Can San Francisco buy out PG&E’s local infrastructure for a greener, more transparent energy future?
Like a house on fire, PG&E is feeling the heat from all sides. On June 21, protestors laid out 85 pairs of shoes, representing the 85 victims of the Camp Fire, in front of PG&E’s office and read the names of the victims as shareholders filed in for their annual meeting. And on July 11, the federal judge in charge of PG&E’s probation ordered that the“offender (PG&E) must provide a fresh, forthright statement owning up to the true extent of the Wall Street Journal report,” a scathing indictment outlining the company’s extreme negligence. The next day, Governor Newsom signed his ambitious wildfire bill, AB1054, that creates a $21 billion fund to help wildfire victims recoup losses from fires caused by PG&E — as long as the utility gets out of bankruptcy by June of 2020.
Meanwhile, an ambitious plan for San Francisco to buy the troubled utility’s local infrastructure has been gathering momentum for months.
At the behest of Mayor Breed, The San Francisco Public Utility Commission completed a “Preliminary Report on Electric Service Options” in May that found the acquisition of local PG&E infrastructure was costly in the short-term but most likely a wise investment in the long term.
“While any sort of acquisition of PG&E property would be a lengthy process, the preliminary report shows that public ownership of San Francisco’s electric grid has the potential for significant long-term benefits relative to investment costs and risks,” the report states in its opening summary.
The 53-page report offers three options for San Francisco, ranging from least risky to the most ambitious: “Limited Independence” from PG&E; “Targeted Investment” for more independence; or, the acquisition of PG&E assets for “Total Power Independence.”
Barbara Hale, Assistant General Manager of the SFPUC's Power Enterprise, is bullish about the city going all in for “Full Independence” to control its own energy future.
“We’re optimistic. We have studied the revenue stream that would cover the costs,” Hale said. “We know it would cost a few billion — that’s with a ‘b’ — but customers would be sending their bills to us and not to PG&E. We think we can go to the bond community and convince them this kind of investment would be repaid.”
“We think a publicly-owned system would be greener, more equitable and more in line with San Francisco values.”
The report found that the ambitious green energy goals of the city would be more attainable. “Initial research shows Total Power Independence would make meeting the City’s goal of being 100 percent carbon neutral by 2030 much less difficult. It would also lead to more stable rates and more transparency for customers.”
San Francisco’s desire for clean energy sources was ratified with the latest enrollment numbers for CleanPowerSF. From July 2018 until April 2019, the number of San Francisco residents and businesses signing up for CleanPowerSF more than quadrupled, from 81,613 customers to 376,119, according to the SFPUC.
“If we can purchase the local system, it would be no more, ‘Mother may I?’” Hale said. “And if residents didn’t like their service, they could wave their fists at City Hall, who could then wave their fists at us.”
Hale noted that having full control of local infrastructure would also avoid the long delays and pricey upgrades that often accompany any new or renovated construction the city undertakes that involves PG&E infrastructure.
“We provide services to public places like schools, libraries, hospitals, and affordable housing,” Hale said. “When one of those customers is renovating, which affects the interconnection with the PG&E run grid, PG&E will say you can’t use the existing connection and you must upgrade.”
It’s rare that a government report is snarky, but an arresting image of an elephant trying to enter a restroom on page 15 illustrates Hale’s point. The image represents the 600 square feet of space PG&E required from the city for a transit worker restroom. The design requirements from PG&E ballooned the capital costs from $60,000 to $500,000.
Hale emphasized that it would be understandable if these upgrades were for safety needs, but PG&E has been demanding the large load capacity requirements for, for example, SF General, at many sites.
“Substantial delays have happened with building or renovating affordable housing because of these upgrade demands,” Hale said. “And it’s not just the added cost, it’s the size. Even if some of these projects gave into PG&E’s demands, the designers are saying we’d have to give up an apartment unit just to fit this upgrade in.”
“And they are demanding this with every facility, not just affordable housing.”
San Francisco has considered buying PG&E’s local infrastructure before. Experts point to Boulder, Colorado, as an example of the hurdles a city faces trying to acquire a private utility for public use. In 2011, when Boulder citizens voted for the municipalization of the city’s privately owned, Minnesota-based utility into a public one, it started a political and legal battle in the community that rages to this day.
The International Brotherhood of Electrical Workers Local 124, representing approximately 17,000 PG&E employees and contractors, is already on record in its opposition to the city’s plan to acquire the local grid “because of potential disruptions to workers' mobility and existing benefits, seniority, pensions, and medical coverage.” (The report tried to address those fears, claiming “PG&E’s existing workforce would be welcomed into SFPUC’s community-owned public service culture, where safety and efficiency are priorities.”)
Meanwhile, as bankruptcy lawyers haggle behind closed doors over the value of lost lives, fire season gets closer and closer. PG&E customers are even buying up generators because of the company’s new policy of shutting down parts of the grid during high fire risk episodes, basically replacing the utility house by house — and adding more greenhouse gas emissions from the generators in the process.
As bad as it looks for the future of the utility, they’ve found a way out of this house on fire before. The fact is there are many investors, not just SFPUC, ready to put their money into PG&E to make a fortune on their own energy futures. If San Francisco is serious about buying out PG&E, it will need to move quickly and with confidence.
That’s because, according to The Mercury News, AB1054 will complicate how San Francisco or other communities can buy out local infrastructure.
"Our analysis is that the late, last-minute amendments to AB 1054 not related to wildfires will make purchasing PG&E assets in San Francisco more difficult,” Will Reisman SFPUC Press Secretary, said. “Currently, Mayor Breed’s office is in contact with Governor Newsom's team to address our concerns. We are continuing to move with forward with our study on public power options for San Francisco, and remain committed to finding a solution that provides safe, reliable and clean electricity for the residents and businesses of this city."