Lloyd Haworth insisted.
The longtime South San Joaquin Irrigation District board member was convinced in 2000 that the agency had a moral obligation to invest the financial bonanza that farmers harvested over the course of nearly a century with the security of property owners throughout Manteca, Ripon and Escalon so that everyone could share in the benefits of the Tri-Dam Project.
The district had dusted off a 1988 report that showed the SSJID could provide lower retail power to customers within its service boundaries. The study had been filed away until Pacific Gas & Electric brownouts started hammering the area in 2000. Farmers were the most vulnerable as their service was cut off first.
It was the year that SSJID started a 14-year journey in earnest in a bid to bring both local control and lower prices to Manteca, Ripon, and Escalon when it comes to energy.
On Thursday, the SSJID cleared a major hurdle to helping the vision that the late dairy farmer and rural Manteca resident helped push. The San Joaquin County Local Agency Formation Commission agreed that SSJID should be allowed to provide for the fourth and final service the state constitution allows irrigations districts to provide — retail power sales. The district already provides the other three services allowed: irrigation water, urban water, and wholesale power production.
The switch from PG&E to SSJID won’t happen overnight. The vote Thursday made it possible for the SSJID to resubmit a formal offer to purchase the for-profit utility’s system within the irrigation district’s boundaries.
Should the district’s good faith offer not be accepted by PG&E, then the SSJID can initiate eminent domain proceedings.
“With LAFCo providing SSJID the authority to include retail energy services as a district business line, we now have an opportunity to pursue a variety of options to meet our community’s energy needs,” noted Jeff Shields who serves as SSJID general manager. “We have a proposal that would reward PG&E and their shareholders while also providing benefit to the customers that remain with PG&E. I would hope that PG&E chooses a negotiation prices rather than a litigation process but only their executives can make that decision.”
“The LAFCo process was long and costly to everyone involved. But more concerning is the toll it takes on the community and the company. These processes are like elections in that they can become quite divisive. We have engaged PG&E in a variety of venues over the past several years in an effort to accomplish our goals of local control and reduced rates, whether at the ballot box (Proposition 16) or legislation or through intervening at the California Public Utilities Commission.”
“Today we have an opportunity to move forward in a positive light. We will reach out to PG&E in that spirit and hope they will ask their lawyers to stand down and their executives step in and negotiate.”
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Price for PG&E system is key point
The SSJID board during their Tuesday meeting will discuss negotiation strategies to purchase the PG&E system behind closed doors as allowed under state law.
LAFCo staff had tried to get SSJID to put a cap on the price they were willing to pay but the commissioners rebuffed such a stipulation as it would have provided PG&E with valuable information on how high SSJID would be willing to go.
The cantankerous debate over the price for the system — it has ranged from a book value of $48 million from a 2009 study to claims at some points by PG&E spokespeople during the past four years that it was worth as much as $450 million — is key to negotiations and the SSJID effort to deliver on a commitment to lower retail power prices 15 percent across the board.
Shields expects the price to be higher than the 2009 study mainly because PG&E has been making upgrades to the system serving the three communities.
Should the matter go the eminent domain route and end up in court, previous judicial decisions have put an upper selling of roughly 1.5 times the book value for what PG&E receives when a local agency takes over part of their service territory as they did in Trinity County, Susanville and Hayfork.
Just recently PG&E itself bought the City of Hercules electrical retail power system for 1.28 times over book value.
Book value sets a price on the system’s infrastructure taking into account age and depreciation among other things.
Another major dollar item are the exit fees SSJID will be required to pay PG&E for taking over their South County service area. The fees reflect other investments in infrastructure PG&E made in order to serve the three communities. The CPUC established two rates one for smaller systems carved out form a for-profit utility’s service territory and the other for larger systems. LAFCo staff assumed it would be the bigger charge base on the assumption SSJID would be a large system. Shields said the SSJID’s reading of the law would make their system a small one and therefore have lower exit fee rates.
SSJID made it clear that power revenues from retail sales will never be taped to subsidize the irrigation system nor will the receipts from water deliveries to local farmers help pay for retail electrical service operations.
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SMUD rates 35% below PG&E rates
SSJID will not do what Modesto Irrigation District does which is using some of its power sales revenues to reduce irrigation water costs. MID retail power rates are 13 percent below PG&E’s.
The Sacramento Municipal Utility District doesn’t subsidize anything using their retail electricity sales. As a result, SMUD has electricity rates 35 percent lower than PG&E.
On Thursday, the district reaffirmed the board’s previous commitments to:
• offer the same energy conservation programs that PG&E provides.
• make the cities of Manteca, Ripon, and Escalon whole for the loss of PG&E franchise fees that go into a city’s general fund. They will do the same with property taxes that jurisdictions within SSJID territory would lose as well.
• keep in place all programs that help provide the low-income with less expensive electricity. Those rates also will be reduced 15 percent across the board.
SSJID was able to successfully avoid having to put in place the same amount of money that PG&E does for the area under public purpose endeavors. The SSJID will keep the actual funding level for the specific programs available but won’t keep set aside in place equal to 42 percent of the overall expenditure. That’s what PG&E takes out of public purpose set aside funds currently for overhead and profit. Instead, SSJID will put that money toward lower rates.
Shields noted not having to worry about a profit is a key to helping SSJID provide lower retail power prices.
“This is a good opportunity to sit down and discuss business,” Shields said of the new chapter in its ongoing enjoyment of PG&E over SSJID entering into the retail power business.