The South San Joaquin Irrigation District has submitted an offer to buy Pacific Gas & Electric retail electric assets in Manteca, Ripon, and Escalon in the for-profit utility company’s latest federal bankruptcy proceedings.
The $116 million offer — similar to one PG&E rejected in 2016 — was revalidated recently by an independent electrical system appraiser who determined it still represents fair market value for assets that are now three years older. The assets added since then were on the dime of developers — who collapsed the expense into the cost of more than 1,800 homes built in the three communities since 2016. The developers besides turning over assets they installed for free also conveyed PG&E 30 percent of the value to cover any property taxes as required under California Public Utilities Commission regulations. What isn’t needed for taxes, PG&E pockets as profit.
“Our offer creates a path toward resolving ongoing litigation between SSJID and PG&E, provides capital to support PG&E and help it fund payment of creditors and wildfire claims in the bankruptcy, and advances SSJID’s decades-long project,” said Peter Rietkerk, SSJID’s general manager. “We look forward to the opportunity to negotiate in good faith with PG&E, and work with other claimants involved in the bankruptcy case.”
The latest offer to PG&E — which ironically is part of a 15-year process SSJID launched while PG&E was still in bankruptcy the first time around in 2003 — is part of a new phase of the 110-year-oldirrigation district’s efforts to enter the retail power business. The effort is designed to reduce rates 15 percent across the board in Manteca, Ripon, and Escalon just as PG&E is pushing for a 12.8 percent rate hike to replace equipment that is aging and has maintenance issues such as the equipment that the utility concedes likely started the November wildfire in Butte County that killed 86 people, destroyed 14,000 homes, and burned 5,000 other buildings.
PG&E rejected first offer back in 2016
The new phase focuses on exploring options in the bankruptcy process that essentially would help provide relief to creditors and wildfire claimants by selling assets that serve less than a quarter of 1 percent of the company’s retail electrical system.
After PG&E rejected SSJID’s 2016 purchase offer, the irrigation district filed a court action to acquire PG&E’s local electric grid through exercise of SSJID’s eminent domain powers. PG&E and SSJID currently have two active court cases that are in limbo due to PG&E’s bankruptcy. The court cases are just two examples of PG&E’s ongoing opposition to SSJID’s efforts.
Since 2004, SSJID has sought to provide safe and reliable retail electric service in a transparent, responsive, and accountable manner, at a 15-percent cost savings over PG&E, to the approximately 40,000 electrical customers in and around the communities of Manteca, Ripon, and Escalon. Recently, these communities renewed their support for SSJID’s project in a joint letter to Governor Newsom.
PG&E has fought SSJID tooth and nail despite their lobbyists securing two final votes in the California Legislature for the 1996 vote to deregulate the California energy market by supporting an endeavor that would help irrigation districts such as SSJID enter the retail power market by providing exemptions from CTC charges — the cost for power lines owned by utilities to deliver power over their transmission lines — for seven years.
That started the SSJID’s initial effort that was focused on starting retail service and then expanding it as opposed to the current effort started to 2014 to exercise authority the state constitution grants irrigation districts to use eminent domain to enter retail power service.
PG&E plays Lucy to SSJID’s Charlie Brown
In a process that resembled Lucy of Peanuts comic strip fame urging Charlie Brown to kick a football she was holding and then yanking it away three times at the last minute, PG&E strung SSJID along to run the clock out on the availability of CTC exemptions. That basically allowed PG&E to profit handsomely from deregulation — a process that they mishandled to such a degree that California suffered through rolling brown outs after they created a holding company to sell all of their assets to themselves that had been paid for in many cases for decades so they could re-depreciate them to jack up profits — without giving up any of its customer base as they promised the legislature they would do.
The first attempt was using an inter-tie at the former Heinz plant in Tracy using some equipment already in place that PG&E agreed to and then backed out. Next SSJID worked with PG&E for an inter-tie near the Delicato winery north of Manteca. Again after giving SSJID an indication that would work PG&E suddenly said no late in the process.
The third attempt was an offer made by PG&E that the SSJID rejected. That offer was to sell SSJID the rural retail system south of Manteca and west of Ripon for $12 million. After having it inspected, they discovered there were poles that dated back to 1924 — the useful and safe lifetime of a wooden power pole is considered 50 years. Most of the system was 30 years beyond what established good practices for power companies was for system replacement.
SSJID regrouped after that.
Their current bid included two other questionable moves by PG&E.
The for-profit PG&E spend $1 million on a public relations blitz to torpedo SSJID’s efforts that they dubbed “Stop the Power Grab”. They set up an office in downtown Manteca and dispatched government relations representatives to forums to literally shout down proponents speaking at meetings that the SSJID was conducting to explain their proposal.
At one point they appropriated the name of the chamber executive director without permission to erroneously show that the business group was against the SSJID proposal.
At one point a firm hired by PG&E to attend every public meeting of the SSJID board, sat in the back of the Manteca board room and hacked into the SSJID computers while a public meeting was taking place.
The consultant specifically rifled through the general manager’s computer downloading proprietary information about the SSJID’s bid to acquire PG&E assets. Those documents were then delivered to PG&E representatives.
PG&E denied any responsibility until such time as the FBI indicated they would launch an investigation. PG&E then gave SSJID a check for nearly $300,000 to cover costs it incurred with computer forensics so they could find out exactly what files the consultant that was doing contract work for PG&E had pilfered while PG&E issued a press release saying they were not admitting responsibility.
Three arguments that PG&E made through the Stop the Power Grab campaign were:
It was un-American to use eminent domain.
SSJID could not be trusted to operate an electrical system safely.
It lacked the sound financial base to do so.
Ironically as Stop the Power Grab was claiming PG&E was being victimized by eminent domain they were using eminent domain to bludgeon a local dairy farmer into submission as well as a Delta grower that were trying to get PG&E to reroute new power lines slightly to avoid major conflicts with their operations.
SSJID — along with Tri-Dam Project partner Oakdale Irrigation District — has been generating and delivering 120 megawatts plus of wholesale power for 65 years. Fifty of those years the power was sold to PG&E.
SSJID has a stellar financial record that is anchored by the Tri-Dam Project that was paid 100 percent by the agency and without a penny in state or federal money or the use of tax credits PG&E often uses for major infrastructure. While SSJID has never operated with a deficit and has sterling bond ratings, PG&E is now in its second bankruptcy in 15 years and is in junk bond territory.
SSJID will also be able to show the bankruptcy court that they have done their homework and are prepared to take the necessary steps to essentially municipalize the local system. Municipalization has been advanced as the best way by some experts to end PG&E spotty safety and service issues.