The contentious relationship between PG&E and San Francisco has grown more tense, with the energy company now seeking to impose costly new requirements for The City to use its grid to deliver publicly-owned Hetch Hetchy power to city projects and even street lights.
The City lost a dispute earlier this year before the Federal Energy Regulatory Commission over similar requirements the utility imposed in recent years on projects like schools, affordable housing and pools. The City has since taken the matter to court.
But now PG&E has filed a Sept 15 proposal with FERC to make the costly hookups a requirement going forward as part of the wholesale distribution tariff, a set of rules for how the San Francisco Public Utilities Commission can use PG&E’s grid to serve The City’s own power customers. The SFPUC delivers over the grid greenhouse gas-free hydroelectric power produced by Hetch Hetchy reservoir in Yosemite.
At the center of the dispute is the difference between what in the utility service world is called primary voltage service versus secondary service. Primary service, traditionally reserved for higher voltage needs, requires more costly and extensive equipment, which takes up a lot of space. In one case cited by The City, a developer had to use 720 square feet of space for the equipment instead of for a planned childcare facility because PG&E required the primary voltage service.
PG&E has said it will now no longer offer the less expensive secondary service hookups but will support existing secondary service as long as there are no upgrades.
“PG&E for the last few years has been imposing the primary service requirements on us,” Barbara Hale, SFPUC’s assistant general manager for power, told the Capital Planning Committee this week. “We’ve objected to it because it is not part of their existing tariff service. With this change, it will become a part of their tariff service.”
Hale estimated it would increase the upfront construction cost to connect to PG&E’s grid by $500,000 per project site. Secondary service equipment generally costs about $50,000.
“Historically at about 2,500 to 3,000 kilowatts a load would be taking service at primary,” she said. “PG&E’s proposal today is to have all load take service at primary, including unmetered load, so traffic signals, street lights. Very, very small load under PG&E’s proposal would be required to take primary service.”
Public power struggle
The dispute is building at a time when San Francisco is seeking to buy PG&E’s infrastructure for the development of its own public power system — but PG&E has rebuffed those efforts.
A contentious relationship has long existed between the utility and San Francisco, in part due to The City’s plan to launch a community choice aggregation program to take away PG&E’s power customers and provide them with electricity from cleaner energy sources. The program, known as CleanPowerSF, launched in May 2016 and has since enrolled more than 400,000 customers. The City uses PG&E’s infrastructure to deliver electricity to these customers.
Ed Harrington, Mayor London Breed’s recent appointment to the San Francisco Public Utilities Commission and a former head of the SFPUC, said during his nomination hearing before the Board of Supervisors that CleanPowerSF was a prelude to having public power.
To get to public power, he said at the time, The City must figure out: “How do we buy out PG&E, how do we make sure the system is sustainable, what will that cost, and how do we do all of that without causing some kind of rate shock?”
The City currently pays PG&E about $12 million for distribution service and $25 million for transmission service a year, according to Hale.
“We have been working with the City Attorney’s Office and the Mayor’s Office on an effort to acquire PG&E’s grid,” Hale said. “The fact that PG&E is making it challenging and expensive for us to connect to their grid just increases the attractiveness of gaining independence from them.”
However, when Breed and City Attorney Dennis Herrera extended an offer to pay $2.5 billion for the acquisition of electric distribution and transmission assets in September 2019, PG&E rejected the offer. The offer was re-extended in August and once again rejected.
Bill Smith, interim CEO for PG&E, wrote: “Far from wanting to sell our assets at this stage, PG&E has redoubled its commitment to improve its service to all of our communities.”
He also said the offer was “substantially below the fair market value of our assets” and that a sale would “unfairly shift a large amount of cost to our remaining customers.”
Increased project costs
Herrera filed opposition to PG&E’s plan with FERC earlier this month, as he continues to litigate the previous dispute in the U.S. Court of Appeals for the D.C. Circuit.
Hale said that despite Herrera’s filing, “we do expect under PG&E’s relationship with FERC that FERC will allow these proposed changes to become effective January 2021 while they consider our concerns.”
City project managers expressed concerns over the blanket requirement.
Toks Ajike, a project manager with the Recreation and Park Department, told the committee, “We continue to have constraints on our side in dedicating equipment space in our open space.”
He wondered if the equipment could be undergrounded.
“We think it will be very challenging and potentially at many sites infeasible for The City to underground and include primary switchgear at sites,” Hale said.
Ajike expressed amazement that the requirement would apply to low energy needs.
An irrigation pump, for example, he said is less than 100-amp, and “having to do primary service on an 100-amp service I think is nuts.”
He also said that “some of the playgrounds that we do the total budget is approximately $2 million average.”
“Having to dedicate just $500,000 for utilities will be tough for us,” Ajike said.
In its filing with FERC, PG &E said that only offering primary service is a standard among large investor-owned utilities. PG&E argued it has the benefits of safety and reliability including that it “keeps each respective utility’s facilities separate, with clear lines of demarcation for crews to work safely.”
Herrera’s filing argues that “PG&E has not demonstrated any safety or reliability risks, or other technical issues, arising out of its provision of secondary service.”
The City also calls attention to complications that could arise with unmetered load, including tens of thousands of streetlights, traffic signals, bus shelters and gunshot detectors.
“Because the power used by these small unmetered loads is predictable, PG&E bills San Francisco based on a formula rather than metered demand,” Herrera’s filing said. “Now, however, PG&E would eliminate this common-sense arrangement and require San Francisco’s streetlights and other small unmetered load to be connected to its primary system and metered.”
Compliance with the requirement, the filing said, “would likely require installing a transformer for each block of streetlights as well as expensive high-side metering that would require significant space (presumably in the public rights-of-way).”
Deterring customers from switching
The City alleges PG&E’s requirements are designed to deter customers from getting their power from somebody else.
“PG&E’s intent is clear. PG&E wants to make WDT service so uneconomic, or physically infeasible, that many end users will be forced to take PG&E retail service,” the filing said. “This is an abuse of its position as an administrator of an open-access tariff and certainly not just and reasonable.”
PG&E said in a statement to the San Francisco Examiner that “for reliability, operational and equity reasons, all new Wholesale Distribution Tariff service going forward will be at primary voltage interconnections.”
The statement said that the primary connection requirements “enhance the safe and reliable operation of each utility’s systems and facilities by making it easier to track ownership of equipment and isolate it for emergency repairs and other maintenance and service issues.”
Only two current PG&E customers take secondary service, San Francisco and the Western Area Power Administration, according to PG&E. A settlement agreement with WAPA will allow for secondary connections through 2024.
Hale testified in a FERC filing last year that the requirements were causing projects to go with PG&E’s retail service.
“Some city departments have asked us to allow them to take retail service from PG&E in order to avoid the delays, costs, and space requirements that PG&E imposes when customers are served by The City,” Hale said in the 2019 declaration. “The City has reluctantly agreed to allow some projects to take PG&E retail service when delays imposed by PG&E on city service became simply too costly and burdensome.”
One example was allowing PG&E to serve the Central Waterfront Navigation Center for the homeless, after The City couldn’t come to a resolution with the utility.
The complications from the disputes in recent years over primary and secondary service have affected all kinds of public projects, The City claims. The SFPUC even submits quarterly reports to the Board of Supervisors detailing the status of electrical service to projects.
A November 2019 quarterly report identified 64 projects that have experienced “interconnection delays, arbitrary requests or increased project costs” from July 2019 through October 2019.
Hale said that the disputes and requirements in the past three years has resulted in “about $16 million in additional costs.”
“We expect that type of increase to be experienced going forward as well,” she said.
The latest move by PG&E, Hale said, only encourages The City to move to buy PG&E’s infrastructure.
“This just keeps pushing The City towards a policy of acquisition of the assets so that we can manage our own costs and our own requirements more reasonably,” she said.