Electricity Markets

Calif. bill calls for turning PG&E into a public power utility

California State Senator Scott Wiener recently introduced legislation that would transform Pacific Gas and Electric into a public power utility.

The legislation, S.B. 917, would turn PG&E into a publicly owned entity, creating the Northern California Energy Utility District. The structure of the utility district would be modeled on the Long Island Power Authority in New York, which operates as a publicly owned utility that contracts with a public benefit corporation to staff a variety of jobs, such as tree trimmers, line workers, and truck drivers.

LIPA was created in 1998 when New York State acquired Long Island Lighting Co. In 2013, state law was amended to make LIPA a public-private partnership. Subsequently a subsidiary of Public Service Enterprise Group won a 12-year contract to operate LIPA’s electric system.

Northern California Energy Utility District’s public benefit corporation would be known as Northern California Energy Utility Services. The proposed public power utility district would also include PG&E’s natural gas distribution system.

PG&E is a subsidiary of PG&E Corporation.

The legislation would also help local jurisdictions as well as Native American tribes that want to form publicly owned utilities, and it would not interfere with communities that are already in the process of forming public power utilities. The legislation would also allow community choice aggregators to maintain and expand their current role providing power procurement services to customers.

“This proposed public-private partnership has the benefit of protecting workers’ salaries and benefits, and providing the positive value of community ownership,” said Barry Moline, executive director of the California Municipal Utilities Association. “Californians are asking for transparency, public accountability, high reliability and lower costs.”

In December, the city of Davis, Calif., became the latest city to support transforming PG&E into a customer-owned utility. Community choice aggregator Valley Clean Energy in late 2019 recently submitted a $300 million bid to purchase Pacific Gas & Electric’s lines, poles and other electricity distribution assets within Yolo County, Calif.

In June, the South San Joaquin Irrigation District (SSJID) forwarded to California Gov. Gavin Newsom a letter signed by the Mayors of the Cities of Escalon, Manteca, and Ripon renewing the cities’ endorsement of SSJID’s 15-year bid to takeover PG&E electric service for these Central Valley communities.

“Under existing law, investor-owned utilities such as PG&E make money not by selling electricity but by building power lines,” a memo from Wiener’s office summarizing the legislation, said. “As a result, they have a strong incentive to keep building power lines out into the fire zone, despite the potential risk, and very little incentive to prioritize safety and reliability.”

The creation of a publicly owned utility would enable residents of Northern California to enjoy “lower energy bills, more reliable power, and the assurance that their electric grid is in good hands,” the memo said.

PG&E filed for Chapter 11 bankruptcy court protection more than a year ago in the face of billions of dollars in liabilities stemming from its role in causing deadly wildfires in 2017 and 2018. Since then, the utility has come under fired for its strategy of shutting down transmission lines to avoid the possibility that its lines might spark wildfires.

S.B. 917 calls for “the earliest possible incorporation” of the Northern California Energy Utility District.

The district would be formed by the acquisition of PG&E’s assets through eminent domain and be governed by a seven-member board representing non-overlapping districts of roughly equal population within the utility’s service territory. The original board would be appointed by the governor, subject to confirmation by the senate, for staggered terms with three of the initial members serving two-year terms and four members serving four-year terms.

All non-management employee contracts of Northern California Energy Utility District would be assigned to Northern California Energy Utility Services. The utility district would have the right to inspect all financial, safety and work performance records of the service corporation. The state’s Public Utilities Commission would have no authority to establish or fix the rates and charges of the utility district.

The legislation would establish the California Consumer Energy and Conservation Financing Authority under the state treasury department for purposes of effecting the acquisition of PG&E assets.

The legislation does not say how much the acquisition of PG&E’s asset would cost.

To become law, S.B. 917 would require approval by the state’s governor and from state regulators.

PG&E Corporation and PG&E on Jan. 31 submitted regulatory and court filings outlining the key elements of the company's updated Chapter 11 Plan of Reorganization. They submitted testimony in the California Public Utilities Commission Plan of Reorganization proceeding and filed its updated Plan with the Bankruptcy Court.

Governor said California was scoping plan for PG&E

In early November, California Gov. Gavin Newsom called on various stakeholders to meet in order to accelerate a consensual resolution to PG&E’s bankruptcy cases that will lead to the creation of a new entity.

At the same time, Newsom warned on Nov. 1 that if the parties failed to reach an agreement quickly “to begin this process of transformation, the state will not hesitate to step in and restructure the utility” and said that “all options are on the table.”

Newsom’s call for action came against the backdrop of a series of major power shutoffs implemented by PG&E aimed at mitigating the risk of wildfires.

In December, Newsom rejected a PG&E bankruptcy settlement, saying in a Dec. 13 letter to the CEO of PG&E Corporation that the plan “falls woefully short” of requirements set out in a wildfire law enacted earlier this year.

Newsom’s approval was not required under state law, but PG&E asked him to weigh in after reaching the settlement, the Los Angeles Times noted in a Dec. 13 article. “The request for the governor’s blessing forced Newsom to take a public position on the company’s reorganization long before state regulators perform an extensive review and must formally sign off on the PG&E proposal or a competing plan next year,” the newspaper reported.

“Taking a stand and making a decision like this is hard,” said CMUA’s Moline. “Foremost, we support the four communities that have made offers to buy the assets of PG&E. For the remainder of PG&E’s customers, they need to weigh in to show their desire for a public model or stick to a future with the private utility.