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Can SSJID legally pay fees to keep Manteca ‘whole’?

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POSTED July 9, 2012 1:41 a.m.

Can South San Joaquin Irrigation District under state law legally pay franchise fees to the cities of Manteca, Ripon, and Escalon?

 It is the latest question to come up in the two-year odyssey of the San Joaquin Local Agency Formation Commission’s review of a SSJID request to enter the retail power business within its boundaries.

Currently PG&E provides Manteca with a state allowed and city mandated 2 percent franchise fee on its total electrical sales within the city limits. That fee accounted for a projected $510,000 in general fund receipts for the city in the fiscal year that ended June 30. The SSJID is committing to give all three cities a 2.5 percent franchise fee. If SSJID and not PG&E were the retail provider in Manteca last fiscal year that would have meant $35,000 more for Manteca’s distressed general fund or $545,000 once SSJID’s projected 15 percent in reduction of power rates are factored into the equation.

Keeping the franchise fee and sweetening a bit was one of the selling points SSJID made when securing the endorsement of those retail power plan from the three cities. The SSJID vowed to keep the three cities financially whole by paying the franchise fees that are not legally required by a public utility.

Manteca - if SSJID becomes the provider and lowers the rates 15 percent below PG&E’s levels - would save $270,000 on its aggregate annual electrical bill.

If it is determined state law prohibits a public utility or irrigation district such as SSJID from paying franchise fees to a city that would mean the switch to SSJID would result in a net loss of $140,000 a year to the City of Manteca.

The SSJID board on Tuesday is being asked to consider sending LAFCo another $50,000 for that agency’s legal fees to study the franchise fee question as well as another review of a LAFCo legal opinion on whether SSJID can legally pursue a Community Choice Aggregation plan instead providing direct retail service and still accomplish its goal of lowering power rates.

The SSJID has given LAFCo $156,000 so far for legal fees.

The additional environmental impact report study for the CCA option is costing SSJID over $100,000. Creating a CCA would allow the district to aggregate the buying power of individual consumers with its boundaries in order to secure better rates from alternative energy contracts with other generators of electricity that in turn would be delivered over PG&E lines with a surcharge attached.

SSJID hired experts to study the CCA option more than four years ago. They determined it was not the most effective way to reduce costs as it would not save individuals, businesses, farmers, and government agencies a s much as if the SSJID took over the retail distribution system.

In addition, PG&E has vigorously fought efforts in San Francisco and Marin County by communities to implement CCAs.

The SSJID board is addressing the CCA option to avoid a possible lawsuit afterwards by PG&E that all options weren’t addressed if LAFCo makes a decision favorable to allowing the 103-year-old irrigation district to enter the retail power business.

One of the previous delays in the review process involved PG&E wanting an independent consulting firm with expertise in public agencies taking over retail power systems to evaluate SSJID’s ability to do so.

The firm that LAFCo picked was recommended by PG&E with SSJID picking up the cost of the study. That study in a nutshell determined SSJID is capable of running a retail system and has the financial resources needed to deliver electricity at 15 percent less than PG&E by investing annual Tri-Dam Project receipts into the retail operations.

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