Opinion Editorial: Retail Electric Worth the Cost

Overcoming PG&E Imposed Barriers is Costly but Worth It.

The South San Joaquin Irrigation District continues its attempt to become the local retail electric power provider within its service area including the Cities of Escalon, Manteca, and Ripon.

The benefits of the project are simple: provide local customers cost effective retail electric power at rates at least 15-percent below what PG&E offers; and provide the level of transparency, accountability, and local control that can only be provided by local public agency governed by a locally elected board.

The path to implementation is also well understood. SSJID received necessary approval from the San Joaquin Local Agency Formation Commission to provide retail electric power in December 2014. Now, SSJID must win two court cases to become the owner and operator of the local electric distribution system. One case would authorize SSJID to purchase the local electric distribution system from PG&E, and the second would determine a fair price to pay PG&E for the system. If successful, then SSJID will start implementing a detailed transition plan towards delivering power to the region.

PG&E has clearly made it an objective to delay and prevent, and to drive up costs necessary for SSJID to get to a final court approval for purchasing the local PG&E system, and now they are complaining to our constituents about the very same SSJID expenditures they are inducing. These accusations ring pretty hollow.

At SSJID, our organizational values include transparency and accountability with our customers and constituents, so we wish to share with you the facts behind SSJID retail electric project costs:

SSJID annually develops and presents its annual budget for public review and approval, including proposed expenditures for the retail electric project. The budget is approved at a public meeting and then published on our website for transparency and accountability to our customers and constituents. Since 2008, SSJID has budgeted a total of the nearly $28.2 million in projected expenditures in its efforts to deliver cost effective public power to the region.

Actual expenditures have totaled nearly $27.7 million since 2008, which is almost $500,000 less than was budgeted. This $27.7 million includes $4.2M in consultants and approximately $18.5M in legal support and services. SSJID did also undertake a smaller but unsuccessful effort to achieve LAFCo approval starting in 2004.

SSJID’s retail electric project has been funded entirely through hydropower generation and/or water transfer revenues; none of the cost has come from local customer rate revenues, and none has come from taxes of any kind. SSJID’s has not raised rates in order to continue this project or to mitigate its financial effects.

The high cost of this project has not compromised SSJID’s financial position. SSJID’s balance sheet is arguably the strongest it has ever been. While supporting this project, SSJID has also invested an average of $6.6 Million annually in our agricultural and treated water systems. Many of these initiatives include investment in state of the art remote on-farm flow measurement, automation, and modernization. All the while, SSJID reserves have grown, reaching a record high $96 million as of January 2020.

Nearly all of SSJID’s retail electric project expenditures were devoted to the required San Joaquin Local Agency Formation Commission (LAFCo) application and approval. PG&E had a right to explain why SSJID’s project shouldn’t be approved at LAFCo, and there is a cost for SSJID to answer PG&E’s objections. But PG&E has gone beyond just explaining their objections and answering SSJID’s arguments. PG&E has also worked a strategy to obstruct the process of getting an answer from LAFCo and the court, primarily through delay tactics. This strategy has been successful, evidenced by the five-year time period between SSJID’s 2009 LAFCo application and eventual 2014 LAFCo approval, and by the fact that the litigation related to this project is all on appeal, well before the court can rule on the validity of our project.

PG&E’s is clearly protecting their monopoly over our local ratepayers at all costs. In essence, they are attempting to solidify a perception that public power is impossible because most potential operators of a public power utility don’t have the financial resources to outlast PG&E’s war chest. Their fear is that if SSJID is successful, it shows other local public agencies that better options for retail electric service are possible.

Given the hurdles imposed on this project, it’s important that our residents continue to understand the reasons why the SSJID board and staff continue to move forward with this worthwhile effort:

The project expenditures are recuperated in rate savings for local residents and businesses after only two years of operation. According to the most recent financial projections, the project will save customers approximately $15.5 million dollars in Year 1, with those savings totaling over $47.5 million after the first three years of operation. For contrast, PG&E’s executive team made over $28.5 million dollars in salaries and compensation in 2016 alone.

Fifteen percent rate discount is possible. Recently, the American Public Power Association, an industry organization representing over 2,000 local public power agencies nationwide, published their annual study confirming that local public utility agencies routinely provide lower rates for electrical service than their investor-owned utility counterparts. Within California, public power agencies are providing their customers power at rates approximately 15.4% below California based investor owned utilities like PG&E, and some do much better than that. How are they doing it? Public power agencies are not burdened with layers of bureaucracy, multi-million dollar executive compensation packages, corporate income taxes, or profit distributions to shareholders on the backs of electric ratepayers. Public agencies like SSJID are non-profit, tax-exempt, and much more nimble to respond to the needs of local businesses and ratepayers.

SSJID is directly accountable to its customers. SSJID’s offices are located here in Manteca and the board is elected by residents within the District’s boundaries. Residents have an opportunity at every board meeting to interface with their representatives on the SSJID board and voice their concerns, opinions, and preferences for SSJID’s programs, services, and rates. When PG&E promises to pass on costs related to the recent northern California wildfires to PG&E ratepayers, they are answering to shareholders and investors, not local customers.

SSJID has a history of determination and success in delivering large, difficult projects. SSJID operates many successful projects that have overcome time, skepticism, and adversity before their true benefits were realized. These projects, such as the Tri-Dam Project on the Stanislaus River, the Nick DeGroot Water Treatment Plant, the pressurized irrigation pilot project, and the solar farm, all serve as reminders of what is possible for our customers and our region when District determination, guided by an altruistic public purpose, overcomes and ultimately achieves success. We believe the electric project will have the same result.

The District knew from the beginning that it would encounter many difficult obstacles in implementing its retail electric project, including determined and costly opposition from PG&E, and has endured many such obstacles already to achieve its current progress. The bottom line is, it’s worth it. We’ll continue to pursue every avenue possible to succeed with this retail electric project while continually evaluating the feasibility of the plan, the likelihood of success, and the benefits to customers to ensure that this course of action continues in the best interests of public.