Dive Brief:
- South San Joaquin Irrigation District (SSJID) will form an electric utility and replace Pacific Gas & Electric following a 4-1 vote by a local government agency, the San Francisco Chronicle reports.
- The San Joaquin Local Agency Formation Commission (LAFCo) authorized the irrigation district to serve customers in Manteca, Escalon and Ripon, Calif., though it must be able to supply power for 15% below PG&E's cost.
- The decision likely kicks off a lengthy process for SSJID to take control of PG&E's distribution assets. The utility and the district have drastically different valuations for the infrastructure.
Dive Insight:
Following years of work and a previous failed attempt in 2006, SSJID has won approval to form an electric utility. In a statement linked from its Facebook page, the district said "there's much to be done and more details to come, but the very first thing to do is this: Thank all of our supporters."
SSJID said it will lower power rates 15% below PG&E’s for all the homes, businesses and schools, "saving area residents an estimated $12 million every year."
But the San Francisco Chronicle points out that the road ahead may go through the court system. PG&E values the assets SSJID would need in excess of $600 million. The irrigation district has estimated the value at $125 million. That could mean an eminent domain court battle rather than a friendly negotiation.
SSJID laid out some possible scenarios on its web page, noting that even with a negotiated price PG&E could still insist on going through an eminent domain process in court because of tax advantages. Under than scenario, SSJID said it could be in service in a year to 18 months.
"If PG&E chooses not to negotiate, SSJID will initiate legal proceedings to acquire the PG&E system. If it’s adversarial in court, the process can take much longer – especially if one party’s strategy is to drag out the process as long as possible," according to SSJID's web site.
