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SSJID may net $50M a year
LAFCO study projects wholesale power costs will soar
SSJID’s electricity is 100 percent renewable and green including solar and hydroelectric power - photo by HIME ROMERO
An independent consultant’s study contends South San Joaquin Irrigation District has undervalued PG&E’s assets and underestimated future power costs.

The study was ordered by the San Joaquin Local Agency Formation Commission and funded by SSJID to analyze the feasibility of the Manteca-based irrigation district’s proposal to enter the retail power business in a bid to reduce rates 15 percent across the board below what PG&E is charging. LAFCO must give its approval before SSJID can proceed into the retail power business.

The report makes three key points:

•SSJID has the expertise and the management skills to run a retail power system.

•The departure of Manteca, Ripon, and Escalon from PG&E service territory will not impact remaining PG&E customers financially.

•SSJID underestimated the value of the PG&E system as well as over estimated power costs for the next four years and then underestimated energy costs after that.

The last point involving value and costs prompted the Common Sense San Joaquin Coalition to issue a statement through former PG&E spokesman Jon Tremayne calling for the SSJID “to stop wasting taxpayer money and to immediately drop its ill-conceived government takeover attempt.”

PA Consulting estimated the upfront cost for SSJID to acquire PG&E’s local system would be $249 million to $283 million  which is roughly four times the amount SSJID has estimated the PG&E’s system is valued at plus start-up costs based on a separate consultant study.

SSJID General Manager Jeff Shields did not view the consultant’s report that was released Friday as bad news.

Shields noted that if PA Consulting’s projection on future electricity costs is true then SSJID is sitting on a virtual gold mine through the Tri-Dam System. Presently, SSJID gets $12 million to $15 million a year as its 50 percent cut of the profits from the hydroelectric power system it owns jointly with Oakdale Irrigation District on the Stanislaus River. If PA Consulting modeling is correct, SSJID may soon be netting up to $50 million annually.

Under state law, that money could only go toward water or power operations of the district ad couldn’t be used for other purposes meaning the SSJID would have significant additional revenue under the PA Consulting analysis to put toward lowering retail power costs.

“That’s going to give us a lot of money that we need to do something with and the board has always said it wants to share Tri-Dam benefits by lower electricity costs for everyone,” Shields pointed out.

The SSJID model took a conservative approach and did not include Tri-Dam revenue into the retail power system. As a result, PA Consulting did not factor in any Tri-dam receipts into the equation.

Also, SSJID’s conservative modeling took only $10 million of the $60 million plus that SSJID has stockpiled in undistributed reserves from Tri-Dam receipts in the past five year since they have paid off the bonds and are now setting aside the money.

The $10 million was going to be used to leverage about eight times the investment that included the $65 million purchases of the PG&E system plus inject millions into separation costs and upgrades. SSJID could easily put up $60 million to leverage the higher acquisition costs and improvements.

Shields won’t have exact numbers until the district’s economist completes his review of the PA Consulting numbers expected to be presented on the SSJID board when they meet in Tuesday at 9 a.m. at the district office, 11011 E. Highway 120.

LAFCO study’s numbers spell real bad news for PG&E customers in the future
Even so, Shields noted that SSJID still has an ace in the hole - the annual Tri-Dam revenue.

“We have a natural hedge against higher costs with Tri-Dam,” Shields said.

The system generates 132 megawatts of electricity and is 100 percent renewable. PG&E, on the other hand, purchases 65 percent of its power on the open market.

Shields noted if the PA Consulting’s energy cost curve ends up playing out that would spell real bad news for PG&E customers as he noted PG&E’s projection of future power costs are significantly lower than the estimates by PA Consulting.

“If you’re a PG&E customer you’d better fasten your seatbelt because you’re going to see rate increases like you’ve never seen before,” Shields said.

The LAFCO report notes that “PA finds that the underlying assumptions regarding purchase price would make SSJID’s business plan…financially infeasible without raising assumed rates or infusing more equity than what is assumed.  Furthermore, PA finds that SSJID’s projected cost of power is understated in the long run and therefore could further impact the business plan by resulting in higher rates or additional equity.”

Shields noted the SSJID has additional significant equity set aside. He again emphasized if PA Consulting’s forecast of projected power to be significantly higher than SSJID has estimated, that it is a blessing in disguise as it would bring significantly more money into SSJID’s coffers to reduce retail power costs as opposed to PG&E customers would have to deal with the San Francisco-based for-profit utility’s less favorable position of having to purchase almost two thirds of the electricity they wheel to customers form the open market.

“With massive budget deficits at all levels of government, now is not the time for SSJID to enter into such a high-stakes risk with hundreds of millions of our taxpayer dollars,” Tremayne of Common Sense added. “Teachers are losing their jobs, families are finding it hard to make ends meet, our local cities are cutting back on vital police and fire services, and SSJID is wasting valuable taxpayer resources.”

Shields has noted the SSJID uses public money gleaned from power sales and not tax dollars in its modeling. It is against state law for the SSJID to us that money to help cities and school districts with general fund shortfalls. The SSJID plan, though, would lower power costs at least 15 percent for schools and cities as well as increase the amount of franchise fees that PG&E currently pays Manteca, Ripon, and Escalon.