Support Continues to Grow for San Jose Mayor’s Vision of a Customer-Owned PG&E

San Jose Mayor Sam Liccardo is charging ahead with his plan to transform PG&E into a customer-owned utility, announcing this week that he’s garnered support for the idea from 114 elected leaders in 58 cities and 10 counties.

“This is ... a call to PG&E, certainly to state authorities as well as to those who are currently in bankruptcy court, that we’re very serious about our desire to transform PG&E into a utility that can once again provide power in a way that's safe, reliable and cost effective,” Liccardo told reporters at a Thursday press conference.

Since unveiling the ambitious proposal about a month ago to the California Public Utilities Commission (CPUC), the mayor and his growing coalition of supporters have been hammering out the details of what a cooperative PG&E would look like.

City officials say the customer-owned utility would preserve PG&E’s existing labor contracts, maintaining and growing its skilled workers to improve the safety of the utility’s infrastructure, customer service and affordability. As proposed, it would also preserve PG&E’s current contracts with independent power producers. It would also operate like a public agency, adhering to transparency standards mandated by the Brown Act and Public Records Act.

The utility would develop and prioritize a “capital investment plan to address infrastructure needs of both the distribution and transmission system to prevent wildfires, reduce Public Safety Power Shutoff (PSPS) events, and improve overall system reliability,” according to the mayor’s office.

A federal bankruptcy judge is slated to consider two competing plans to reorganize PG&E, one from shareholders and one from bondholders—both of which pose a challenge to Liccardo’s proposal.

“The biggest challenge is that we have two contenders to take PG&E out of bankruptcy … that have very strong financial interests to ensure that we do not prevail and these are large powerful financial institutions,” the mayor acknowledged. “These are hedge funds, companies in New York and we expect that they’re going to play hard.”

But he said he’s confident that the customer-owned utility model will rise on top on its own merits. Financial institutions expressed “significant appetite” for the idea, he said. Once they figure out a way to get financial backing, Liccardo said the coalition will be in a much better position to file a third proposal with the bankruptcy court.

Many of those financial institutions understand that customer-owned utility is cheaper to operate, according to Liccardo. A customer-owned utility can borrow at a lower cost of capital, which can realize billions of dollars of savings that can be reinvested into micro-grids and upgrading old infrastructure.

Plus, a customer-owned utility wouldn’t profit from its rates, as revenues would be invested into local communities. According to the set of operating principles introduced by the mayor, a utility run as a co-op would ensure that low-income residents continue to receive discounted rates through existing PG&E initiatives like the California Alternate Rates for Energy Program (CARE), which provides monthly discount of 20 percent or more on gas and electricity for low-income residents.

Liccardo said rates for customers will increase regardless of who owns PG&E, since the company faces tens and billions of dollars of pending claims for wildfire victims. Meanwhile, Gov. Gavin Newsom signed into law AB 1054, which mandates PG&E’s customers to fund part of its $21 billion wildfire fund through a collective $2.5 surcharge, a fee added after the 2001 energy crisis that was set to expire in 2020 and is now extended for another 15 years.

PG&E is already on probation after being convicted of six federal criminal charges for the San Bruno gas pipeline explosion that killed eight people in 2010.

The company filed for bankruptcy protection in January 2019, with tens of billions of dollars in liability from fires started in 2017 and 2018.

More recently, CPUC released a scorching report that charged the utility with a dozen violations for failing to maintain power lines that ignited the November 2018 Camp Fire, which killed 85 people.

“We need to let go of the delusion that someone else is going to pay for the neglect of PG&E,” Liccardo said.

If customers pay for it, he added, then they might as well own it. “And we should make sure that every dollar we put in this company actually serves our residents,” he said.

Nicholas Chan is a journalist who covers politics, culture and current events in Silicon Valley. Follow him on Twitter at @nicholaschanhk.

13 Comments

  1. > San Jose Mayor Sam Liccardo is . . . announcing this week that he’s garnered support for the idea from 114 elected leaders in 58 cities and 10 counties.

    Impossible to believe, but Liccardo seems to have found the 114 people in California who are stupider and more incompetent than PG&E’s management.

    Liccardo is a rare talent.

  2. Regardless of whether or not these criticisms of PG&E, claiming that it has failed to perform the duties for which it had been paid, are valid, it just strikes me as monstrously ironic that they are voiced by the mayor of a city that perennially does NOTHING but fail to live up to it’s own obligations, squandering the money it is given to perform specific jobs, NONE of which are acceptably performed.
    What kind of self righteous hypocrite is this guy?
    Oh yeah. I forgot. He’s an ambitious Democrat Silicon Valley politician.

  3. Sam – it is helpful to have a little history when speaking out.

    25 years ago there were no catastrophic fires started by PGE. 25 years ago we had some of the lowest electric rates in the nation.

    What happened?

    Politicians.

    25 years ago – PGE was an Investor Owned Utility (IOU) REGULATED utility in California. The largest and best IOU in the country. But then something happened. Politicians.

    The wise smart asses who get elected to public office because they “think” they know more that everyone else – decided they could improve electric delivery service to the public. So they “de-regulated” the private electric utilities in CA. this did affect the Municipal Owned Utilities (MOU) but not as much.

    The deregulation was meant to spur “Competition” in the electric industry – driving down prices and improving service – How has that worked out thus far Walter? – – Here are some useful facts.

    There are four parts to electric service to your home.

    Part 1. Generation. PGE used to have lots of generation, turbines such as Moss Landing, steam from the geysers, some imported and wheeled in from out of state but most of its electric generation came form 24 dams in the Sierras built (and paid off) many, many years ago. When demand called for it – the dams opened, turbines spun and electric flowed down the transmission lines. Under the political decision PGE was required to sell all its generation, dams, everything – to out of state companies and then buy the power back from them. The purpose was to create “competition” so you would get cheaper electric rates. Can you explain how that works?

    Part 2 of electric service is transmission – – those big power lines you see crossing the countryside from all reaches across the West. PGE was allowed to keep that. Since power lines don’t create electricity – they only way they can “earn” income is to charge for the service of wheeling electric from there to here. I don’t think the politicians will get into that – and keep paying PGE to wheel the electric in. Its’ not glamorous and has little financial gain. But as we know see – -has terrific upkeep costs.

    Part 3 – is distribution – – this is where you see PGE substations at various places where the big transmission lines come in and the electric is distributed around the local area.. Again this is not a big financial gain center – just part of an overall utility. The politicians will probably leave that to be handled by PGE as well.

    Part 4 is the billing. Pay attention Sam – this is where it gets interesting. There is where the finances of electric come to affect you. Since PGE has to buy the power they sell – they do this through the Independent State Operator (ISO) and its Power Exchange. All electric utilities in CA buy their power through the ISO – utilities can also sell excess power through the ISO – not just for today – but for next week or 6 months from now.

    This is where the local politicians think they will make big cost savings on electricity costs – not in Parts 1,2 or 3 but in buying power. All the other parts will be left to or contracted out to PGE and spin off companies of PGE. The electric will still be wheeled across the state on the same transmission lines!!! They will be contracted to do the same thing PGE does now – only with the fine expertise of San Jose city government added on to “manage” all of this at a lower cost. How do you see that working out Sam? We will still have the same conditions that create the fires now – new building into former wild areas, drier climate, 10,000,000 dead trees and same operating budget to keep transmission lines intact – only with the added benefit of SJ city hall “managing” everything. Can you honestly say that will be a benefit to our city Sam?

    Politicians claiming they can do better at a cheaper cost – are just blowing smoke. The fires are a terrible thing that the politicians are scheming to take advantage of – just to gouge citizens our of more money – “he who controls Part 4 – controls the purse strings”

    BEWARE: there is a fable going around that a municipal utility (MOU) can provide electric cheaper and safer. The city of Santa Clara has its own electric dept Silicon Valley Power – which has much cheaper rates that PGE customers do. Are they that good? – – – NO. here is the dirty little secret that NO politician to listen to or address. SVP has the same good workers as PGE but SVP has an advantage. In Part 4 it is noted that ALL electric utilities must buy their power (and sell) through the ISO. However, back when the politicians wrote the deregulation bill in the mid ‘90’s they put in a proviso that allowed the Municipal electrics (MOU) to buy FEDERAL power as well as power generated any place else – -coal fired from Utah/AZ, hydro from Idaho. But only MOU could buy the very, very cheap federal power, (Grand Coolie, Hoover dams) SVP has a “brokerage” room that operates 24/7 right now as you read this in SC. They are buying/selling power all the time – – right now they could be buying federal power to be used next July – very cheap. Next July, in a heat wave, PGE or our own SJ politicians will be rushing out to buy some extra power – at a steep price of course.

    If you ever wonder why the small city of Santa Clara can have such cheap electric rates AND have great schools, little homeless, non-pothole streets, well staffed libraries and fully funded PD/FD – – you are starting to get the picture. They have a cash cow – buy low, sell high. See how that works?

    BUT WAIT – THERES MORE – again I have tried to explain this to our city leaders – and they won’t talk about it – – -it is a dirty secret that the city of the “bright saint” – operated by some powerful people all connected by brothers and certain schools don’t want discussed. Yet the poor citizens of SJ pay much more for electric and get lesser service that those in SC – – consider this.

    Some very large Tech firms are set up in SC – – one good reason is that they get to have very cheap electric rates. This creates a very large, wealthy tax base for a city that is smaller that District 3 in SJ. How cheap are those rates? Good question Sam. It is hard to say. SVP has electric contracts with these tech firms – but the public is NOT allowed to see these contracts to find out how cheap their electric really costs. I know what your thinking Sam – – “SVP is a public agency, dealing with public resources and this should be transparent” Right? NOTE: here is a good story for someone like Jenn to investigate.

    See if you can find out Sam – – there are powerful forces that want to keep certain things from the public – us dumb voters – – in fact by the time you read this – I could have an “accident” and be unable to discuss any further.

    So Sam,, if you want San Jose to be a public utility – -you will need to be more forthcoming on how you will A. provide cheaper costs and B. – – prevent those damn fires. Thus far it is just political talk exploiting tragedy – with no real answers provided. It is just an poor excuse to dig into ratepayers pockets to shore up a financially weak SJ city government. I strongly urge the citizens of San Jose – to stay out of the electric service business. Fix the pot holes we’ve already been taxed (2x) for.

    San Jose is the capital of “silicon valley” in the middle of the greatest economic boom in 50 years and yet the city runs a budget deficit. Why? Bad management? Corruption? or funds siphoned off to fund the fat pensions of the great administrative talent that got us in this mess?

    Whatever weak excuse you want to use- fine – we don’t believe you anyway. Just stay out of a vital service business you know nothing about. Remember when we first went into de-regulation of our electric? all kinds of out-of-state companies came in with promises’ and we had continuous brownouts. Things are precarious enough with our lives and our electric service as it is – – don’t fuck it up anymore Sam.

  4. Sam, it is helpful to have a little history and knowledge when advocating.
    25 years ago there were no catastrophic fires started by PGE. 25 years ago we had some of the lowest electric rates in the nation.

    What happened?

    Politicians.

    25 years ago – PGE was an Investor Owned Utility (IOU) REGULATED utility in California. The largest and best IOU in the country. But then something happened. Politicians.

    The wise smart asses who get elected to public office because they “think” they know more that everyone else – decided they could improve electric delivery service to the public. So they “de-regulated” the private electric utilities in CA. this did affect the Municipal Owned Utilities (MOU) but not nearly as much.

    The deregulation was meant to spur “Competition” in the electric industry – driving down prices and improving service – How has that worked out thus far Sam? – – Here are some useful facts.

    There are four parts to electric service to our homes and business’.

    Part 1. Generation. PGE used to have lots of generation, turbines such as Moss Landing, steam from the geysers, some imported and wheeled in from out of state but most of its electric generation came form 24 dams in the Sierras built (and paid off) many, many years ago. When demand called for it – the dams opened, turbines spun and electric flowed down the transmission lines. Under the political de-regulation decision PGE was required to sell all of its generation, dams, everything – to out of state companies and then buy the power back from them. The purpose was to create “competition” so you would get cheaper electric rates. Can you explain how that works?

    Part 2 of electric service is transmission – – those big power lines you see crossing the countryside from all reaches across the West. PGE was allowed to keep that. Since power lines don’t create or generate electric power – they only way they can “earn” income is to charge for the service of wheeling electric from there to here. I don’t think politicians will want to get into that – and so they will keep paying PGE to wheel the electric in. Its’ not glamorous and has little financial gain. But as we now see – -has terrific upkeep costs.

    Part 3 – is distribution – – this is where you see PGE substations at various places where the big transmission lines come in and the electric is distributed around the local area.. Again this is not a big financial gain center – just part of an overall utility. The politicians will probably leave that to be handled by PGE as well.

    Part 4 is the billing. Pay attention everyone – this is where it gets interesting. There is where the finances of electric come to affect you. Since PGE has to buy the power they sell – they do this through the Independent State Operator (ISO) and its Power Exchange. All electric utilities in CA buy their power through the ISO – utilities can also sell excess power through the ISO – not only for today – but for next week or 6 months from now.

    This is where the local politicians think they will make big cost savings on electricity costs – not in Parts 1,2 or 3 but in buying and selling power. All the other parts will be left to or contracted out to PGE and spin off companies of PGE. They will be contracted to do the same thing PGE does now – only with the fine expertise of San Jose city government added on to “manage” all of this at a lower cost. How do you see that working out Sam? We will still have the same conditions that create the fires now – new building into former wild areas, drier climate, 10,000,000 dead trees and same operating budget to keep transmission lines intact – only with the added benefit of SJ city hall “managing” everything.

    Politicians claiming they can do better at a cheaper cost – are just blowing smoke. The fires are a terrible thing that the politicians are scheming to take advantage of – just to gouge citizens our of more money – “he who controls Part 4 – controls the purse strings”

    BEWARE: there is a fable going around that a municipal utility (MOU) can provide electric cheaper and safer. The city of Santa Clara has its own electric dept Silicon Valley Power – which has much cheaper rates that PGE customers do. Are they that good? – – – NO. here is the dirty little secret that I have gotten NO politician to listen to. SVP has the same good workers as PGE but they have an advantage. In Part 4 it is noted that ALL electric utilities must buy their power (and sell) through the ISO. However, back when the politicians wrote the deregulation bill in the mid ‘90’s they put in a proviso that allowed the Municipal electrics (MOU) to buy FEDERAL power as well as power generated any place else – -coal fired from Utah/AZ, hydro from Idaho. But only MOU could buy the very, very cheap federal power, (Grand Coolie, Hoover dams) SVP has a “brokerage” room that operates 24/7 right in SC. They are buying/selling power all the time – – right now they could be buying federal power to be used next July – very cheap. Next July, in a heat wave, PGE or our own SJ politicians will be rushing out to buy some extra power – at a steep price of course.

    If you ever wonder why the small city of Santa Clara can have such cheap electric rates AND have great schools, little homeless, non-pothole streets, well staffed libraries and fully funded PD/FD – – you are starting to get the picture. They have a cash cow – buy low, sell high. See how that works Sam? You won’t have that advantage.

    BUT WAIT – THERES MORE – again I have tried to explain this to our city leaders – and they won’t talk about it – – -it is a dirty secret that the “city of the bright saint” – operated by some powerful people all connected by “brothers and certain schools” don’t want discussed. Yet the poor citizens of SJ pay much more for electric and get lesser service that those in SC – – consider this.

    Some very large Tech firms are set up in SC – – one good reason is that they get to have very cheap electric rates. This creates a very large, wealthy tax base for a city that is smaller that District 3 in SJ. How cheap are those rates? Good question. It is hard to say. SVP has electric contracts with these tech firms – but the public is NOT allowed to see these contracts to find out how cheap their electric really costs. I know what your thinking Sam – – “SVP is a public agency, dealing with public resources and this should be transparent” Right?

    See if you can find out Sam – – there are powerful forces that want to keep certain things from the public, like myself and other “dumb” voters – – in fact by the time you read this – I could have an “accident” and be unable to discuss any further.

    So Sam if you want San Jose to be a public utility – – you will need to be more forthcoming on how this will A. provide cheaper costs and B. – – prevent those damn fires. Thus far it is just political talk exploiting tragedy – with no real answers provided. It is just an poor excuse to dig into ratepayers pockets to shore up a financially weak SJ city government. I strongly urge the citizens of San Jose – to stay out of the electric service business. Fix the pot holes we’ve already been taxed (2x) for.

    • MR. BIQUITOUS:

      A brilliant report and analysis.

      Thank you very much for your time, expertise, and energy to explain this to all of us.

      Your point about high tech companies locating in Santa Clara to take advantage of cheap federal energy is astounding.

      It goes a long way toward explaining why San Jose is an impoverished, overtaxed, and under-revenued “bedroom community” for the rich, subsidized, wealth-producing business of the peninsula sucking off of the federal energy gravy train.

      Your analysis raises many questions:

      First and foremost, How can I as a tiny little inconsequential pissant resident of San Jose become a residential energy customer of Silicon Valley Power?

      Secondly, is there a scheme whereby San Jose could annex Santa Clara, take ownership of Silicon Valley Power, take over its federal energy subsidies, and make San Jose global hub for energy guzzling, wealth producing businesses?

      Do you suppose that is REALLY Smiling Sam’s scheme? Maybe I have underestimated his guile?

  5. PG&E mismanaged the entire electrical grid to the point that a 50mph wind causes it to cut power to hundreds of thousands. Sam wants the government to take over management. What could possibly go wrong?
    When it’s mismanaged by public employees, the unfounded pension liability will rise exponentially.

  6. No way the shareholders, bondholders, etc will ever allow the CA grid to be broken up into tiny pieces and sold off to munis… again these city council politicians and their child like outlook on reality. He sounds like the BA degree holders piping off about housing is a human right. No one is building another grid in CA, so the infrastructure is essentially one of a kind. Why would someone who owns a irreplacable, absolutely essential asset break it up into little pieces and sell it for a couple of billion? Because feelings? No matter the settlements they reach on fires, etc the ratepayers will cover it, so why would anyone sell off the most valuable pieces? Maybe Auburn or Kern County, but not the bay area. Wake up.

  7. Will this $70M/year solve the homeless problem?
    If no, then what? More taxes? When will it end and when will they have enough?

    Voters, please, please pay attention…. Go luck up the last 5 years of San Jose’s budget. Pay close attention to the year-over-year increase in Property/Sales/Utility/Business tax receipts that the City Council has been awarded with in the last 5 years.

    Then ask yourself, with such large increases in tax receipts, why do we need a new tax?

    The answer is, “we don’t need a new tax”. What we need is a fiscally responsible and accountable Council and Mayor who can manage the overly generous taxes we already pay into the system to solve complex problems.

    If they are not competent enough to do so, its time to vote them out and bring in a new crop of councilors who can…rinse & repeat until we see results without paying more in taxes.

  8. And their first cry will be to ‘harden the system’, bury the Iines!. The Sierra Club should love that one.

  9. I know you express yourself with insults but please explain why it’s a bad idea in your opinion. I’m trying to learn more about this in order to form my own opinion. I don’t completely understand the pros and cons. Please enlighten me/us here with ideas of why it’s good or bad. I get your irritated with Liccardo as am I, but I still always try to understand each issue as it comes up. Maybe Liccardo is right on this, I just don’t know enough and you are not informing anyone with your tantrums.

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