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SSJID throws down gauntlet

Retail power move could save typical family $349 a year

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POSTED September 4, 2009 2:53 a.m.
South San Joaquin Irrigation District is forging ahead in its bid to replace PG&E as the retail power provider in Manteca, Ripon, and Escalon with the goal of reducing rates by 15 percent across the board and enhancing reliability.

Meeting in an open-sided vehicle maintenance shed as the summer valley heat warmed up to the mid-90s, the elected board comprised of four farmers and a retired construction inspector voted unanimously to continue its David vs. Goliath fight. It was a stark contrast to the air conditioned plush board room in the San Francisco skyscraper where PG&E’s governing board runs the for-profit concern away from public input.

Parked outside was the SSJID fleet – workhouse Chevrolet Silverado pickup trucks and a couple of Suburbans -  without a $12 million corporate jet in sight.

It was also out of range of the SSJID’s wireless computer network – the same one a consultant working for PG&E hacked into sensitive computer files pertaining in SSJID’s retail power strategy while working on a laptop computer in the rear of the boardroom during a public meeting.  That incident prompted an FBI inquiry and ended up with PG&E paying $446,161.70 to SSJID to cover legal and other damages the corporate espionage inflicted on the irrigation district.

The decision Thursday means a return trip to the San Joaquin County Local Agency Formation Commission where their application to enter the retail power business was denied in 2006.

Emily Barnett, PG&E’s government relations representative, slammed the board for returning to that venue telling them during Thursday’s hearing that they were submitted the same “flawed” application in 2006 and have simply wasted $12 million that was gleaned from SSJID’s profits from Tri-Dam power sales to PG&E that PG&E paid for cents on the dollar and then marked up and sold the power to its customers.

Mark Oliver – a former Manteca Chamber of Commerce president who attended a luncheon several years ago where PG&E representatives virtually shouted down the SSJID speaker – countered that Barnett was misconstruing what happened. Oliver pointed out the LAFCO staff recommended approval and that it was because SSJID “didn’t play the political  game” with board members that they lost.

PG&E last time crafted the entire issue before LAFCO in terms of eminent domain even though that isn’t a concern of the LAFCO board. They went as far as with Barnett doing the task – to enlist Manteca Chamber of Commerce Chief Executive Officer Debby Moorhead who also serves now as a Manteca  council member to become head of  the Stop the Power Grab organization that PG&E set up to battle SSJID.

PG&E enlisted chamber support on One Voice trip
Barnett enlisted Moorhead during a One Voice lobbying trip in Washington, D.C.

Stop the Power Grab – working in concert with the then  Manteca Chamber of Commerce board – came out with a resolution that said they were against eminent domain being used. Barnett – who sat on the chamber board at the time – made an unsuccessful effort to stop the watering down of the chamber’s resolution. Originally the chamber’s resolution – on Barnett’s insistence – specifically spoke against a public agency such as SSJID using eminent domain to take over a private concern.

The chamber has already stated it is not taking a position this time around.

Moorhead, though, will be asked to take a position on a proposed franchise agreement with the City of Manteca that SSJID has submitted that would give the city 20 percent more money than PG&E pays them on an annual basis, has a performance clause that assures a much more rapid turnaround than PG&E has in answering city calls for service, and also ultimately cuts power  costs for the city by $300,000 a year. Similar franchise agreements are being crafted with the cities of Escalon and Ripon.

That vote is expected within the next month.

SSJID board member John Holbrook on Thursday took on the eminent domain issue head-on after it was brought up by Stop the Power Grab President Brian Regnart and California Alliance to Protect property Rights President Marko Mlikotin.

Both spoke against what they called the abuse of eminent domain by government agencies to take over private businesses such as PG&E.

Holbrook asked why neither organization speaks out against PG&E’s use of  eminent domain – a power PG&E has as a quasi-public agency.

He told of a Delta farmer who lost a large swath of his farmland for PG&E power poles recently and is only receiving $1,000. The farmer had no say in stopping PG&E from taking the property.

PG&E calls SSJID proposal risky
“It’s disappointing that SSJID is planning to spend even more taxpayer money on a risky plan to take over PG&E’s electric system through eminent domain, particularly during these difficult economic times,” said Nancy McFadden, senior vice president of Public Affairs for PG&E in a press release. “If SSJID truly was interested in making a difference in these communities, it would use its $74 million surplus … to keep police on the streets, staff local fire stations and keep schools open to continue teaching our children.”

SSJID General Manager Jeff Shields at the start of Thursday’s meeting brought up difficult economic times as well.

Shields, though, talked of putting $10 million of that surplus as seed money for retail power to work “to help our struggling community.”

He noted the 15 percent cutback translates to freeing up $11.6 million among the residents, businesses, and government agencies within SSJID territory that could be put back into the community every year. The average family using 1,000 kilowatt hours monthly in Manteca could see savings of $349 a year.

McFadden, who was not at the meeting, also stated in her release that “in order to pursue this hostile takeover of PG&E’s electric business in this area, the SSJID will have to pay fair market value, which would be determined by a court. SSJID would also be financially responsible for building additional infrastructure to separate from PG&E’s grid.

The SSJID doesn’t dispute the framing of her statement but says it has exhaustive studies that place the value for the fair market value and several at $65.1 million. They plan to spend another $63.8 million initially on facilities for separation and increased reliability.

PG&E has counted on SSJID for electricity for some 53 years
McFadden also stated, “SSJID has no experience in providing electric service, and an SSJID takeover could cost more than $400 million in acquisition costs alone.”

The SSJID – through its Tri-Dam partnership – actually has nearly 55 years of service generating and providing wholesale electrical service including 53 years to PG&E.

The LAFCO application delineates how the district has positioned itself to reduce power rates across the board by 15 percent. That represents an initial $11.6 million savings throughout the district in 2011. It also will outline the district’s healthy financial status which includes $61 million in undistributed reserves as well as touch on the experience it has gained in more than 50 years of flawless generation and delivery of wholesale electricity from its Tri-Dam Project on the Stanislaus River.

The LAFCO application outlines how the district plans to provide electrical servcie plus listing how it meets the requirements required by law to take the step of adding retail power service to its repertoire of agricultural water, treated municipal water, and power generation services.

The SSJID move comes at the same time PG&E is moving forward with yet another series of rate increases of 10 percent in the coming year. PG&E is also operating with a protected profit margin of 11.35 percent as the acceptable return on its equity as authorized by the California Public Utilities Commission and Federal Energy Regulatory Commission.

Currently PG&E provides Manteca with a 2 percent franchise fee on its total electrical sales within the city limits that accounted for $495,000 in general fund receipts for the city in the fiscal year that ended June 30. The SSJID is committing to give the city a 2.5 percent franchise fee. If SSJID and not PG&E was the retail provider in Manteca last fiscal year, it would have meant $99,000 or a total of $594,000. That is roughly the salary and benefits of a public safety employee for one year.

The city also would benefit from the 15 percent reduction in electrical bills. With electrical costs to run the city pushing $2 million a year, that would mean a $300,000 annual savings. The bottom line is the City of Manteca would be $399,000 better off financially every year with SSJID as compared to PG&E.

Similar savings would be experienced by Manteca Unified School District, the City of Ripon, City of Escalon. Ripon Unified School District, and Escalon Unified School District.

Even the SSJID would be money ahead. By supplying its own power to run the various district irrigation pumps, the district would save $40,000 a year.

SSJID offering more assistance programs that CPUC mandates for PG&E to provide
In addition, SSJID is working with Manteca to potentially eliminate much of its expensive power load for the wastewater treatment plant. Unlike PG&E that caps solar plants at a million megawatts, SSJID would have no problem with a Manteca system that could wipe out the $1.2 million annual power bill to run the wastewater treatment plant.

PG&E commits 2.85 percent of its revenue to energy savings and assistance program. SSJID’s plan is to provide 4 percent.

SSJID intends to pay competitive wages for all of the retail power workers they will need to run the system. They have had a half century of working with the International Brotherhood of Electrical Workers through Tri-Dam.

Forward thinking since the time the district was formed a century ago coupled with prudent financial management has allowed it to not only have an adequate supply of water for current and future needs but to offer the lowest agricultural water rates in the state. The district hasn’t had a rate increase in over 20 years.

The district also stepped forward to get the cities of Manteca, Tracy, Lathrop, and Escalon to work together to build a state-of-the-art water treatment facility that is helping supply the municipalities with clean water and reduce reliance on dropping underground aquifers that are more and more susceptible to salt water intrusion.
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