, got the formal party nod this time around. In doing so, he defeated a better-financed candidate with the backing of Andrew Janz, the leading Democratic challenger to Nunes last year.
Endorsement caucuses tend to receive less attention than the keynotes speeches and televised forums that define most party get-togethers. But for party activists, they often offer a dramatic highpoint — a forum where the ideological battles, internecine rivalries and the pent up frustrations of hundreds of sleep-deprived party activists spill out into the open (or at least onto Twitter).
This year, the drama was in short supply. That was in keeping with the relatively low-key undertone of a convention as notable for what did not transpire as what did. There were the no-shows by Joe Biden and Elizabeth Warren, the relative absence of booing and heckling that characterized previous confabs, and only a passing appearance by Gov. Gavin Newsom who ducked out early for his conservative in-laws’ 50th wedding anniversary — effectively leaving the West Coast’s largest Democratic party for a much smaller Republican one.
Moderate East Bay Democratic state Sen. Steve Glazer, who has a knack for ticking off organized labor, failed to get his party’s endorsement. But neither did his challenger, disability rights activist Marisol Rubio.
For Rubio, denying Glazer the formal backing off his own party is a victory of sorts — denying him campaign help from Senate Democratic leadership in Sacramento.
But this isn’t a new challenge for Glazer. In a 2015 special election, he beat Assemblywoman Susan Bonilla despite (or maybe because) of her strong backing from labor groups. Glazer, who has called for bans on transit agency strikes and wants to reform teacher tenure rules, has endeared himself to the moderate voters in the Orinda area.
In 2020, he will also be able to count on much higher name recognition among voters. Prior to the vote, Rubio insisted that the district as a whole is “much more progressive than it was four years ago.”
The party also won’t be picking a side in a contested senate race in Orange County.
Dave Min, who unsuccessfully ran for Congress last year, is hoping to replace state Sen. John Moorlach, one of the most vulnerable of the remaining Republicans in a rapidly changing Orange County. So is fellow Democrat Katrina Foley, the mayor of Costa Mesa. Though Min won a majority of the votes at this weekend’s endorsing caucus, he failed to cross the 60% threshold needed to win the party’s formal support.
Foley said her more moderate brand of politics is a “better fit for the district,” but can make organizing party activists, a necessary task to earn an endorsement, more difficult. “The activists want to hear the fiery partisanship,” she said.
Min, who was inspired to run for office after the election of 2016, said that his more clearly stated progressive views will make it clearer to voters why he is running for office. “The line from her campaign is that it’s her time, that she has the experience,” he said. “What you don’t hear is ‘why.’ Why is now her time?”
Min won the party endorsement in 2018 but failed to make one of the top two slots in the June election. That may speak to the inherent value of a party seal of approval. But in lower-profile races without an incumbent, a state party endorsement can offer voters, many of whom may have little information to go on, an electorally-decisive cue.
Bliatout is counting on it. Despite losing out on the party’s backing last year to Janz last year in their bid to unseat Nunes, Bliatout won 62% of the votes at the endorsing caucus — more than twice as many as Janz’ pick, Phil Arballo.
“Everyone is engaged and wants to do something — this is true activism,” said Bliatout, explaining his win. “We are united at this point against Devin Nunes.”
Last year, Janz raised $9.5 million in his run against Nunes, but lost by 5 percentage points.
While the party’s statewide endorsing convention was gaveled to a close on Sunday afternoon, a few high profile races have yet to be decided.
On the first day of the convention, Newsom announced that special elections for a congressional district in Simi Valley and a state senate district in Palm Springs would be held on March 3 to coincide with the statewide presidential primary. If no candidate receives more than 50 percent of the vote, a runoff will be held on May 12.
The party will call for local endorsing caucuses for those seats in the coming weeks.
The Simi Valley district was until recently represented by Katie Hill, who resigned from Congress after conservative media published nude photos of her online, forcing her to admit to a sexual relationship with a campaign staffer. Hill paid a brief visit to the convention this weekend, where she was enthusiastically received by delegates and visiting politicos, including presidential candidate Pete Buttigieg. Hill has endorsed as her replacement Assemblywoman Christy Smith from Santa Clarita, as have most of the party’s establishment.
To the dismay of many party insiders, Cenk Uyger, the host of the progressive YouTube show and podcast The Young Turks, will also be running for the seat.
Also in play: the Palm Springs senate seat represented by conservative Republican Jeff Stone, who resigned to take a regional leadership position at the Department of Labor. At the moment, at least four Democrats have announced or are considering a run in what has become an increasingly purple seat.
A party endorsement could help to winnow down the field, ensuring that at least one Democrat makes it into the top two positions during the May run-off election, should there be one.