Court Sides With San Francisco PUC In Dispute With PG&E Over Power Grid Connections

by Paul Ciampoli
APPA News Director
January 31, 2022

The U.S. Court of Appeals for the District of Columbia Circuit recently sided with the San Francisco Public Utilities Commission (SFPUC) in a dispute with Pacific Gas & Electric (PG&E) over electricity connections. In its opinion, the appeals court directed the Federal Energy Regulatory Commission (FERC) to conduct further proceedings related to matters addressed in the decision.

The dispute centers on PG&E’s wholesale service to SFPUC under rules approved by FERC. The SFPUC purchases access to PG&E’s distribution system in San Francisco — paying PG&E about $20 million per year — to serve facilities providing city services.

PG&E, “in an attempt to stymie competition from the SFPUC, has been obstructing public projects for years, demanding the installation of unnecessary and expensive equipment before hooking up those projects to the electric grid,” SFPUC said in a news release related to the court’s decision.

The court’s decision covers two separate appeals from San Francisco, challenging a series of FERC orders.  

One, a San Francisco complaint in January 2019 about what SFPUC claimed were PG&E’s demands for costly and unnecessary equipment designed for high-voltage primary power connections. San Francisco argued that secondary connections, which carry lower voltages, are the appropriate connection types for these projects. FERC sided with PG&E, and San Francisco appealed to the D.C. Circuit Court, which ruled in the city’s favor. 

The appellate court, in a unanimous ruling by a three-judge panel, found that FERC had not justified its decision to uphold PG&E’s refusal to provide SFPUC interconnections at secondary voltage. Focusing on the Commission’s finding that PG&E’s actions were justified by safety and reliability concerns, the court found that FERC’s decision-making was flawed, noting in the ruling that FERC “does not provide sufficient justification for its conclusion,” “does not meet its burden of reasoned decision-making,” and that FERC’s “‘passing reference to relevant factors,’ … is not sufficient to satisfy [FERC]’s obligation to carry out ‘reasoned’ and ‘principled’ decision making.”

The court also said that the orders on review “present a troubling pattern of inattentiveness to potential anti-competitive effects of PG&E’s administration of its open-access tariff.”

The court said that “More than a century ago, Congress authorized the Hetch Hetchy System not only to provide San Francisco with a source of cheap power but also to ensure competition in its retail power market. Faced with claims that PG&E was frustrating that competition by treating its own retail service preferentially and refusing service for customers San Francisco had served for decades, [FERC] fell short of meeting its ‘duty’ to ensure that rules or practices affecting wholesale rates are ‘just and reasonable.’”

The second case addressed by the court started with a San Francisco complaint in 2013 regarding grandfathered customers who were served up until 1992.

The court found that FERC’s orders on grandfathering, which limited the city’s ability to continue to serve many of the customers it was serving in 1992, “are arbitrary and capricious.”

The court’s decision invalidated FERC’s orders on these topics and sent the matters back to FERC for “further proceedings consistent with this opinion.”

The SFPUC is a department of the City and County of San Francisco. It delivers drinking water to 2.7 million people in the San Francisco Bay Area, collects and treats wastewater for the City and County of San Francisco, and generates power for municipal buildings, residents, and businesses.