South San Joaquin Irrigation District has cleared another legal hurdle in its bid to acquire the PG&E distribution system within their boundaries. That acquisition is being pursued in a quest to deliver retail power 15 percent below rates users are currently being charged.
The California Third District Court of Appeals on Dec. 15 overturned a 2017 San Joaquin Superior Court ruling on two cases PG&E filed against the San Joaquin County Local Area Formation Commission.
PG&E had sued in the county court arguing that LAFCO had improperly granted SSJID the authority to enter the retail power business by allowing it to proceed by agreeing with the irrigation district they could keep the cities of Manteca, Ripon, and Escalon “whole” by making sure the two percent franchise fees that PG&E paid would continue if SSJID takes over the local system.
Because of that ruling regarding franchise tax fees, the Superior Court also tossed the eminent domain lawsuit SSJID had filed to secure the retail distribution system within their boundaries at market value after PG&E rejected a SSJID offer that irrigation district officials said was above market cost.
The Appeals Court determined it was lawful for the SSJID to do so given they had proven they had adequate revenue from other sources to continue paying what amounts to a two percent franchise fee to the three cities. The biggest source of SSJID funds are its share of annual proceeds from the Tri-Dam Project’s wholesale sales from power plants they operate on the Stanislaus River along with the Oakdale Irrigation District. Some years the two districts have split as much as $15 million. The amount fluctuates due to markets as well as snowpack and storage conditions.
Tri-Dam Project currently has a contract with Silicon Valley Power to purchase electricity it generates.
The court also ruled the SSJID and LAFCO shall recover their costs on appeal.
PG&E still has the option to appeal the ruling to the California State Supreme Court.
“It was a solid win for SSJID,” noted SSJID Executive Director Peter Rietkerk.
An appeal to the state’s high court aside, the district still has to restart its eminent domain lawsuit against PG&E unless, by chance, the district makes another offer to PG&E and the for-profit utility accepts it.
If an eminent domain lawsuit is successful the courts would set the price SSJID pays for the retail distribution system.
When SSJID started the current process in 2012, the SSJID committed to give all three cities a 2.5 percent franchise fee instead of the state allowed and city mandated two percent. If SSJID and not PG&E were the retail provider in Manteca during 2012, for example, that would have meant $35,000 more for Manteca’s general fund or $545,000 once SSJID’s projected 15 percent in reduction of power rates are factored into the equation.
Since then PG&E rates have skyrocketed significantly while Manteca has grown as well. And while the city has installed energy saving measures electricity keeps going up. The financial advantage the City of Manteca alone would receive if SSJID was the retail provider with a more robust “franchise fee” and 15 percent lower power costs is likely in excess of $700,000. Escalon and Ripon would likely see benefits for their bottom lines as well.
Over time, the SSJID model sees rate savings between what they are able to sell electricity at and what PG&E does to increase even more.
Consumers — residents, farmers, and businesses — in the three cities would collectively have at least $14 million year after year to spend on something other
If the years SSJID has invested so far to obtain the local PG&E system seems like a futile effort, keep in mind it took 23 years after the people of Sacramento first moved to exercise their right to acquire their local retail system from PG&E and to start delivering electricity in 1946 through the Sacramento Municipal Utility District.
What PG&E is doing to stop SSJID is almost a replay of their efforts in courts for almost a quarter of a century to stop SMUD.
Today SMUD’s average rates are 35 percent lower than what PG&E charges. Only a handful of utilities have lower rates than SMUD in California — Roseville Electric and Turlock Irrigation District. That difference is slight.
The gap between SMUD and other local, publicly owned utilities compared to PG&E continues to grow as PG&E’s annual rate increases are significantly higher.
Based on a California Public Utilities Commission (CPUC) analysis between 2002 and 2019 PG&E rates rose an average of 37 percent compared to the 19 percent the consumer price index rate rose. The data available for average local utilities for the 10-year period between 2008 and 2017 shows a 3.33 percent increase. While 20-year data was not available for all local utilities, based on SMUD only the increase in rates was less than 10 percent for the corresponding 20 year period or roughly a quarter of PG&E’s.
Two thorough analyses conducted by a firm that specializes in evaluating the soundness of private and public providers have concluded SSJID can provide rates at least 15 percent lower than PG&E. The firm is the same one that PG&E has hired to do work for them.
As a public agency the SSJID can raise capital at a rate 40 percent below PG&E since they do not pay shareholder dividends or federal taxes. That is critical in overall rate costs given PG&E has said it needs to spend at least $28 billion over the next four years to upgrade and harden its infrastructure. Throw in the utility’s plans to bury a large share of distribution lines in wildfire prone areas and another $20 billion is added to the cost.
That is in addition to satisfying shareholders. As an example, PG&E paid out $7 billion in dividends between 2009 and 2017 and had a 10 to 12 percent return on profit.
