SF should explore buying out PG&E and switching to public power, says commission

In January, San Francisco Mayor London Breed responded to bankruptcy and scandal at Pacific Gas and Electric Company (PG&E) by asking the San Francisco Public Utilities Commission (SFPUC) to explore the feasibility of shutting out PG&E and providing power exclusively through city-owned assets.

SFPUC General Manager Harlan Kelly Jr. provided a preliminary report on Monday, saying that, although the city will need to study the question in more depth, the commission views the prospect as entirely plausible.

In fact, Kelly sounds adamant about the subject, writing that “this report represents the first step toward exploring the potential acquisition of PG&E assets” in San Francisco and repeatedly emphasizing that the city’s goal of operating off of 100 percent clean energy by 2030 would be much easier without PG&E.

Presently, the city already provides electricity to most San Francisco customers through two public programs. Kelly writes, in part:

Wholesale and retail power services are provided by the SFPUC’s Hetch Hetchy Power Enterprise, San Francisco’s century‐old public power retail electric utility. The SFPUC owns and operates its own, green‐house gas free hydroelectric generation and other local renewable generation, and delivers these supplies to meet Hetch Hetchy Power’s customer needs. [...]

Clean Power SF and Hetch Hetchy Power together supply nearly 80 percent of San Francisco’s electricity needs today.

However, PG&E owns and controls most of the equipment and infrastructure used to deliver electricity in SF, which is a source of tension between City Hall and the utility.

Among other problems, the report repeats longstanding allegations that PG&E habitually sabotages SF’s public power programs: “Because PG&E is a direct competitor in serving San Francisco customers, its strategy has been to leverage its ownership of assets to impose unnecessary and expensive requirements.”

SFPUC’s tentative opinion lays out three potential future courses of action:

1. “Limited independence.” This is essentially the same system in place now, but expanded. “The Hetch Hetchy Power utility will grow its customer base through transfers of PG&E customers,” but the city would still rely on PG&E. The report estimates that this could cost up to $100 million annually, but also projects yearly electricity sales revenues of roughly the same amount.
2. “More independence.” Under this plan, SF would buy or build much of the equipment and technical infrastructure currently supplied by PG&E, but still not cut the utility out entirely. “The city has been actively pursuing targeted investments” already, the report notes. Costs would run anywhere from $10 million to $300 million per action, depending on how much the city wants to go in for. Estimated additional revenues could run up to $220 million.
3. “Acquire PG&E assets for full independence.” The big plunge, finally cutting the middleman out entirely. “The city can completely remove its reliance on PG&E for local electricity services through purchasing PG&E’s electric delivery assets and maintenance inventories in and near San Francisco.” There’s no telling how much this may cost, as it depends too much on the fair market value of the equipment; SFPUC commits to only the vague terms of “a few billion dollars initially.” Revenue increases could run up to $700 million each year.

The report concludes by noting its lack of any proposal that does not include cutting out at least some of PG&E’s influence, promising that “the city has and will continue to [...] increase our independence from PG&E.”

In April, the city published the results of a poll conducted by SF opinion polling firm Goodwin Simon Strategic Research reporting that 68 percent out of a sample of 435 registered SF voters “were in favor of the SFPUC delivering public power to the city.”

On Monday, Breed signaled her support for a break from PG&E once again, saying in an emailed statement, “It is in the long-term interest of our city to continue down this path to take advantage of this unique opportunity.”

PG&E spokesperson Lynsey Paulo told Curbed SF, "We look forward to reviewing the city's analysis and appreciate the open and transparent dialogue on the subject."