Fracking - and the subsequent surge in natural gas supplies it has helped trigger - is expected to enhance South San Joaquin Irrigation District’s ability to lower electrical rates across the board 15 percent in Manteca, Ripon, and Escalon.
The SSJID has been advised by San Joaquin Local Agency Formation Commission officials to expect the irrigation district’s request to enter the retail power business to be placed on a November meeting agenda.
An independent analysis of the SSJID proposal commissioned by LAFCo concludes that the district is both capable of running retail power operations and has the financial wherewithal to deliver rates at 15 percent below what PG&E charges. The crux of the SSJID plan requires them to acquire the PG&E distribution system in Manteca, Ripon, and Escalon.
SSJID General Manager Jeff Shields noted this week since the independent studies were completed the district is on even sounder footing for its plan to lower power rates.
Shields credits it to a surplus of natural gas made possible by fracking techniques. That surplus is driving down prices for natural gas that fuel a number of power generation plants.
Sixty percent of PG&E charges are for the actual purchase or generation of electricity.
“That’s a significant part of your power bill,” Shields said. “A drop in that cost will definitely drop retail power charges.”
Documents pertaining to the SSJID’s application that were prepared by independent consultants can be downloaded from the LAFCo website at www.co.san-joaquin.ca.is/lafco/
Dropping power costs at first glance would seem to be problematic for the SSJID plan since cheaper electricity produced by natural gas would impact hydroelectric power. The district’s ability to lower power costs is predicated on net receipts from the Tri-Dam Project. Tri-Dam generates between $12 million and $15 million a year historically in net revenue for the SSJID. The district plans to use a large chunk of more than $70 million from Tri-Dam that they’ve squirreled away to buy and finance the purchase of the PG&E system. The independent studies have shown that the SSJID can make 15 percent lower power happen by diverting part of the Tri-Dam receipts each year to the retail power operations. The SSJID board has already voted to do exactly that.
That money will also be used to secure a long-term power contract. The Tri-Dam power per se would continue to be sold primarily on the much more profitable peak market
SSJID has a built in hedge since half of the more than 120 kilowatts the system generates qualifies for California’s Renewable Energy Credit (REC) program. A certain amount of REC credits must be generated or secured annually by manufacturers to stay in compliance with state air quality laws and not be subjected to stiff fines. As such, qualified green renewable energy commands a higher price.
So as natural gas prices drop, only a portion of the Tri-Dam power generation is impacted in terms of market price.