In a recent letter, the mayor of San Francisco asked the San Francisco Public Utilities Commission (SFPUC) to prepare for the potential ramifications of Pacific Gas & Electric’s “current instability” as the investor-owned utility moves towards a bankruptcy filing by performing a detailed analysis that the mayor said should evaluate all options, including the possibility of “acquiring or building electrical infrastructure assets.”
The San Francisco PUC, despite its name, is not a regulatory agency but rather a department of the City and County of San Francisco. It provides retail drinking water and wastewater services to San Francisco, 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.
In the Jan. 14 letter, Mayor London Breed laid out her concerns about PG&E’s “ability to safely and reliably deliver services essential to the people of San Francisco.” She referred to questions raised about PG&E’s role in recent wildfires, the departure of the company’s CEO and other senior executives, and the company’s preparations to file for bankruptcy as a result of $30 billion in liabilities it is facing related to wildfires.
In preparation for the potential ramifications from PG&E’s “current instability,” the mayor is asking SFPUC to conduct a “detailed analysis of the current health of the electrical network and a robust feasibility study on the various potential outcomes, along with engaging with the appropriate state legislative and regulatory bodies.”
SFPUC is “studying the near and long-term impacts of a PG&E bankruptcy and identifying all possible options to ensure continuity for all San Francisco power customers, including the possibility of acquiring or building electrical infrastructure assets,” Harlan Kelly, Jr., SFPUC’s general manager, said.
SFPUC 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. In all, 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. The program is on track to have 365,000 accounts enrolled by April.
The city of San Francisco and its utility had been preparing for greater independence from PG&E even before the bankruptcy threat arose. Members of the city’s Board of Supervisors were concerned about the rising costs that PG&E charges for its distribution service and had begun looking into severing ties with the utility.
Several past attempts at municipalization – as long ago as the 1930s and as recently as 2001 and 2002 – have failed. In June, however, 72% of voters in San Francisco approved Proposition A, which grants SFPUC bonding authority for electric infrastructure.
SFPUC already had bonding authority for its water operations, but its ability to raise capital for its electrical operations was limited to items such as energy efficiency programs. Proposition A gives the utility the ability to issue bonds for clean energy projects subject to approval by two-thirds of the city’s Board of Supervisors.
During a meeting of the city’s Board of Supervisors on Tuesday, several supervisors expressed support for achieving independence from PG&E with one saying it is “urgent” for the city to replace PG&E with a utility that is not primarily driven by “the profit motive” and another calling for becoming completely independent of PG&E and adopting “a local version of a green new deal” in which SFPUC would have its own generation resources.
Speaking at the meeting, Barbara Hale, assistant general manager for power at SFPUC, said the utility is “well equipped” to take on the billing responsibility that is now conducted by PG&E “because we already do it for water.”
Hale also said that SFPUC is preparing to assess its equipment and financial condition in terms of operating costs and revenues in response to the mayor’s letter. She said SFPUC’s costs would likely be lower than PG&E’s.
Several supervisors floated the idea of acquiring San Francisco’s distribution system from PG&E and noted that the utility has said it is looking at asset sales in conjunction with the bankruptcy process. They noted that the cost of that acquisition could be high, but could be financed, at least in part, by SFPUC’s new bonding authority.
Hale also raised a concern about what PG&E’s bankruptcy could do to the cash flows the city receives from PG&E, which pays property taxes and makes lease payments to SFPUC. “One concern is that PG&E’s bankruptcy could disrupt cash flows to SFPUC for its CleanPowerSF program,” she said.
Hale said SFPUC is looking into the legal and regulatory structure that allows PG&E to act as the bill collector for SFPUC. “Those are our revenues, and PG&E is only a pass-through,” she said, adding that SFPUC is looking at how to “protect ourselves in that setting. We are planning for the worst if we do see a delay in remittances. We have internal options we are looking at.”
Several other questions were raised, but not answered, at the meeting such as whether or not PG&E has to be a willing seller in order for SFPUC to acquire the city’s distribution system and whether or not SFPUC has the right of first refusal to buy the city’s distribution assets from PG&E.
Meanwhile, SFPUC is analyzing the health of its electrical network, studying the feasibility of potential outcomes, and engaging with state legislative and regulatory bodies. SFPUC is working toward completing a preliminary report on its findings and a plan for a more detailed analysis and recommendations within the next three months.
Facing at least $30 billion in wildfire-related liabilities, PG&E Corp. is preparing to file for bankruptcy, a move the company says will allow its electric and natural gas utility to keep operating.
The company on Jan. 14 said that it provided the 15-day advance notice required by recently enacted California law that it and its wholly owned subsidiary Pacific Gas and Electric Company currently intend to file petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code on or about Jan. 29, 2019.
The California Public Utilities Commission began a proceeding in late December that, among other things, will look into the possibility that some or all of PG&E could be reconstituted as a publicly-owned utility or utilities.
