Environment Report: Activist Investors Target Sempra

A pair of activist investors is trying to restructure Sempra Energy, the owner of San Diego Gas & Electric.

Two investment funds — billionaire Paul Singer’s Elliott Management and Bluescape Energy, run by the former head of a Texas utility — announced Monday they had bought about 5 percent of Sempra and wanted to shake up the company by pruning away subsidiaries they claim show a lack of corporate focus.

They want to replace members of the company’s board and begin selling off subsidiaries, perhaps including utilities in Chile and Peru, a Mexican infrastructure company and Sempra’s renewable energy development arm.

Instead, their hope is to focus on SDG&E, Southern California Gas Company and Oncor, a Texas-based utility that Sempra just bought. Their bet is that regulated American utility monopolies will be more profitable over the long term than a collection of other energy assets. They also claim this focus can avoid some of the company’s problems, like the massive leak of natural gas from a storage facility in Aliso Canyon in 2015 that sent tons of greenhouses gases into the air and threatened energy reliability. They suggest such things are happening because Sempra has lost focus.

Sempra’s strategy over the past several years has been to grow using the financial strength of its Southern California utilities to help the company enter new markets. In one vivid graphic prepared by the investors, Sempra is shown grabbing cash from Southern California ratepayers and spending it outside of the region.

In a letter to the California Public Utilities Commission, the investors said they believe new Sempra CEO Jeffrey Martin has a “unique opportunity” to restructure the company. In a recent conversation with financial analysts, Martin, who became CEO on May 1, said Sempra should be thought of as “more of an infrastructure company” than a gas company. It’s not clear exactly how his vision and those of the activist investors may clash.

In a statement, Sempra said it would review the plan and respond “in due course.”

Stock prices were up 15 percent halfway through the trading day Monday.

• The CPUC delayed making a final decision on what to do about SDG&E’s proposal to build a new $600 million gas pipeline. An administrative law judge recommended the commission reject the plan. A decision was expected later this month, but may now be delayed until late summer or early fall.
• State fire investigators blamed Pacific Gas & Electric for helping to cause several major fires in Northern California. Power companies in our state are on the hook for damage that results from fires they start or contribute to. Total damage from the wildfires is nearly $10 billion; PG&E only made $1.7 billion last year, according to the San Francisco Chronicle.

(Disclosure: Mitch Mitchell, SDG&E’s vice president for government affairs, sits on Voice of San Diego’s board of directors.)

State Money Will Flow to Pure Water Project

This year’s state budget will include $30 million for a San Diego project to recycle wastewater into drinking water.

Known as Pure Water, the project is expected to cost $1.4 billion, but officials have yet to say how the project will affect ratepayers’ bills, in part because they are still looking for loans and grants to pay for the project. It previously lost out on other money from the 2014 “water bond.”

Related: A proposed “water tax” was not included in the state budget, handing certain urban water districts a victory. The money was supposed to help some of the 360,000 Californians with unsafe drinking water, largely because they live in rural areas and are served by underfunded and understaffed water agencies.

Voters also approved a $4 billion water bond last week. Another bond for water issues will also be on the November ballot.

In Other News

• Heal the Bay published its annual report card of beach health. None of San Diego’s beaches made the group’s list of 10 biggest “beach bummers.”
• The Imperial Irrigation District controls a big chunk of the Colorado River. Last week, voters replaced one member of the district’s board, but avoided a shakeup that had been pushed by some farming interests that had wanted to weaken the district’s control over water supplies, a move that could have complicated attempts to share the river in California and among other states and Mexico. (Desert Sun)
• Coal could be making a federally driven comeback. The Trump administration is working on plans that prop up aging coal and nuclear plants, which are losing out to low-priced natural gas and increasingly competitive renewable energy projects. In Arizona, though, local officials are resisting efforts to prop up an aging coal plant that is on the verge of closing, something that would be an economic blow to the Hopi and Navajo tribes.

From the Actual Environment

Drive or hike around the Owens Valley — the valley on the eastern side of the Sierra Nevada mountain range past Yosemite — and you’ll eventually come across signs that say nearby land is property of the city of Los Angeles.

A century ago, officials from Los Angeles went out there, bought up land and exported water to their city.

Most people know some version of that history. But it’s still something to come across those signs on a dirt road outside a small mountain town some 250 miles away from Hollywood.

The signs are more than pieces of paper, though. They are truly signs of power.

In recent weeks, farmers in Mono County have been complaining that officials in the city of Los Angeles have suddenly cut off access to water for ranchers who lease land from the city.

In an April letter to Los Angeles Mayor Eric Garcetti, the chairman of the Mono County Board of Supervisors said the city’s “short-sighted proposal to dewater thousands of acres, devastating valuable habitat and natural environments, should not become your legacy.”

The city replied in late May that ranchers were never guaranteed the water and that they have previously gotten “extremely favorable lease terms and virtually free water. In the meantime, residents and businesses in Los Angeles continue to conserve water each year while facing increasing water bills that are driven in part by the need to purchase more water from the California Delta.”