San Francisco offered Pacific Gas and Electric Company (PG&E) $2.5 billion to purchase its power infrastructure that serves the city.
The offer, which was outlined in a Sept. 6 letter sent by the city to PG&E, comes as the utility seeks Chapter 11 bankruptcy protection. PG&E owes billions of dollars in liability costs for its role in sparking deadly California wildfires in 2017 and 2018.
San Francisco officials stated they believe the acquisition would be mutually beneficial, allowing PG&E to maximize value for its stakeholders while the city could provide stable rates to customers at or below those of PG&E, as well as the ability to focus on local concerns such as its climate action goals.
So far though, PG&E has shown little interest and disputes the city’s claim that it would provide cheaper, more reliable power.
“To be clear, PG&E’s San Francisco electric system is not for sale,” PG&E spokesperson Jennifer Robison said. “The purchase offer falls significantly below the actual value of PG&E facilities that San Francisco seeks to purchase.”
The city, which has for decades toyed with the idea of separating from private power, already supplies nearly 80% of its own power needs through Hetch Hetchy Power and CleanPowerSf Community Choice Aggregation program, which is distributed through PG&E infrastructure.
But a statement from PG&E spokesperson Andy Castagnola did indicate the utility is “open to communication” on the issue.
Barbara Hale, the San Francisco Public Utilities Commission assistant general manager in charge of power, called the response “half full, half empty.”
“I’m focusing on the part where they say they’ll talk to us,” Hale said. “I’m going to wait and see.”
“The offer we made is a premium value offer in an expedited bankruptcy setting,” Hale added.
Per state legislation passed earlier this year, PG&E will need to exit bankruptcy protection by June 2020 in order to participate in a state wildfire relief fund.
If PG&E decides to sell, San Francisco would utilize money from a municipal power bond approved by voters last year, recouping the cost via customer’s electricity bills. The deal would still need to clear other hurdles, such as approval from state and federal regulators.
Poll results released by Mayor London Breed in April indicated 68% voter approval for publicly owned power. But voters rejected measures to move the city toward municipal power in 2001 and 2008.
Among the most vocal opponents of the acquisition has been the International Brotherhood of Electrical Workers Local 1245, a labor union representing 12,000 PG&E employees.
According to Tom Dalzell, a union lawyer and Local 1245’s business manager, the change in ownership would diminish workers’ pension plans. PG&E union agreements require 30 years of service and 55 years of age to receive a full pension, and most employees would likely remain with PG&E rather than work for the city and take the hit, according to Dalzell.
“The city will be out there looking for a lot of very skilled workers to work in a very idiosyncratic, very complex network system,” Dalzell said.
Plus, PG&E has access to thousands of employees in the greater Bay Area who can respond instantly, whereas a municipality would need to call a contractor and negotiate prices — which could create serious reliability issues, according to Dalzell.
But those aren’t his only concerns.
The expansiveness of PG&E’s service territory allows the utility’s many customers to pay less individually for costs ensued from expensive fire-prone areas, according to Dalzell.
“San Francisco’s saying ‘we are a cooler coastal area with very low risk of fire, so screw the rest of California, we’re going to save a little bit of money,’” Dalzell said. “I don’t think the Board of Supervisors cares one little bit, or mayor Breed.”
According to Hale, PG&E customers outside San Francisco would see their rates increase, but only by a dollar or less.
“We are a relatively small part of PG&E’s electric service,” said Hale, who added that the city would continue to purchase high voltage power that carries increased costs as PG&E addresses wildfire woes.
“We’re not through this proposal avoiding paying San Francisco’s share of those costs,” Hale said.
According to Dalzell, if the city was able to strike a deal it would probably be closer to $6 billion or more.
City officials plan to meet with PG&E CEO William Johnson Sept. 26 to discuss the proposal further.