View Mobile Site

Depreciation, age factors put value of PG&E system at $65.1 million

Text Size: Small Large Medium
POSTED September 10, 2009 2:32 a.m.
A typical PG&E power pole and line serving Manteca, Ripon, and Escalon is 37 years-old.

That age factor – determined by experts with a global track record dealing with infrastructure – was gleaned by sampling pole date stamps and nails in the overhead portion of the 800 miles of distribution feeds serving power customers within the South San Joaquin Irrigation District boundaries.

That – when coupled with PG&E’s own depreciation information filed annually with the Federal Energy Regulation Commission prompted R.W. Beck – the firm secured by SSJID to appraise the PG&E retail system – to indicate $65,116,000 as the just compensation for the PG&E system.

PG&E, through various spokespersons, claims the value is $400 million.

The rub comes when determining what constitutes fair market value under California law. PG&E’s figure is based on replacement value. However, due to aging components and the fact PG&E itself has depreciated much of the South County system and used that deprecation schedule to reduce their corporate taxes, the fair market value would be less than replacement cost.

Should SSJID secure San Joaquin County Local Agency Formation Commission permission to enter the retail power business, it is clear that PG&E doesn’t want to follow the deprecation route that they had applied to reduce their tax liability. Unless the two agencies come to an agreement at fair market value, the issue of price ultimately would be determined by the San Joaquin County Superior Court.

The goal of SSJID is to lower power rates 15 percent across the board as well as to improve service reliability.

R. W. Beck is a global concern with 24 offices across North America and one office in Singapore. It has project experience in more than 70 countries and territories across six continents.

PG&E government relations representative Emily Barnett last week ridiculed the SSJID saying no appraiser could possibly know the worth of the PG&E system since they can’t see what is underground.

R.W. Beck analyzed city building permits required before developers could put in the infrastructure for PG&E which they have to turn over at no charge plus pay PG&E 34 percent of its value so the utility doesn’t have to pay taxes on the improvements they receive for free.

They also poured over numerous PG&E public filings pertaining to their infrastructure. Visual inspections of visible components of the underground system – vaults and boxes – also provided a good insight into what was underground.

SSJID General Manager Jeff Shields noted that engineers such as the ones R.W. Beck employs that specialize in electrical power systems can determine what equipment is by tell-tale signs such as the type of wiring.

That led R.W. Beck to conclude the average age of underground facilities in the SSJID service territory is 21 years.

The inventory list the independent firm hired by SSJID included approximately 7,593 transformers of which 72 percent are overhead. There are also about 31,604 service drops.

SSJID has posted the appraisal on its website at www.ssjid.com for public review. PG&E – which for the past year through representatives such as Barnett has demanded SSJID produce an appraisal - has not made a similar report available to the public on its system serving Manteca, Ripon, and Escalon at its website that can be accessed at www.pge.com nor have they produced it at any public forum as SSJID has.

Ultimately, if the courts decide the price tag, a judge could order yet another independent appraisal be conducted.

The R.W. Beck study puts the fair market value on the PG&E system within the SSJID territory at $61 million. It added $1,958,000 for severance damages and $2,158,000 for substation impairment to bring the total just compensation to $65,116,000.
Commenting is not available.

Commenting not available.

Please wait ...