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PG&E makes it clear: Its about profit
Court papers quote CEO remarks on push for Prop. 16
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PG&E’s bid to amend the California Constitution in the June 8 election - Proposition 16 - is the subject of a League of Women’s Voters forum taking place Monday, May 3, from 7 to 8:30 p.m. in the McFall Room of the Manteca Library at 320 W. Center St.

The League of Women Voters of California has taken a position against Proposition 16 that is the brainchild of PG&E which is the only contributor to the $35 million campaign to get it passed. The measure essentially requires a two thirds approval of voters before a local jurisdiction can enter the retail power business.

Speaking will be SSJID General Manager Jeff Shields who will explain the Manteca-based public agency’s plans to provide electric service. Cate White will explain the League’s position. The League did not invite PG&E to attend.

Passage of Proposition 16 would require a two-thirds vote to not only establish a new public electrical service agency anywhere within PG&E territory but it would also require a two-thirds vote if a public power agency wanted to add additional territory or possibly even increase its electric load depending upon how language is interpreted.

PG&E Chief Executive Officer Peter Darbee’s unguarded comments at a gathering of investors made it clear that the for-profit utility only bankrolled Proposition 16 to protect its monopoly in Northern California communities such as Manteca, Ripon, and Lathrop.

The remarks from a March 1 meeting are included in legal documents filed in Sacramento Superior Court on Wednesday as part of the lawsuit that a group of public utilities including the Modesto Irrigation District filed in a bid to get Proposition 16 disqualified from the June 8 ballot.

Darbee’s comments undermine PG&E’s official line that Proposition 16 is about protecting the right to vote but instead is designed to “greatly diminish” the chance anyone would conduct an election to succeed from PG&E control.

Darbee is quoted as saying, the “idea was to diminish. You know, rather than year after year different communities coming in (as) this or that and putting this up for vote and having us spend millions and millions of shareholders to defend it repeatedly, we felt this was a way that we could sort of diminish that level. . .”  Proposition 16, which PG&E drafted and qualified for the ballot and is now the only source of funds for the $35 million campaign blitz to get the measure passed, is being touted by PG&E as a right to vote measure. It requires a two thirds vote of any jurisdiction before they can create or expand a public utility.

Critics have lambasted the measure noting that the measure didn’t simply ask for a simple majority but a two thirds vote that greatly enhances protection of PG&E’s monetary interest.

Under state law, none of the public utilities that PG&E is targeting the measure at can spend money on a “no campaign” but PG&E is free to spend as much as it wishes.

“This was never about PG&E being worried about protecting voting rights,” noted South San Joaquin Irrigation District General Manager Jeff Shields. “This is about protecting PG&E from competition.”

SSJID is currently in the 10th year of struggle to enter the retail power business in a bid to reduce rates across the board by at least 15 percent in Manteca, Ripon, and Escalon.

They are now awaiting a San Joaquin Local Agency Formation Commission decision on whether they will be given the OK to enter the retail business after 54 years-plus as a flawless provider of wholesale power to other agencies including PG&E.

PG&E blocked other SSJID attempts to enter retail business
In an ironic twist, SSJID decided to consider entering the retail power business on a carrot extended by PG&E and other major California utilities to sway the state legislature to de-regulate public utilities when Gray Davis was governor.

The utilities led by PG&E offered irrigation districts such as SSJID the opportunity to obtain exemptions from transmission charges for a set number of years to help get them started in the retail power business.

SSJID was the only irrigation district in the state to take up the utilities on the offer they made in good faith as part of bargaining with the legislature to reduce regulations governing their activities.

There had been three different efforts to jump start SSJID’s retail power business working with PG&E. In several instances, PG&E blocked efforts to inter-tie with a new substation to start service to smaller areas of the 72,000-acre district. One was on Lovelace Road near Delicato Vineyards and the other was tying in at the old Heinz plant in Tracy. The third time PG&E offered to sell SSJID an aging system south of Manteca to the Stanislaus River that at the time had many improvements dating back to the 1920s.

SSJID has $61M set aside to help its effort
The SSJID board’s confidence that they can lower rates significantly is based on $61 million accumulating in an undistributed reserve from the board’s stewardship of the district’s share of hydroelectric revenue from the Tri-Dam Project SSJID operates in conjunction with Oakdale irrigation District.
The district plans to launch the retail system with $10 million from its undistributed reserves. The fact they will still have almost $45 million in undistributed reserves the year after starting the system will allow the district to secure high investment grade ratings for taxable and non-taxable bonds to acquire and upgrade the system.

In the initial four years that would be an $8.7 million annual debt service. Even if Tri-Dam didn’t generate another penny – which is highly unlikely as it has been bringing in a minimum of $10 million a year from power sales – and the district didn’t collect a dime from its systems, the SSJID could still pay debt service and have money left in its bank accounts.

That undistributed cash reserves are expected to reach $75 million by 2014 after retail start-up expenses are incurred. The undistributed cash reserve is designed as a safety salve should the district ever need help making its debt service on retail power. It is what will allow the district to retain the highest possible bond rating.  The annual debt level peaks out at $10.8 million annually after five years and stays that way until bonds are paid off in 2040.

The business plan also provides for capital improvements to be made to the system after the initial start-up and upgrades five years into the SSJID selling retail power. It starts at $3.3 million a year and escalates up to $7.1 million annually by 2040.

Based on bond counsel research, the SSJID’s business plan would continually build an ending cash balance each year starting at $15.7 million the first year, reaching $45.8 million after five years, $90.8 million in 10 years, $319.9 million in 20 years, and $764.6 million in 30 years.

The Tri-Dam Project was financed by selling wholesale power to PG&E over 50 years. Tri-Dam is a series of three dams with hydroelectric plants on the Stanislaus River. After the bonds were paid off, instead of money going to debt service it went to unrestricted cash reserves.

The SSJID estimates they can put $140 million back in the pocket of local businesses, families, and government agencies during the first 10 years of providing retail service due to lower rates.