Mayors of Sacramento, Elk Grove join coalition of CA officials seeking ‘customer-owned’ PG&E

Sacramento Mayor Darrell Steinberg and about two dozen elected officials across California are proposing embattled Pacific Gas and Electric Co. be transformed from an investor-owned corporation into a customer-owned utility.

A coalition of mayors and county supervisors Tuesday sent a letter to the California Public Utilities Commission and Gov. Gavin Newsom urging them to consider the option, instead of a traditional bankruptcy reorganization plan for PG&E Corp.

Mayor Steve Ly of Elk Grove, Mayor Brett Lee of Davis and Yolo County Supervisor Don Saylor also signed the letter.

“A customer-owned utility can operate without the burdens of paying dividends to shareholders, and exempt from federal taxation. As a result, a cooperative financial structure will save ratepayers many billions of dollars in financing costs over this next decade,” reads the letter, which was first reported by The Wall Street Journal.

While Sacramento is already served by the Sacramento Municipal Utility District, the letter is signed by other mayors and county supervisors who lead communities in PG&E territory. PG&E provides gas service to Sacramento residents.

If PG&E were to become a customer-owned utility, the city of Sacramento would not contribute funding, Steinberg said. The mayor signed the letter anyway, at the request of San Jose Mayor Sam Liccardo, to support his fellow mayors who represent areas that are dealing with “a very very difficult situation,” he said.

“Electricity, which can be about life and death, should be seen as a public commodity,” Steinberg said. “Those sets of options ought to be considered and thought through. Our city’s a pretty good example of how it can be done right.”

The change in structure would raise capital from a broad pool of debt financing in greater amounts and at a lower cost than an investor-owned company, the letter said. PG&E needs tens of billions of dollars over the next decade for system hardening, wildfire protection and cyber security, the letter said.

Any takeover would require approval from the PUC and the bankruptcy court — and wouldn’t be cheap.

PG&E’s investors have proposed a plan that would inject close to $40 billion in new debt and equity to pay old wildfire claims and pull the utility out of bankruptcy. A separate group, led by PG&E’s major bondholders, mounted a competing plan to seize ownership of the company.

The company issued a statement Tuesday brushing aside the letter – as it has with previous efforts mounted by the city of San Francisco and others to take over parts of the utility’s grid.

“We are aware of proposals by various government agencies to acquire PG&E assets or to convert parts of the company to what is being described as a mutualized entity. We study and analyze each proposal. However, PG&E’s facilities are not for sale, and changing the structure of the company would not create a safer operation.

“We remain firmly convinced that a government or customer takeover is not the optimal solution that will address the challenges and serve the long-run interests of all customers in the communities we serve. We remain focused on fairly resolving wildfire claims and exiting the Chapter 11 process as quickly as possible. PG&E is committed to working with all stakeholders to make the necessary changes moving forward to build a stronger and safer PG&E and be the company our customers and communities want and deserve.”

Some local governments in the Sacramento region, including Rocklin, Lincoln and Yolo County, have explored leaving PG&E.

Last month, Valley Clean Energy submitted a bid to buy PG&E’s poles and lines in Yolo County for $300 million. If Valley Clean Energy is successful, the city of Davis and other Yolo County municipalities would contribute funding, likely through issuing bonds, Davis Mayor Lee said.

In 2006, Sacramento and Placer county residents rejected a ballot measure that would have expanded SMUD’s service area into Yolo County.

“We are envious of the fact that (Sacramento) has SMUD,” Lee said. “Our dissatisfaction with PG&E is not just a recent phenomena. It’s been over the course of many years.”

Some experts say a government takeover isn’t necessarily a cure-all for PG&E’s troubles.

Already driven into bankruptcy by billions in wildfire damages, PG&E blacked out hundreds of thousands of homes four times last month as high winds kicked up but apparently couldn’t prevent new fires from igniting even as the lights went out.

A faulty transformer line has been linked to the Kincade Fire in Sonoma County, which destroyed hundreds of buildings and prompted 180,000 residents to evacuate. Four smaller fires in the East Bay in recent days may have been caused by PG&E’s equipment.

Newsom has reacted with scorn to PG&E Chief Executive Bill Johnson’s prediction that it could take 10 years for PG&E to “harden” its electrical equipment against future disasters. The governor said he wants his newly appointed “energy czar,” Ana Matasantos, to explore a dramatic restructuring of the company, including partial takeovers by local governments. As a last resort, Newsom said he would consider the state trying to buy the entire company.

Staff writer Alexandra Yoon-Hendricks contributed to this report.

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Theresa Clift covers Sacramento City Hall. Before joining The Bee in 2018, she worked as a local government reporter for the Pittsburgh Tribune-Review, the Daily Press in Virginia and the Wausau Daily Herald in Wisconsin. She grew up in Michigan and graduated from Central Michigan University.
Dale Kasler covers climate change, the environment, economics and the convoluted world of California water. He also covers major enterprise stories for McClatchy’s Western newspapers. He joined The Bee in 1996 from the Des Moines Register and graduated from Northwestern University.