Electricity Markets

Report sees municipalization benefits for San Francisco

In a preliminary study released on Monday, the San Francisco Public Utilities Commission found that public ownership of the city’s electric grid has “the potential for significant longterm benefits relative to investment costs and risks.”

In the report, the authors said their initial analysis suggests public ownership could result in “likely net cost savings over the long term as well as rate stability and affordability, and possibly even rate reductions for customers.”

The report also found that reaching the city’s goal of 100% greenhouse gasfree electricity supplies by 2030, as well as other critical city goals on affordable housing, are much more likely without Pacific Gas & Electric ownership of San Francisco’s electric distribution assets.

The authors emphasized the report is only preliminary and further study is needed before rendering a final recommendation.

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.

The San Francisco Public Utilities Commission is not a regulatory agency but a department of the City and County of San Francisco that provides retail drinking water and wastewater services to San Francisco and wholesale water to three Bay Area counties, hydroelectric and solar power to Hetch Hetchy electricity customers, and power to the residents and businesses of San Francisco through its CleanPowerSF program.

The San Francisco PUC owns the Hetch Hetchy Project, a reservoir, dam and series of hydroelectric plants with 385 MW of capacity that powers all the city’s services, including electric buses and municipal offices. Hetch Hetchy provides 17% of San Francisco’s electrical needs, but the city still uses PG&E power lines to distribute energy in the city from Hetch Hetchy and for its CleanPowerSF program.

Together, Hetch Hetchy power and CleanPowerSF provide about 80% of San Francisco’s electricity needs. However, CleanPowerSF customers pay nearly $200 million per year for PG&E distribution service.

Even prior to its recent bankruptcy filing, the rising costs that PG&E charges for its distribution services prompted San Francisco to begin exploring independence from the utility.

Past attempts at municipalization – as long ago as the 1930s and as recently as 2001 and 2002 – have failed. But in June, 72% of San Francisco voters approved Proposition A, which grants SFPUC bonding authority for electric infrastructure. Prior to passage, the San Francisco PUC’s bonding authority was limited to wastewater and water operations and for repair and replacement of existing facilities.

In January, several members of the city’s Board of Supervisors suggested that the city could acquire the electric distribution system needed to serve its populace from PG&E. The cost would be high, they conceded, but it could be borne through the Public Utilities Commission’s new bonding authority.

The recently released report laid out three options for the city: limited independence, targeted investment for more independence, and full independence by acquiring PG&E assets.

The city’s reliance on PG&E service could also jeopardize its affordable housing and school renovation project, the report said.

The targeted investment option could also jeopardize the gains of the city’s CleanPowerSF program because of reliance on PG&E service, the report found.

Under the full independence option, the city could expand the scope of its Hetch Hetchy project and incorporate its CleanPowerSF program into that project. Full independence would give the city more control over its energy choices and position it to meet its greenhouse gas reduction targets.

The report noted that full independence would require the city to undertake further analysis to determine whether or not the acquisition is feasible and would benefit taxpayers and electric customers over the long term.

The authors of the report said that, based on their preliminary findings, the city “should and will continue to analyze and study the implications of obtaining full power independence by purchasing PG&E’s electric assets serving San Francisco.”

In the next phase of the analysis, the city will be examining the impact of acquiring PG&E distribution assets on workforce, environmental justice, affordability, safety and reliability, neighborhood revitalization and community engagement.

The report is available for download here.