San Francisco Asks CPUC To Determine Value Of PG&E’s Local Electric Assets

July 28, 2021

by Paul Ciampoli
APPA News Director
July 28, 2021

The City and County of San Francisco on July 27 submitted a petition with the California Public Utilities Commission (CPUC) seeking a formal determination of the value of investor-owned Pacific Gas & Electric’s local electric infrastructure, the next step in San Francisco’s efforts to acquire the utility’s city-based electric facilities and complete the city’s transition to public power. 

“Owning the grid would allow San Francisco to provide clean, reliable and affordable electricity throughout the City while also taking meaningful climate action, like reaching its set target of using 100% renewable electricity by 2025,” the Office of San Francisco Mayor London Breed noted in a news release.

The move comes after the city made a $2.5 billion offer in 2019 to purchase PG&E’s local electric assets. San Francisco resubmitted its offer when PG&E emerged from bankruptcy in 2020. PG&E rejected both San Francisco purchase offers.

“San Francisco is ready to transition to full public power, and today we are asking the CPUC to determine a fair price that will allow us to move forward with the acquisition of our local power grid,” said Breed in a statement. “It’s been clear for a long time that full public power is the right choice for our city and our residents, and we know we can do this job more safely, more reliably, and more cost effectively than PG&E. It’s time for everyone in the city to have access to clean, reliable, affordable public power.”

“Generally, electric service provided by publicly-owned utilities is more affordable than service from investor-owned utilities,” the petition noted. “This is due to factors such as the absence of large executive bonuses, shareholders, and taxes.”

Transitioning to public power has public support. A 2019 poll found that nearly 70% of San Franciscans support switching to public power.

In the valuation petition filed by City Attorney Dennis Herrera, the city asks the CPUC to determine the just compensation to be paid for PG&E’s electricity distribution assets that serve San Francisco. State law gives the CPUC the authority to set definitive valuations for utility assets. San Francisco’s petition also proposes a process for the Commission to assess the value of PG&E’s electric facilities.

Breed’s office noted that San Francisco has demonstrated its effectiveness as a local power provider for more than 100 years, delivering hydropower from Hetch Hetchy Power to customers like the San Francisco International Airport, the San Francisco Zoo, and Zuckerberg San Francisco General Hospital. The San Francisco Public Utilities Commission’s (SFPUC) CleanPowerSF program also purchases renewable power for over 370,000 homes and businesses. Collectively, the two programs provide more than 70% of the electricity consumed in San Francisco.

San Francisco has also set a goal of shifting to 100% renewable electricity by 2025 and 100% renewable energy by 2040, a target that will be easier to achieve if San Francisco had local control of its power grid.

San Francisco would use bonds secured by future revenues from electricity generation to acquire PG&E’s infrastructure, so no funds for existing city services, like affordable housing, libraries or addressing homelessness, would be affected.

In the valuation request, San Francisco said that PG&E’s “ongoing problems with providing safe and reliable gas and electric service throughout its service territory are well-known.” The city noted that the CPUC has acknowledged that PG&E’s recent history of safety performance “has ranged from dismal to abysmal.”

While San Francisco has not experienced the devastation associated with catastrophic wildfires and other disasters caused by PG&E, “over the years PG&E’s difficulty in maintaining a safe and reliable system has caused multiple incidents resulting in injuries and property damage within the city,” the petition said.

“PG&E customers in San Francisco, like PG&E’s other customers, have also paid substantial costs resulting from PG&E’s physical and financial disasters, including two bankruptcies in as many decades,” the city said.

The city also said that while San Francisco’s acquisition of PG&E assets in San Francisco would benefit the city and its residents, such an acquisition would not materially burden PG&E’s remaining ratepayers and could potentially benefit them as well.

The petition pointed out that San Francisco is a small part of PG&E’s large service territory and PG&E’s revenues per San Francisco customer are smaller than its revenues per PG&E customer outside the city. “The size of PG&E’s remaining service territory would be reduced along with its service obligations. This alone could benefit remaining ratepayers as PG&E would no longer have any expenses or service obligations related to the upkeep — and future capital needs — of the assets purchased by San Francisco.”

Acquisition of PG&E’s property serving San Francisco will provide numerous benefits, the petition said, including enabling the city to provide affordable, safe, and reliable service, and take meaningful environmental and climate action; and improve its programs to ensure workforce development and equity.

“Electric service provided by the city would also be more transparent and accountable to customers,” the city said, noting that bi-weekly meetings of the SFPUC are open to the public.

In addition, rate setting decisions are governed by the city’s charter, which requires independent review, and are subject to rejection by the Board of Supervisors. And SFPUC Commissioners are appointed by the mayor, subject to approval by the Board. “Ultimately, the mayor and board are directly accountable to the voters.”

The petition said that the city developed the two formal offers to PG&E to purchase the assets the city would need to serve San Francisco customers with the advice of experts using standard methods of asset valuation.

“In its responses, PG&E claimed that the city’s offer price was far below the value of the assets. The city seeks to fix the value of the targeted assets using the Commission’s unique expertise under authority granted to the Commission by state law. The city hopes that establishing a definitive value will facilitate negotiation of an acquisition transaction with PG&E.”