After more than a century of operation in San Francisco, Pacific Gas and Electric Co. appears inclined to stay put, largely rebuffing a $2.5 billion cash offer from city leaders to acquire the troubled utility's electric distribution and transmission assets needed to serve all electricity customers in San Francisco.
While Pacific Gas and Electric, or PG&E, agrees "on the importance of continuing to serve the citizens of San Francisco with safe, clean, affordable and reliable energy" and remains open to discussing a transaction as part of its Chapter 11 bankruptcy reorganization, "we don't believe municipalization is in the best interests of our customers and stakeholders," the utility said in an emailed statement.
In a Sept. 6 letter to PG&E Corp. CEO and President Bill Johnson and PG&E CEO and President Andrew Vesey, San Francisco Mayor London Breed and City Attorney Dennis Herrera detailed terms and conditions for the proposed acquisition of transformers, 115-kV transmission lines and distribution assets "that we believe will be mutually beneficial for the city's constituents, the debtors and their creditors, customers and other stakeholders."
The proposed transaction, which came just as PG&E was expected to file its reorganization plan Sept. 9, "represents a very attractive premium valuation compared to recent electric utility transactions that reflects the unique circumstances of, and expedited timing resulting from, the debtors' Chapter 11 bankruptcy cases," they said.
In a recent letter to Gov. Gavin Newsom, Breed and Herrera said they had "lost trust in PG&E as a steward of the public utility in San Francisco." They called PG&E's bankruptcy restructuring a "historic opportunity" to benefit the city, the state and the utility.
San Francisco, which already procures nearly 80% of its electricity through its municipal power agency and a community choice aggregation program, would expand its reach to about 400,000 customer accounts with a peak power demand of 1,000 MW, according to a report by the San Francisco Public Utilities Commission.
Union opposed
While the city said it would collaborate with PG&E's workforce on a transition, the local union representing most of PG&E's unionized workers, the International Brotherhood of Electrical Workers Local 1245, is opposed to a takeover.
"We do not at all oppose public ownership in principle," according to a union campaign against the transaction. "We oppose the City of San Francisco spending billions of dollars to take over PG&E for a number of reasons."
By the union's estimate, such an acquisition would actually cost San Francisco $6 billion, money that should be spent on "higher priorities" such as addressing homelessness, building affordable housing and improving transportation. San Francisco would also lose $20 million in annual revenue that now funds city parks, libraries and schools, the union added.
Moreover, the city has "a long history of playing politics with their own power agency and they are not always very respectful of the role of unions in making sure workers are protected," according to the union.
The mayor and city attorney said they intend to discuss the offer with Johnson at a meeting Sept. 26. Any transaction would require approval of the bankruptcy court and state energy regulators.
