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San Jose Wants to Form Own Utility, Avoid PG&E Power Outages

60,000 of San Jose’s residents were affected by PG&E’s recent “preventive” power outages. Mayor Sam Liccardo is open to any alternative, including forming its own utility or one that is “a customer-owned co-op."

(TNS) — Frustrated with PG&E’s outages, San Jose is considering splitting off from the troubled company and forming its own electric utility — something San Francisco has already proposed.

San Jose Mayor Sam Liccardo has heatedly criticized the utility for the outage that affected 60,000 of his city’s residents, and he’s looking at a broad slate of alternatives.

“I’ve seen better organized riots,” Liccardo wrote in an opinion piece in The Chronicle on Monday about the outages, borrowing a phrase from the film “Chariots of Fire.”

Another option Liccardo raised Monday is turning PG&E from an investor-owned, private utility into a customer-owned co-op. That would be even better than the city taking over PG&E’s local infrastructure, he said.

Were a broad array of customers to become owners of PG&E, that would reduce the risk that the company would push “to raise rates to the same extent that they would if it were a hedge fund looking to simply extract value from the company and perhaps leave the carcass of the company and billions of dollars of more debt on the taxpayers,” he said in an interview Monday.

PG&E’s recent outage cost the city $500,000, Liccardo estimated. He wants to find state or PG&E funding to reimburse taxpayers.

He wrote that he wants to “fully explore whether San Jose should take over PG&E’s distribution infrastructure, as San Francisco has proposed.”

PG&E spokesman James Noonan said Monday the company had not seen San Jose’s proposal.

“PG&E’s facility is not for sale, and to (sell) would not be consistent with our charter to operate or our mission to serve Northern and Central California communities,” Noonan said. “We remain focused on the safety of our customers and communities and will continue to work together with state and local government partners and across all sectors and districts to develop comprehensive long-term safety and energy solutions for the future.”

Liccardo’s spokeswoman, Chloe Meyere, said the city is pursuing multiple options, including building out local power generation and storage equipment and possibly purchasing PG&E infrastructure. Either way, the city would have to create a public utility.

Liccardo wants to poll residents this fall on whether they’d support a ballot measure to buy wires and other local electric equipment currently owned by PG&E. He said Monday he can’t provide an estimate yet of what the city would purchase and how much it would cost.

San Francisco sent a letter last month to PG&E offering to pay $2.5 billion to buy the city’s electricity infrastructure, but the company rejected it. (San Francisco is not looking to buy PG&E’s gas business.)

Creating a public utility won’t ensure that San Jose has full protection against what PG&E calls a public safety power shut-off because of the deep interconnections of big power lines, but it would protect against some more localized lines being turned off, Liccardo said in a memo Friday.

State Senator Scott Wiener, D-San Francisco, said he fully supports San Jose and San Francisco’s plans to create public utilities and purchase infrastructure.

“We have quite a few publicly owned utilities in California with a long history of success. The model works,” Wiener said Monday. “A publicly owned utility is more accountable to the ratepayers. What we’ve learned from PG&E is that the company is not accountable. This latest massive blackout shows that.”

Wiener said he is “exploring options” to support cities taking over utility infrastructure.

Liccardo said he was in talks with other cities and counties about creating a customer-owned utility but had no more information to share Monday. Compared with a city-run utility, the customer-owned option could get greater access to capital and exemption from state and federal taxes, which could free up to $13 billion in financing and savings, he said.

With regard to the recent mass outages, Liccardo also wants to investigate if wind speeds, humidity and temperature in impacted neighborhoods actually met PG&E’s thresholds to cut power. Some residents in the more than 30 counties whose power got shut off this month complained that there was little wind where they lived. PG&E said that because of its widespread system, some customers could lose power even if the conditions were not dangerous in their area.

PG&E is considering another weather-induced public safety shut-off starting Wednesday night because of hot, windy and dry weather predictions in parts of its service territory, though San Jose would not be affected.

Liccardo’s proposal to look into the formation of San Jose’s own utility goes before a city committee for a vote Wednesday, then the City Council for approval before polling and feasibility studies begin. The idea of creating a local utility, while fraught with “legal challenges, multibillion-dollar capital costs, and operational challenges,” deserves a long-overdue deeper look, his Friday memo said.

If big cities split off from PG&E — and there are many hurdles before that can happen, not least coming to an agreement with the utility — critics fear it could leave rural communities with higher costs.

©2019 the San Francisco Chronicle. Distributed by Tribune Content Agency, LLC.

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