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Utility's Power Business Bid Fails: SSJID's Plan Claimed Residents Would Save 15% on Electricity

Posted on: Saturday, 17 June 2006, 12:00 CDT

By Inga Miller, The Modesto Bee, Calif.

Jun. 17--The South San Joaquin Irrigation District's bid to get into the retail power business was denied Friday by the San Joaquin Local Agency Formation Commission.

The 4-1 vote, which came after a four-hour public hearing, represents a major disappointment for the irrigation district, which has spent $7 million during the past decade on a proposal detailing how it could provide residents in and around Ripon, Escalon and Manteca with power at rates 15 percent below those of Pacific Gas & Electric Co.

"We certainly thought we met the burden of evidence," said Stevan Stroud, general manager for the SSJID. He said district officials plan to regroup and move forward. The district could reapply to LAFCO.

"We had experts making sure the plan was well thought out," he said. "I'm disappointed the commission didn't agree."

The plan relies on power generated by the SSJID and the Oakdale Irrigation District through dams on the Stanislaus River. The districts collect a hefty profit in wholesale deals. The SSJID planned to use those profits and bonds to acquire PG&E's infrastructure. Then it would buy and sell power from the dams for its customers.

LAFCO was given the job of assessing the SSJID's financial ability to buy PG&E's infrastructure and deliver power. Only with the commission's blessing can the SSJID submit a bid to buy PG&E's equipment. LAFCO Executive Officer Bruce Baracco said the irrigation district met the requirements.

But commissioners made no secret of their distaste for the method the SSJID plans to use to acquire PG&E's infrastructure. PG&E has said that its equipment is not for sale. So the SSJID would have to win a court ruling in favor of eminent domain finding the acquisition is in the public's best interest.

"I am confident it will end up being an eminent domain situation," Commissioner Gary Giovanetti said. "We do not have a willing seller, so I will make a motion to disagree with staff's recommendation."

He added later that he believed the SSJID fell short of showing it could handle the proposed acquisition. County Supervisors Jack Sieglock and Victor Mow, who also serve as commissioners, agreed. Commissioner Gary Haskin cast the only no vote.

PG&E has made undisclosed SSJID figures a key point in its defense. The irrigation district maintained it is committed to reducing rates by 15 percent, and that it has plenty of revenue -- including $10 million to $15 million a year in wholesale power generated on the Stanislaus River -- to buy PG&E's infrastructure, but that publishing figures would compromise its ability to negotiate.

"They had a flimsy application at best and the commission saw through it," PG&E spokeswoman Emily Barnett said. "It was a very clear 4-1 decision from the commission. (SSJID) didn't substantiate their claim of dropping rates 15 percent."

The SSJID estimates the value of PG&E's infrastructure between $50 million and $80 million, based on a valuation by public utilities appraiser Nancy Hughes of Seattle-based RWBeck.

PG&E claims its infrastructure is worth $285 million. That's based on replacement value for their poles and other delivery equipment, less depreciation. The difference, it says, would cause the SSJID to raise its rates by 12 percent to 15 percent.

That, Hughes said, "considerably overestimates the value."

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Copyright (c) 2006, The Modesto Bee, Calif.

Distributed by Knight Ridder/Tribune Business News.

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Source: The Modesto Bee

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