The future trajectory of Manteca, Ripon, and Escalon electricity bills is hanging in the balance when PG&E and South San Joaquin Irrigation District face-off today in the state appellate court.
What is a stake is who will own the retail electrical distribution system serving the three cities and surrounding rural area.
If SSJID prevails it will lead to power bills that at the front end will be 15 percent lower than PG&E. That gap, if history is repeated where other agencies forced a sale of PG&E territory such as the Sacramento Municipal Utility District, will widen as the years past.
It would mean local residents, businesses, and farms won’t help underwrite profits that flow primarily to Wall Street hedge funds. SSJID would be able to take advantage of lower interest rates based on its solid rated financial status to fund system upgrades.
It also means five people who live in the community will have to answer to customers.
If PG&E prevails more than 130,000 Manteca, Ripon, and Escalon residents will continue to be slammed with rate hikes attributed to the need to address years of the for-profit utility failing to effectively address long-term maintenance issues, a proposed $20 billion plan to underground power lines that are mostly 100 miles or more from SSJID and to keep the state guarantee of nearly a 11 percent return flowing into PG&E coffers and the pockets of their investors.
Each side today will have 25 minutes to make oral arguments in appeals filed in early 2019 after a lower court ruled against SSJID in its bid to use provisions in the California constitution designed to allow irrigation districts the use of eminent domain for public benefit.
A ruling will take place at a later date after justices have digested both written documents submitted that started the appeal process and today’s oral arguments.
“We’re happy to be able to see some movement in the case,” said SSJID General Manager Peter Rietkerk.
Current SSJID retail power
process started in 2004
The appeal is the latest step in a process SSJID started in 2004. It is predated by a previous effort by SSJID to take advantage of concessions PG&E and other for profit power companies made to secure votes in the legislature to allow for their partial deregulation.
The concession was offering irrigation districts the ability to enter retail power sales by means of exempting them from transmission line charges for a set number of years if they took advantage of a window to do so.
SSJID was the only irrigation district in California to try and utilize the credits. That is do in a large part to the financial anchor provided by the 1950s decision to build the Tri-Dam Project and its series of hydroelectric plants on the Stanislaus River in partnership with the Oakdale Irrigation District.
Three times PG&E and SSJID hammered out deals. And each time at the last minute PG&E took them of the table.
The legislation that allowed partial deregulation led to a series of questionable moves by PG&E to pad their profits. In doing so they subjected 16 million Northern California customers to brownouts and skyrocketing power bills. It also led to their first bankruptcy. PG&E followed that up within 15 years with their second bankruptcy due in part to decisions to divert money approved by California Public Utilities Commission via rate hikes for line maintenance and replacement of aging poles.
Those actions are blamed for helping set the stage of deadly wildfires sparked by PG&E equipment. That includes the inferno three years ago that destroyed more than 20,000 homes and other buildings such as stores, churches, schools, and hospitals in and around Paradise. It is also the fire that made PG&E a rarity on Wall Street as a corporation that has convicted felon status. That came after PG&E pled guilty to manslaughter charges in the death of 84 of their ratepayers.
SMUD with rates 35 percent
lower than PG&E took 23 years
to prevail against the utility
If the 17 years SSJID has invested so far to obtain the local PG&E system seems like a futile effort keep in mind it took 23 years after the people of Sacramento first moved to exercise their right to acquire their local retail system from PG&E and to start delivering electricity in 1946 through the Sacramento Municipal Utility District.
What PG&E is doing to stop SSJID is almost a replay of their efforts in courts for almost a quarter of a century to stop SMUD.
Today SMUD’s average rates are 35 percent lower than what PG&E charges. Only a handful of utilities have lower rates than SMUD in California — Roseville Electric and Turlock Irrigation District. That difference is slight.
The gap between SMUD and other local, publically owned utilities compared to PG&E continues to grow as PG&E’s annual rate increases are significantly higher.
Based on a California Public Utilities Commission (CPUC) analysis between 2002 and 2019 PG&E rates rose an average of 37 percent compared to the 19 percent the consumer price index rate rose. The data available for average local utilities for the 10-year period between 2008 and 2017 shows a 3.33 percent increase. While 20-year data was not available for all local utilities, based on SMUD only the increase in rates was less than 10 percent for the corresponding 20 year period or roughly a quarter of PG&E’s
Rietkerk noted that whatever decision is made — whether the courts provide a go ahead or back PG&E — the SSJID board will assess the situation before taking the next step to assure they continue to be on firm financial grounds.
“The board has done that at every milestone,” Rietkerk said.
Two thorough analysis conducted by a firm that specializes in evaluating the soundless of private and public provides have concluded SSJID can provide rates at least 15 percent lower than PG&E. The firm is the same one that PG&E has hired to do work for them.
As a public agency the SSJID can raise capital at a rate 40 percent below PG&E since they do not pay shareholder dividends or federal taxes. That is critical in overall rate costs given PG&E has said it needs to spend at least $28 billion over the next four years to upgrade and harden its infrastructure. Throw in the utility’s plans to bury a large share of distribution lines in wildfire prone areas and another $20 billion is added to the cost.
That is in addition to satisfying shareholders. As an example, PG&E paid out $7 billion in dividends between 2009 and 2017 and had a 10 to 12 percent return or profit.
To contact Dennis Wyatt, email dwyatt@dwyatt@mantecabulletin.com
