San Francisco Takes A Step Toward Municipalizing Its Electric System

This week the City and County of San Francisco filed a Petition for a Valuation of Certain Pacific Gas and Electric Company Property Pursuant to Public Utilities Code Section 1401-1421 (Petition). The Petition asks the California Public Utilities Commission (CPUC) to officially determine the monetary value of the Pacific Gas and Electric Company (PG&E) electric distribution system within and adjoining the City’s legal boundaries. CPUC valuation is authorized by statute, and is a step toward establishing a municipal utility that the Petition says will provide affordable, safe and reliable service to city residents, enable the city to undertake meaningful environmental and climate action, and improve programs to ensure workforce development and equity.

Municipalities have a right under the California Constitution and statutes to acquire electric infrastructure (wires, substations, etc.) located within and adjacent to city boundaries through a process referred to as “eminent domain” or “condemnation.” But the law requires payment of “just compensation” for the infrastructure, which means a price that reflects its current value. According to the Petition, San Francisco recently made two formal offers to PG&E to purchase the assets at a valuation calculated by experts using standard methods of asset valuation. PG&E responded to the City’s offers by claiming the price was “far below” the value of the assets. When parties cannot agree on valuation of investor-owned utility assets, the California Public Utilities Code provides a process for the CPUC to do so.

The Petition summarizes the City’s experience owning and operating the Hetch Hetchy water, wastewater and power facilities, and provision of electric service to City agencies and public offices and at new development sites in and around San Francisco under the 1913 Raker Act. The City also operates a community choice aggregation program, CleanPowerSF, which provides electric service using PG&E’s distribution system to over 380,000 accounts. According to the Petition, PG&E service issues and delays have prevented the City from effectively serving customers, and “it has become clear to the City that acquiring and assuming responsibility for the distribution system is the only way for it to operate its electric utility to meet its objectives.” Those objectives include meeting climate action and environmental goals, providing workforce protections to City employees, and achieving equity and environmental justice.

According to the Petition, the City has satisfied statutory requirements by demonstrating its intent to acquire PG&E’s distribution facilities and the ability to finance the acquisition. The assets include:

  • Distribution-level substations, metering, customer-level interconnections, and related facilities;
  • Transmission assets, including lines, busses, transformers and related 115 and 230 kV facilities;
  • A portion of the Martin Substation or interconnections to enable control of power flows into the City;
  • Related assets, including relays, SCADA, transformers, rolling stock, telecommunication and control center equipment, support systems and records, operating and maintenance facilities, service yards, warehouses, customer service and call centers, metering and billing records, PG&E-owned lands and land-related rights and agreements, street lights and similar unmetered facilities.

The City does not intend to acquire PG&E’s San Francisco headquarters, or land and facilities related to PG&E’s natural gas operations and services.

The CPUC has opened a new proceeding (P.21-07-012) for consideration of the Petition. Next, the CPUC will issue an “order to show cause” to PG&E that will initiate valuation proceedings.

Contact: Andy Brown or Jeff Harris