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SSJID clears vote in bid to take over PG&E in Manteca, Ripon, Escalon

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POSTED December 12, 2014 1:26 a.m.

STOCKTON – It took 63 months, millions of dollars and a community coalition that seemed to swell as more time went on. 

But the South San Joaquin Irrigation District has finally cleared the insurmountable hurdle – the Local Agency Formation Commission – and is one step closer to entering the retail power business by making a play for PG&E’s existing distribution network to 60,000 customers in Manteca, Ripon and Escalon. 

And now the battle begins. 

After a special two-day public hearing, the LAFCo commission voted 4-1, with public member and chairman Steve Nilssen dissenting, to accept the mountains of documents that SSJID had commissioned and completed at the request of the agency and give the green light that will allow SSJID to expand its existing utility services. 

The district was shot down by the same agency when making the same request in 2006. That decision sparked several legal battles that gave PG&E lawyers what they felt was a solid foundation for dismissal.

Many of the details were ironed out on the fly – Stockton-based land-use attorney Steve Herum, who was representing SSJID, pitched several “conditions” for approval Tuesday morning that hadn’t been seen by either the LAFCo staff or the PG&E legal team. The decision will only open the door towards future negotiations between the two entities as they search for what SSJID General Manager Jeff Shields hopes is an amicable solution. 

He isn’t holding his breath. 

“They tend to treat cases like this like they’re precedent, and I don’t understand why it has to be that way because this has the chance to be something that’s really good for the company and its investors,” Shields said. “We made a standing of $75 million for their existing system and we’ll probably resubmit that offer right away – maybe after the holidays. 

“I think that if you look up and down the State of California there are plenty of great examples of why these things work, and I think that when people look back on this decision down the road they’re going to see that it was something ultimately that was very good for everybody involved.”

The next phase of the fight will more than likely play itself out in a courtroom. 

High-powered Los Angeles real estate litigator George Soneff told the commission that a protracted lawsuit is a “very likely scenario” as the next step given the legal precedence that he was already set when SSJID filed suit against LAFCo the first time their application was denied and lost. 

Soneff, who represented PG&E during the on-the-fly negotiations late in the day with LAFCo counsel and opposite Herum, said that be felt it was hard to see any benefits from the district’s pitch when the sheer volume of risk makes it easy to see that it’s anything but a safe bet. 

“We have maintained that SSJID’s plan poses significant risks to the safety, reliability and affordability of retail electric service for our customers and are disappointed that the SJ LAFCo has approved – with conditions – SSJID’s proposed takeover of retail electric service in Manteca, Ripon and Escalon,” PG&E spokesperson Nicole Liebelt said in a statement. We have also agreed with LAFCo’s staff recommendations that highlighted the risks, costs and issues related to SSJID’s plan. 

“We still believe that SSJID’s plan is not in the best interest of our customers, greatly underestimates the value of our facilities and does not resolve or address the stranded service of customers in the border areas near the Stanislaus River. We fully intend to participate in the next steps of the legal process to protect and advocate for the best interest of our customers.”

Other items included in the discussion were:

• How SSJID would make agencies that will lose out on PG&E tax base “whole” if they’re not legally obligated to pay property tax or franchise fees. 

• How the district plans on getting down to the 15 percent rate reduction mark and when they’ll know exactly when they’ve reached that threshold – something that will be dependent upon not only the sale price of PG&E’s existing system, but all necessary exit fees as well. 

• Making clear distinguishing differences between money generated by and through the sale and distribution of irrigation water and that of power from the Tri-Dam project. One of PG&E’s stipulations was that money from the retail power business not be used to supplement the water delivery system. 

Just because SSJID has gotten the nod from LAFCo, however, doesn’t mean that they’re obligated to act. 

The next phase, which will more than likely involve SSJID needing to use eminent domain to acquire PG&E’s system (any amount above book value, Shields said, will offset the need to pay capital gains tax) will hinge on the agreed-upon value. If SSJID doesn’t like the terms, they can choose not to proceed, but would then be on the hook for all of PG&E’s legal fees pertaining to the matter.

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