San Francisco eyes PG&E utility’s grid assets for ‘total power independence’

As Pacific Gas and Electric Co. and its parent company PG&E Corp. struggle to formulate a plan of reorganization in their joint Chapter 11 bankruptcy proceeding, their hometown of San Francisco is advancing a plan of escape.

San Francisco’s exploration of full independence from the utility through the possible purchase of its electric distribution assets serving the city is entering the next phase, according to a preliminary report released May 13.

“While any sort of acquisition of [Pacific Gas and Electric, or 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,” Harlan Kelly, general manager of the San Francisco Public Utilities Commission, said in a letter to Mayor London Breed accompanying the report.

“Initial research shows total power independence would make meeting the city’s goal of being 100% carbon neutral by 2030 much less difficult,” Kelly added, while also leading to “more stable rates and more transparency for customers.”

The report follows a March 14 letter from Breed and City Attorney Dennis Herrera to top executives at PG&E Corp. underscoring the city’s “seriousness” of a possible takeover offer for PG&E power lines that serve the city and county of San Francisco, where the utility is based.

The San Francisco Public Utilities Commission already supplies power to the city’s municipal operations from hydroelectric power plants within its Hetch Hetchy Power System, as well as solar facilities on city property, and also procures power for retail electric customers through CleanPowerSF, a local power agency set up under California’s community choice aggregation model. But San Francisco still relies on PG&E to deliver the vast majority of power derived from Hetch Hetchy and CleanPowerSF.

SCENARIOS

Scenarios explored in the report game out three options for San Francisco’s future relationship with the embattled utility, ranging from a continuation of the status quo to San Francisco’s “full independence from PG&E.” Under the latter, the public utility would purchase PG&E’s physical assets in and near San Francisco for a roughly estimated “few billion dollars” to serve some 400,000 accounts with a collective peak power demand of 1,000 MW, according to the preliminary report. The asset purchase would be funded by revenue bonds.

Under the full independence model, San Francisco would also offer employment to PG&E’s union and other employees that currently manage the local grid, the report said.

“The next phase of the analysis will go deeper,” Kelly added in his letter to the mayor, by exploring the impacts of acquiring PG&E’s distribution assets on affordability, safety, reliability, workforce, environmental justice, neighborhood revitalization and community engagement. “This analysis will also include the impact of San Francisco’s departure from the larger PG&E system on other ratepayers across California,” he said.

— Garrett Hering, S&P Global Market Intelligence, newsdesk@spglobal.com

— Edited by Pankti Mehta, newsdesk@spglobal.com

 

San Francisco eyes PG&E utility’s grid assets for ‘total power independence’, by Garrett Hering, S&P Global, May 14, 2019.

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