When Pacific Gas and Electric Company announced its intent to file for Chapter 11 bankruptcy protection on Jan. 14, it prompted uncertainties about the utility giant’s future, and it didn’t take long for other utilities to look at how they might benefit from the situation.
That same day, there were reports in San Francisco the city could try to acquire some or all of PG&E’s local operations and infrastructure. The city’s mayor asked the San Francisco Public Utilities Commission to analyze impacts of PG&E’s bankruptcy and what the city will need to do to ensure electricity services continue uninterrupted.
“The analysis should evaluate all options, including the possibility of acquiring and building electrical infrastructure assets,” Mayor London Breed said in a two-page letter dated Jan. 14 to SFPUC General Manager Harlan Kelly. A SFPUC report is due in mid-April.
In Tuolumne County, most of the population relies on PG&E infrastructure to convey 95 percent of the water that goes to about 44,000 Tuolumne Utilities District customers. TUD has no water rights and relies on a 46-page 1983 contract with PG&E for access to waters conveyed by PG&E from the South Fork Stanislaus River watershed.
Pacific Gas and Electric filed for Chapter 11 bankruptcy protection on Jan. 29. But the utility giant’s communications staff this week won’t say if the Spring Gap-Stanislaus Hydroelectric Project and the Phoenix Hydroelectric Project are for sale. The two projects include Pinecrest Reservoir, Philadelphia Ditch, Lyons Reservoir, the Tuolumne Main Canal and multiple powerhouses.
Asked Wednesday if PG&E assets in Tuolumne County are part of any negotiations or discussions with TUD or anyone else, Lynsey Paulo, a senior communications manager with PG&E, gave a general statement that didn’t address specifics in Tuolumne County.
“PG&E regularly evaluates the way the company is structured, strategically, operationally and financially,” Paulo said in a phone interview. “So that we are best positioned to operate efficiently and to provide safe and reliable service to our customers. We do not expect any impact to electric or natural gas service for our customers as a result of the chapter eleven process. Serving our customers safely remains our top responsibility.”
Ed Pattison, the current TUD general manager hired in October, said Wednesday TUD is signatory to a confidentiality agreement with PG&E regarding any infrastructure acquisition negotiations. He said that it’s clear in the past month there is regional and statewide interest about PG&E facilities and water rights.
Tuolumne Utilities District administration and staff strongly believe water supply and infrastructure necessary for supplying water should be locally owned, Pattison emphasized.
Asked specifically how much it would cost if TUD tried to buy the Spring Gap-Stanislaus Hydroelectric Project, Pattison referred to the confidentiality agreement with PG&E and said more generally, “TUD is very interested in acquiring PG&E assets if they are available.”
With any bankruptcy there is uncertainty, Pattison said. That’s a reality of bankruptcy. PG&E declaring bankruptcy causes concerns because of the 1983 contract with PG&E. That 46-page agreement predates the creation of TUD in 1992, but it remains binding and in effect for PG&E and TUD today. The contract sets forth the terms and conditions for TUD's water supplies.
To date, TUD has seen no change in its operations with PG&E. Pattison said PG&E’s recent performance during low-altitude snow storms that brought down hundreds of trees and triggered outages for thousands of residents showed PG&E is sticking by the 1983 contract.
“I’m thinking that 1983 agreement is going to be adhered to,” Pattison said. “PG&E says on the record publicly it’s business as usual, and I haven’t seen anything to disbelieve them. The recent snow storms caused problems for all utilities with outages and equipment and personnel. PG&E keep water going through their system throughout those incidents.”
Nevertheless, with bankruptcy there’s always uncertainty, Pattison said. PG&E’s previous bankruptcy was a different set of circumstances. In April 2001, in the midst of a California energy crisis that caused periodic rolling blackouts, PG&E declared bankruptcy to seek relief from $9 billion in wholesale energy debt. The company paid back about $30 million to creditors, increased customers’ rates to offset costs, and came out of debt four years later in April 2005.
“That was different,” Pattison said. “It’s a new world, and it’s challenging for anyone to predict the outcome of this current bankruptcy for PG&E.”
TUD’s chief concern is ensuring and providing a reliable, high-quality water supply at affordable rates, Pattison said. Any deviation from the 1983 agreement with PG&E could jeopardize current TUD operations. Pattison talked about an urban water management plan from 2015, and it’s synchronicity with the current county general plan update. He said TUD has absorbed at least five small water systems for various reasons in the past 10 years.
At this time, Pattison said Wednesday, no information exists or can be publicly shared to identify facilities, rights, or costs of interest to TUD.
Tuolumne Utilities District provides water and sewer services to west Tuolumne County communities with about 44,000 residents, including Jamestown, Columbia, Big Hill, Gibbs Ranch, Sonora, Mono Village, Phoenix Lake, Curtis Creek, the town of Tuolumne, Crystal Falls, Cedar Ridge, Sugarpine, and Peaceful Pines. About 95 percent of the water TUD distributes comes from the South Fork Stanislaus River and is impounded in PG&E’s Pinecrest and Lyons reservoirs. PG&E owns and operates the ditch-flume system called the Tuolumne Main Canal, which conveys water about 15 miles from Lyons to Phoenix Powerhouse on Lyons Bald Mountain Road, above Phoenix Reservoir. In addition, TUD owns and operates 71 miles of ditch, flume, pipe, and tunnel infrastructure that diverts water from the PG&E system at multiple locations.