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A pawn, a $350,000 study & taking $12M out of people’s pockets

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POSTED May 30, 2013 1:51 a.m.

One man’s due diligence is costing more than 40,000 households, business, and farmers $12 million a year.

James Glaser - the gatekeeper of the San Joaquin Local Agency Formation Commission - is the linchpin for moving a proposal to have the people of Manteca, Ripon, and Escalon control a vital component of the local economy and not a for-profit corporation in San Francisco. Glaser is the man who decides when the LAFCo board will decide the fate of the South San Joaquin Irrigation District’s proposal to enter the retail business.

No problem there. It is his job. But the question is why is it taking 46 months and counting?

The wheels of government are said to move slowly but there is a point when it stops looking like due diligence and takes on characteristics of foot dragging or fear.

Glaser has said he’d like to make sure all of the “T”s are crossed and the “I”s dotted knowing there is a strong likelihood the David vs. Goliath fight will probably head to court after it leaves LAFCo. That in itself is a Herculean task given PG&E’s history after they brokered a deregulation deal on the premise it would lower rates only to see the unchained private power sector jolt customers with sky high rate increases while making brownouts synonymous with the Golden State.

He also has voiced concern that “little old grandmothers” might be left out in the cold. He is referencing discount programs PG&E has in place - through California Public Utilities Commission edicts - to help individuals who are on limited income.

It is also a concern shared by the SSJID board that has crafted policies to make sure they offer the same programs that the CPUC requires of privately owned utilities that have quasi-public powers. SSJID has gone a step further and has gone on record with a plan to pay even more in franchisee tax fees to the cities of Manteca, Ripon, and Escalon to keep those municipalities whole and then some. They have spent $6 million plus on redundant studies by economists with expertise in power systems to make sure they can do all of that, buy the PG&E system, upgrade it, and reduce rates by at least 15 percent before even submitting an application to LAFCo 46 months ago.

 Glaser as executive director says LAFCo is in uncharted territory. Not true. They approved an application to carve out a chunk of the PG&E territory costing the utility 11,000 future customers by putting the Lathrop Irrigation District into business. It started with rates 5 percent below PG&E and will hit a 25 percent reduction as customers are added to provide economies of scale. Guess who is running the system as a contracted entity? It’s the SSJID.

An independent study secured by LAFCo concluded that SSJID has the wherewithal to run a retail power system. That is important since in municipal service reviews LAFCo has to determine if the entity is capable and can provide services.

The fun starts when it comes to Government Code Section 56824.14. It requires LAFCo to confirm that a request for a special district has “sufficient revenues” to offer a different service.

Glaser admits his expertise in economics especially in regards to the Byzantine world of electrical power is limited at best. Hence the relying on independent studies of which Glaser now wants a third due to the fact the last one that was done is now three years old and doesn’t reflect today’s power market.

Putting aside the SSJID edge thanks to the double whammy of Tri-Dam receipts and the state mandate that power providers secure renewable green energy that they have to pay a $35 per megawatt premium for, Glaser’s request is reasonable - to a point.

A $350,000 study means the consultant is starting from scratch.  The question that Glaser is seeking the answer to pertains to the economics of the power market and whether SSJID will have the money to pull off the rate reduction. The only thing that’s changed to a large degree is the cost of power and how it plays against the built in bonus of having renewable power that is almost the equivalent of being able to print money.

A laser precise report should do the trick. Asking for the entire thing to be done again understandably opens the door to question motive and whether the LAFCo strategy is to turn this into the bureaucratic equivalent of the 99 Year War to appease Goliath.

While LAFCo fiddles, it is costing Manteca, Ripon, and Escalon residents $12 million a year in money they could save by leaving PG&E behind.

The power struggle between SSJID and PG&E started in the mid-1990s. That’s when SSJID realized they had the ability and financial means once Tri-Dam bonds were paid off to take advantage of the deal PG&E and Southern Consolidated Electric brokered to get the necessary votes for deregulation.

It created a limited number of credits for free use of transmission lines of existing utilities for irrigation districts to buy and then distribute power within their jurisdictions. The ability to access those exemptions have long since expired but not until SSJID made three attempts to take advantage of them but were blocked each time by PG&E.

The $350,000 question is whether LAFCo is now a pawn in PG&E’s latest bid to protect their interests at the expense of the people.

This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA.  He can be contacted at dwyatt@mantecabulletin.com or 209-249-3519.

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