Electricity Markets

Mayors renew support for South San Joaquin Irrigation District PG&E takeover bid

The South San Joaquin Irrigation District (SSJID) on June 26 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 Pacific Gas & Electric (PG&E) electric service for these Central Valley communities.

“SSJID has completed all of the necessary work to prepare for condemnation and subsequent operation of PG&E’s system within its service territory,” noted the June 26 letter endorsed by Mayors Robert Swift of Escalon, Benjamin Cantu of Manteca, and Leo Zuber of Ripon. “Our communities have long endeavored to realize the promise of SSJID’s project, and the time for this project to come to fruition is now.”

Facing billions of dollars in wildfire-related liabilities, PG&E Corporation and its primary operating subsidiary, Pacific Gas and Electric Company, on Jan. 29 filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California.

The letter from the mayors to Newsom notes that SSJID has fought to provide retail electric service to the communities of Manteca, Ripon, and Escalon since 2004. “SSJID’s municipalization effort aims to supplant PG&E as the local electric utility and replace it with a transparent, responsive, safe, economical, and locally accountable utility that understands the needs and values of our communities,” the mayors said in their letter to Newsom.

The mayors noted that SSJID has completed all of the necessary work to prepare for condemnation and subsequent operation of PG&E’s system within its service territory. “SSJID has developed a detailed inventory and valuation of the relevant portion of the PG&E system, formulated a business plan, engineered a separation plan that maintains service for PG&E customers that would remain were SSJID to take over service within District boundaries, made an offer of purchase to PG&E, and initiated a condemnation action to purchase PG&E assets when the company indicated its assets were not for sale.”

The concept of municipalizing specific PG&E-served areas “that are ready and willing to shoulder the responsibility of serving their own communities while meeting California’s renewable energy and climate goals, should be given strong consideration as a solution to the current PG&E problem,” wrote Swift, Cantu of Manteca, and Zuber.

They said that municipalization provides an opportunity to generate capital to address wildfire liabilities through sale of PG&E assets, makes PG&E more efficient for remaining utility customers by incrementally reducing PG&E’s size, and incentivizes a reorganized PG&E (or its successor) to develop and implement a proper corporate culture that prioritizes safety and capital improvement to avoid future catastrophes.  

“Our local communities offer their support of SSJID’s retail electric project and its commitment to providing our communities with safe, reliable, transparent, and locally accountable power,” the mayors said. “We respectfully request the opportunity to meet with you to discuss the merits of SSJID’s project,” they told Newsom.

“Furthermore, we request your consideration of the benefits this municipalization effort provides not only for our communities in the Central Valley, but also as part of a global solution to the PG&E problem.”

“On behalf of the SSJID board of directors, I would like to thank the communities of Escalon, Manteca, and Ripon, for their continued support of SSJID’s Retail Electric Project,” said Peter Rietkerk, General Manager of SSJID. He said SSJID “is technically and financially capable of bringing this project to fruition, and our resolve remains as strong as our purpose, to provide the utmost value to our agricultural, urban, and business communities, by protecting and delivering vital resources with exceptional service.”

The letter also noted that in December 2014, “with the support of our communities,” SSJID received local approval from the San Joaquin County Local Agency Formation Commission (SJLAFCo) to provide retail electric service.

SJLAFCo’s approval included an endorsement of the financial feasibility of SSJID’s retail electric project and economic protections for customers and the local economy upon transition of electric service from PG&E to SSJID.

Public power, co-op groups seek wildfire liability reforms

Groups representing public power and cooperative utilities recently urged California to change its strict liability rules for wildfires caused by utility infrastructure and take other steps to reduce the risks of wildfires and their financial fallout.

Last year, then-Gov. Jerry Brown signed a bill that directed the governor’s office to create the Commission on Catastrophic Wildfire Cost and Recovery, partly to make recommendations on legal changes to ensure wildfire costs are fairly spread among affected parties.

The commission received initial comments on April 22 from dozens of parties, including joint comments from the California Municipal Utilities Association, the Southern California Public Power Authority, the Northern California Power Agency and Golden State Power Cooperative. The groups represent 46 public power utilities and four cooperatives that serve about a quarter of California.

Report sees municipalization benefits for San Francisco

Meanwhile, in a preliminary study released in May, the San Francisco Public Utilities Commission found that public ownership of the city’s electric grid has “the potential for significant long‐term benefits relative to investment costs and risks.”

The report was requested by San Francisco Mayor London Breed in January in response to PG&E’s bankruptcy filing in the wake of the wildfires that have ravaged northern California.

PG&E bondholders propose plan

In other news related to PG&E’s bankruptcy, Reuters reported in late June that a committee of bondholders of PG&E Corp's utility unit “proposed a bankruptcy reorganization plan that would inject up to $30 billion to help the California power provider emerge from Chapter 11 and pay off its liability from wildfires.”

In his February 2019 State of the State address, Newsom called for the creation of a strike force to develop a comprehensive strategy, within 60 days, to address the destabilizing effect of catastrophic wildfires on the state’s electric utilities. A report by the strike force was published on April 12.

Newsom in June released a progress report on recommendations laid out in the strike force report.