SF and PG&E lock horns over power-distribution agreement

San Francisco’s battle with PG&E over a municipal clean-power program is well-known — but a lesser-known battle with the energy giant is threatening to cost The City hundreds of millions of dollars.

The conflict could also impair the Hetch Hetchy power enterprise that provides electricity to government operations like City Hall, fire stations and Muni.

After more than two years of negotiations, The City and PG&E remain at odds over the terms of an interconnection agreement set to expire July 1. The agreement allows the San Francisco Public Utilities Commission to deliver hydroelectric Hetch Hetchy power over PG&E’s infrastructure to libraries, police and fire stations and other customers.

The City is in agreement with the utility company about the increase in transmission costs, which will rise between $12 million and $14 million annually.

But city officials are fighting proposed terms around requirements to install intervening facilities that they say would be devastating.

Installation of intervening facilities is a federal requirement in the Energy Policy Act of 1992. Intervening facilities can include poles, meters, meter cabinets, phone lines (for meter reading), protection devices, switches, transformers and any other equipment required for interconnection, according to PG&E.

The dispute hinges on which customers are grandfathered in and exempted from the requirement.

Since PG&E will not exempt locations that are remodeled, relocated or new public buildings, during the next 10 years it could cost The City more than $652 million to install such facilities, SFPUC officials said. PG&E contends it’s being nothing but fair. “We’re already being very liberal in our willingness to grandfather in customers,” PG&E spokesman Jonathan Marshall said.

He said the rules being applied exist for any wholesaler. “It’s not a big hardship,” Marshall said.

Intervening facilities create a distinct delineation between two energy entities and ensures protection and reliability of the power distribution grid. For the new Hunters Point Naval Shipyard redevelopment, for example, the SFPUC installed two switchgears as intervening facilities. The requirement as being imposed by PG&E would erode the SFPUC’s customer base, SFPUC officials claim. SFPUC officials contend there are cases where its not possible, due to lack of space or safety reasons, to install such facilities.

Battles with PG&E aren’t new, but the difference in this case is the unity at City Hall. There’s been infighting over CleanPowerSF. Supporters of that renewable-energy program have accused opponents like Mayor Ed Lee of bowing to PG&E interests.

The mayor surprisingly threw his support behind CleanPowerSF in January. But when it comes to the wrangling over the interconnection agreement there appears to be a united political front. The city attorney filed a complaint with Federal Energy Regulatory Commission over PG&E’s proposal, which the SFPUC has raised an alarm about. Barbara Hale, SFPUC assistant general manager for power, said the terms being proposed “will impose unnecessary costs on us and our customers.”

Mayoral spokeswoman Christine Falvey said Friday that “the mayor is supportive of the SFPUC position on this.” She said the ongoing dispute over the interconnection agreement did not play a factor in the mayor’s decision to support CleanPowerSF, a type of community-choice aggregation program the utility company has long opposed in cities throughout the region.

Even U.S. Sen. Dianne Feinstein, D-Calif., who helped negotiate the agreement when serving as San Francisco’s mayor, has gotten involved. In a Dec. 15 letter to the FERC, Feinstein requested continuation of the existing agreement to allow for more time to negotiate and resolve “several difficult issues.” She references the 1913 Raker Act, which permitted the creation of the Hetch Hetchy Reservoir and created city obligations to provide hydropower.

More time is also what the Lee hopes to see. “The mayor would like the existing agreement to remain in place as the SFPUC and PG&E work to reach an agreement,” Falvey said.

But PG&E said The City has had more than enough time.

“This agreement has been set to expire for quite some time,” Marshall said. “This is no sudden revelation to the city.”

A ruling from FERC is expected to happen any day.


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