Subscriber Login

TSO Focus

Pacific Gas and Electric Company: In sync with the state’s renewable energy goals [free access]

March 14, 2017

Pacific Gas and Electric Company (PG&E) is one of the largest combined natural gas and electric energy companies in the United States. Incorporated in 1905, it is the subsidiary of PG&E Corporation, an energy-based holding company headquartered in San Francisco. PG&E provides natural gas and electric service to approximately 16 million consumers throughout a 70,000 square mile service area in northern and central California.

 

PG&E has 7,691 MW of installed hydroelectric, nuclear, natural gas, solar and fuel cell generation capacity. The company owns around 29,624 circuit km of transmission lines and 91 substations with a total capacity of 63,400 MVA. The company also has a distribution line length of 142,000 circuit miles.

 

The utility is playing a crucial role in achieving renewable energy targets for California. The state’s renewable energy target of 33 per cent is one of the highest in the United States, and is to be achieved by the end of 2020. PG&E supported SB 350 (Clean Energy and Pollution Reduction Act of 2015) as an important step toward achieving California’s aggressive climate change and clean energy goals. Signed by California’s governor, SB 350 increases the state’s Renewable Portfolio Standard (RPS) to 50 per cent by 2030, and doubles state energy efficiency goals. By the end of 2015, nearly 30 per cent of the electricity transmitted by PG&E was sourced from RPS-eligible resources.

 

In addition, PG&E is focusing on integrating a wide range of advanced communications and control technologies throughout the electric grid to enhance the resiliency of the system and restore power outages more quickly.  In recent years, the utility has exhibited a keen interest in developing new transmission infrastructure projects in the state. In April 2016, PG&E formed a strategic alliance with TransCanyon, LLC—a joint venture between subsidiaries of Berkshire Hathaway Energy and Pinnacle West Capital Corporation—to jointly pursue competitive transmission opportunities solicited by California Independent System Operator Corporation (CAISO).

 

Existing network

PG&E’s network operates at voltage levels of 60 kV to 500 kV. As of March 2015, the company owned a transmission line length of 29,624 circuit km, marking an increase of 1.66 per cent over the 29,141 circuit km it owned in the previous year. Between 2011 and 2015, the company’s line length declined marginally at a compound annual growth rate (CAGR) of 0.29 per cent from 29,975 circuit km in 2011 to   29,624 circuit km in 2015.

 

During 2011-15, the utility’s transformer capacity increased at a CAGR of 1.5 per cent from 59,743 MVA in 2011 to 63,400 MVA in 2015. Besides, the company owned 91 substations in 2015. The number of substations has remained stagnant over the years.

 

Table 1: Growth in PG&E’s transmission network

 

2011

2012

2013

2014

2015

Line length (circuit km)

29,975

29,141

29,165

29,141

29,624

Transformer capacity (MVA)

59,743

60,800

62,289

63,400

63,400

Number of substations

91

91

91

91

91

Source: Pacific Gas and Electric Corporation

 

Financial performance

In the 2015, PG&E reported an operating revenue of USD15,598 million, witnessing a decrease of over 8.7 per cent from the previous year. However, the utility’s revenues grew consistently at a CAGR of over 1 per cent between 2011 and 2015, increasing from USD14,956 million to USD15,598 million.

 

The company witnessed a significant decline in its operating income from USD1,795 million in 2014 to USD861 million in 2015. In addition, the company’s net income witnessed a notable decline from USD1,450 million in 2014 to USD888 million in 2015. These decreases are attributable to the impacts of the nuclear refueling outage at Diablo Canyon Power Plant in the fourth quarter of 2015, as well as a number of smaller miscellaneous items.

 

The company’s capital expenditure on transmission increased from USD4,833 million in 2014 to USD 5,173 million in 2015, registering an increase of over 7 per cent.

 

Table 2: Key financial indicators of PG&E

 

2011

2012

2013

2014

2015

Revenues

14,956

15,040

16,833

17,090

           15,598

Operating income

1,298

1,067

1,096

1,795

                861

Net income

858

830

828

1,450

                888

Capital expenditure

4,038

4,624

5,207

4,833

             5,173

Source: Pacific Gas and Electric Corporation

 

Operational performance

In 2015, PG&E showcased consistent improvement in operational standards. It transmitted 85.86 TWh of electricity in comparison to 81.25 TWh in 2011. Besides, the average PG&E customer experienced less than one outage during the year.

 

The average time a PG&E customer was without power [System Average Interruption Duration Index (SAIDI)] was 96 minutes, representing a 50 per cent improvement since 2006. The average number of power interruptions per customer [System Average Interruption Frequency Index (SAIFI)] dropped to 0.871, 40 per cent less than in 2006.

 

Recent investments and initiatives

In 2015, PG&E invested USD5.2 billion to enhance infrastructure and improve safety and reliability. Throughout the year, the focus was on upgrading the power system through a multitude of local projects to enhance reliability and increase capacity. These activities ranged from upgrading power lines and replacing power poles in Sonora to using helicopters to upgrade several miles of transmission towers and power lines along the well-travelled Dumbarton Bridge between Newark and Menlo Park in the San Francisco Bay Area. Besides, the utility also installed advanced automation technology on power lines stretching throughout its service area. This move has helped the company avoid 130 million customer outage minutes and prevented more than 1.3 million customers from experiencing a sustained outage.

 

One of the key projects undertaken by the company in 2015 was the upgrade of San Francisco’s Mission substation. The USD4.4 million project included substantial investment in the site’s internal infrastructure and improvement to the building’s aesthetics. It is part of PG&E’s plan to invest USD1.2 billion in San Francisco’s electric and gas infrastructure to improve overall safety and reliability.

 

California’s transition toward more renewable energy, as well as a smarter grid, has spurred investment in energy storage technologies. California’s energy storage target requires investor-owned utilities to procure 1,325 MW of storage by 2020, with PG&E’s share at 580 MW. In 2015, PG&E presented the first 75 MW of energy storage contracts to the California Public Utilities Commission (PUC) for review and approval.

 

In 2016, it announced a joint proposal with labour and leading environmental organisations that would increase the company’s investment in energy efficiency, renewables and storage beyond current state mandates while phasing out PG&E’s production of nuclear power in California by 2025. This move is in line with PG&E’s commitment to a 55 per cent renewable energy target in 2031, an ambitious voluntary commitment by a major US energy company.

 

PG&E has been actively participating in CAISO’s competitive process for building transmission projects in the state. In 2013, when competition was first introduced in the California transmission market, PG&E, in a joint bid with BHE U.S. Transmission (a subsidiary of BHE), was selected by CAISO to jointly build, own and operate a transmission line project located in California's Central Valley region. In 2015, PG&E was also selected by CAISO to build, own and operate two new electric substations in California's Central Valley and the South Bay.

 

Further, in 2016, PG&E formed a strategic alliance with TransCanyon, LLC, to jointly pursue competitive transmission opportunities solicited by CAISO.

 

Key upcoming projects

PG&E has several projects and investments underway, including smart grid infrastructure modernisation.

 

One of the biggest projects scheduled to be online in 2020 is the 115/230 kV Bakersfield power connect transmission project. It is expected to increase the capacity of Bakersfield’s electric system and provide new redundancy to help PG&E respond to the area’s growing energy demands. The project entails the construction of a new substation and upgrades to approximately 30 miles (48.3 km) of transmission lines connected to the new substation, as well as improvements to existing substations in the area. It also involves the conversion of several transmission lines from the 115 kV to the 230 kV voltage level.

 

Another important planned project is the 230 kV Central California power connect transmission project. The scope of this project includes the construction of a new 70-100-mile (112.7-161.1-km), 230 kV transmission line, which will run from the existing Midway substation located near Buttonwillow to a new 230/115 kV substation located near Santa Maria, in California; a new 115 kV line from the new 230 kV substation (near Santa Maria) to the existing Divide substation; and a new 115 kV line to loop to the new substation (near Santa Maria) from the existing 115 kV Santa Maria−Sisquoc and Mesa−Sisquoc lines, all located in Santa Maria. CAISO approved the project in 2013. Currently, PG&E is in the early stages of routing the project and selecting the site for setting up the new substation. In May 2016, PG&E scheduled three public meetings for the project in Buttonwillow, Taft and California Valley.

 

PG&E is also planning to undertake the 115/230 kV South County power connect transmission project. The project is expected to significantly increase the capacity of southern Santa Clara County’s electric system, thus helping to ensure future electric reliability for Morgan Hill-Gilroy and the surrounding communities. Along with upgrades to key transmission lines in the area, the proposed project entails the construction of a new substation and two new transmission lines at 115 kV and 220 kV to connect a new transmission source to the local electric grid. These upgrades will increase the redundancy of the transmission system serving the area and reduce the risk of local power outages due to transmission line disruptions. However, currently the project is facing criticism from the local residents due to its likely impact on the environment, water supplies, land values and the rural character of the area. The final decision on the construction of the high voltage project depends upon the approval of CAISO, which is reassessing transmission projects throughout California.

 

The company also plans to undertake two other high voltage projects, namely, the 70/230 kV Paso Robles Area power connect transmission project and the 230 kV Northern San Joaquin power connect transmission project.

 

The 70/230 kV Paso Robles Area project entails the construction of additional components at the Estrella substation site to connect the new substation to the new transmission line and local power grid; connection of the existing Morro Bay–Gates 230 kV transmission line to the Estrella substation; connection of the existing San Miguel–Paso Robles 70 kV transmission line to the Estrella substation; and various other upgrade works.

 

The 230 kV Northern San Joaquin project will bring new transmission sources to the northern area of San Joaquin County, and will serve more than 50,000 households and businesses in the Stockton, Lodi, Lockeford, Victor, Acampo and Thornton communities. The proposed project entails the construction of new 230 kV high-capacity transmission lines to connect PG&E's existing Lockeford substation that is east of Lodi, and the 8 Mile substation that is just north of Stockton, to the Lodi Electric Utility's Industrial substation in Lodi; as well as upgrades to these substations. The developer is planning to submit its application to PUC by late-2017 or early-2018.

 

Table 3: PG&E’s key transmission projects

Project

Voltage (kV)

Line length (km)

Expected completion

Bakersfield power connect transmission project

115/230

101

2020

Central California power connect transmission project

115/230

161

By 2025

South County power connect transmission project

115/230

NA

NA

Paso Robles Area power connect transmission project

70/230

NA

NA

Northern San Joaquin power connect transmission project

230

NA

NA

NA–Not available

Source: Pacific Gas and Electric Corporation

 

Summing up

PG&E is currently exploring a range of options to reach California’s renewable energy goals. The company has made significant progress to this end, with nearly 30 per cent of the energy delivered to customers coming from eligible renewable sources in 2015. However, going forward, it will be crucial for the company to address the consistently evolving technology and market forces. The company is expected to have a holistic view to balance the growth in renewables with the rising costs for the customers. This approach will enable PG&E to find the most viable renewable energy options and apply them to the greatest effect, while safely and reliably providing the best value for customers.