It has been a challenging time lately for Ted Craver at the helm of Edison International, the Rosemead parent of the region’s largest utility, Southern California Edison. The 64-year-old chief executive has had to grapple with safety problems that ultimately forced the shutdown of the majority-owned San Onofre Nuclear Generating Station in northern San Diego County. Even more nightmarish for the company was a scandal over a private meeting over that shutdown between Edison executives and Public Utilities Commission President Michael Peevey that ultimately resulted in a $16.7 million fine. More recently, Edison came out on the short end of a debate over trying to force solar rooftop customers to bear more of the costs for maintaining the power grid. Former bank executive Craver spoke to the Business Journal days after Edison’s latest quarterly earnings announcement about recent challenges and future plans.
Question: You are on record as saying you want to keep increases in customer rates at or below the rate of inflation. How is that possible with the billions of dollars in spending Edison is planning to upgrade its grid?
Answer: We’ve been intensely working on this over the past several years. We’ve been making investments to reduce costs going forward – digitization, energy efficiency and the like. We’ve been on this path to hold the line on further increases even though we’re investing substantial resources. In fact, we’re actually reducing rates 8 percent this year versus last year.
Reducing rates? How is that possible? And is that for all your customers?
One of the reasons we were able to reduce the system average rate 8 percent is the settlement over the shutdown of the San Onofre plant. We had a significant insurance claims settlement of $400 million and 95 percent of that went back to customers. And, yes, that reduction is for all our customers.
What was your reaction when you first heard about a meeting an Edison representative had in a Poland hotel room with former PUC President Michael Peevey on the San Onofre shutdown costs, one of the unreported meetings that ultimately resulted in Edison paying a $16.7 million fine?
We were obviously concerned about that. We try to conduct our affairs with the highest integrity. I was clearly not happy that we had these things going on. It caused us to look hard at what we’re doing and to have people trained and aware to make sure these types of things don’t happen again.
During the debate on fees for rooftop solar installations, Edison argued, among other things, that grid connection fees need to be higher. But the CPUC didn’t go as far as Edison sought. So how is Edison going to keep costs in check?
This whole debate is really about the extent of cost-shifting between one group of customers – those with solar rooftop panels selling power back onto the grid – and the other group of nonsolar customers. The PUC ruling means that nonsolar customers are picking up more of the cost. That’s going on already; we were just trying to even this out some, so that over time, nonsolar customers didn’t pick up such a large share of this burden.
Wait a moment. You just said you were trying to keep customer rates in check and rates were going down this year. Now you’re saying rates could be going up for all those customers without solar rooftop panels?
First, this is already happening to some extent. But it all goes back to what we’re doing to modernize the grid, to make it more efficient, so that over time we can charge less than we would have. Going forward, one of our goals is to expand the universe of electric customers – getting more electric vehicles on the road, for example. The more customers we have, the more we can spread the grid maintenance costs around. It’s also why we are trying to do all that we can to encourage and stimulate rooftop solar, home energy storage, energy efficiency.
You have said SCE plans to spend $12 billion over the next three years to modernize its electric grid. So where is all that money going to go? And how did Edison fall so far behind on infrastructure maintenance?
We’ve been spending this kind of money for the last 10 years, ramping it up gradually to about $4 billion a year. We anticipate staying at around that level for the rest of the decade. Let me give you a taste here of why we’re doing this. We have about 4,600 circuits, each one serving about 1,200 homes. When you start getting very large numbers of people with rooftop solar or other energy storage technologies, it creates a very different type of electric system, where you have to manage two-way flows instead of the traditional one-way flow. And that means you have to change out the circuits to accommodate that two-way flow.
If this turns out to be a very hot summer, does SCE have enough power to ensure uninterrupted deliveries?
We had some nervous moments in the last couple of summers with hydropower shortages from the drought. But we were able to import electricity from the Pacific Northwest into Southern California. We’ve done a lot of investment in the transmission system to provide us more flexibility. We’re in pretty good shape.
There’s talk now that all the wells at the massive Aliso Canyon gas field will be shut down for months, if not years. With Edison seeking approval for more natural gas-powered generation plants, how concerned are you about natural gas supplies?
We pay attention to the reliability of our natural gas supplies. It’s still a little early on how this is going to evolve. At this point, I’m maybe a slight bit nervous about it, but I don’t want to raise alarms that aren’t necessary.
What do you do for fun in your spare time?
I used to run marathons but since becoming CEO, the time to train just hasn’t been there. Instead, I’ve been doing more triathlons. I’ve found that I’m not half bad at swimming and cycling. I do this for fun, not for serious competition.
What’s one of the biggest lessons you’ve learned during your career?
Looking back over some of the controversies that we’ve had, I’ve learned it’s important to have a strong sense of what you believe makes sense and is the right course.
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