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Eminent Domain Next Step In SSJID Battle

It was the culmination of almost 15 years of research, planning, and millions of dollars.

But this past week, the South San Joaquin Irrigation District’s Board of Directors voted unanimously to adopt a resolution that formally begins the eminent domain process against PG&E to take over their existing power delivery system within the district and enter the retail power business for themselves.

But it won’t be quite that easy.

The San Francisco-based investor-owned utility is currently locked up in litigation over a variety of issues with SSJID including the decision in December from San Joaquin County LAFCO that recognized their ability to enter the retail power business and cleared a major hurdle that served as a stumbling block several years earlier when they pushed for the same thing.

A legal challenge to the district’s attempt to use eminent domain will likely be forthcoming as well after lawyer David Moran – a partner at the Los Angeles-based firm of Manatt, Phelps and Phillips that also represented PG&E at the LAFCO hearing – told the directors that all legal avenues would be researched and pursued.

That was something that SSJID’s in-house lawyer Steve Emrick warned about when he told the directors prior to the vote that they had the option to walk away if they were so inclined without any sort of legal consequence – adding that their sole reason for doing this would be to benefit the customers and the community which has supported the district for more than 100 years. Emrick was cordial in his remarks to PG&E representatives and noted that while they will likely take legal action to prevent the district for beginning the condemnation procedures, that the team of lawyers that have been working for the district are also prepared in the event that happens.

Aside from the Moran, everybody else who spoke at the five-hour long meeting were in favor of the decision. It was a wide-ranging group that included farmers, business owners, politicians and civic leaders that all praised the district’s dedication to the undertaking and praised the 15 percent reduction that they’ve been promising from the start.

Former Manteca Police Chief and former Boys and Girls Club of Manteca CEO Charlie Halford told the board that the amount of money that non-profits would save in just energy costs alone would be a huge boost to operating budgets that are typically razor thin.

Almond grower Dave Phippen told the board that not only is it something that they should do because it will benefit the farmers that have long been treated as rate paying stepchildren by PG&E when they’re forced to run pumps on their property, but also because it will benefit those in the communities that have long supported their mission to deliver clean agricultural water to farmers.

“This is an opportunity to share with everybody in the district,” Phippen said. “It’s a chance to think outside of the boundaries of agricultural water delivery and think about what we have and what we can share with the people who have supported us over the years.”

The proposal also drew support from Escalon Mayor Gary Haskin, Manteca City Manager Karen McLaughlin and Ripon City Councilman Leo Zuber – a trio that represents the three municipal entities that would benefit if SSJID were to be successful in taking over the existing system.

All three of those communities have issued resolutions stating that they stand behind the district in their push for local control.

But according to PG&E, they aren’t going to roll over without a fight.

“For more than 100 years it has been PG&E’s privilege to provide our customers in Manteca, Ripon and Escalon with safe, reliable, affordable and clean energy and we look forward to continuing to do so for many years to come,” said PG&E Corporate Relations Representative Brandi Ehlers Merlo. “Energy delivery is PG&E’s core business and the company’s electric distribution business is not for sale. PG&E believes that SSJID has based its takeover plans on unrealistic financial projections that we believe would ultimately result in increased electric rates and risks to customers. SSJID has significantly undervalued PG&E’s electric transmission and distribution assets and not adequately considered severance costs.”

Emotions weren’t the only thing that the district introduced, however, to make its case to both the directors and the public that the move was in the best interest of the nearly 60,000 people that would be affected by the transition.

According to Jeff Michael – the Director for the Center of Business and Policy Research at the University of the Pacific – the move would save ratepayers in the three communities that will be affected $15.5 million in the first year alone, and that amount of money will translate in 56 saved jobs and more than $7 million worth of direct economic impact to Manteca, Ripon and Escalon.

The district also showed that even extreme unforeseen events wouldn’t prevent them from being able to make the proposal work financially. According to testimony, even if power costs rose 23 percent they still would be able to make the math work. They could also withstand interest rates increasing up to 90 percent, operating expenses increasing 70 percent, capital expenditures increasing over 200 percent, and the purchase price rising 80 percent to over $360 million – as long as any of those came individually and not as part of a grouping of them.

“I’m in a comfortable position right now, and I think the rest of these directors are in a comfortable position as well,” noted SSJID Director Dave Kamper. “But this is going to help those among us that suffer the most and that’s a good reason in my book to do it.”

In their official statement, PG&E said that they believe that their existing customers would want them to stand up and oppose what amounts to be a “hostile takeover” attempt by the district – one that’s more than two decades in the making.

“We don’t believe that our customers would want us to stand back and allow an inexperienced entity take responsibility for ensuring safe, reliable, clean and affordable power in this area through an eminent domain takeover,” Ehlers Merlo said. “PG&E will continue to oppose the taking of its property as SSJID moves forward with its hostile takeover plans.”