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.
Today, we released a set of principles that presents a framework for a customer-owned PG&E that is transparent, accountable, and equitable to put the company’s days of underinvestment, mismanagement, and negligence far behind us.
— Sam Liccardo (@sliccardo) December 5, 2019
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.