An update on efforts by Tuolumne Utilities District to acquire pre-1914 water rights and infrastructure from Pacific Gas and Electric Co. was highlighted Monday in a special meeting of the elected TUD board of directors.
Key new information that came out Monday included estimates that TUD rates will have to cover an additional $22.5 million over five years to acquire PG&E water rights and infrastructure, take on operation and maintenance costs, and to provide sufficient cash reserves during the transition.
Impacts on individual TUD customers’ expenses could see the cost of 800 cubic feet of water rise from $64.50 a month to $81.37 a month, an increase of $16.87 monthly, in order to make a deal with PG&E financially feasible, a TUD consultant said. If approved, the new, higher rates would commence Sept. 1.
The meeting offered a preview of what TUD staff will present again Tuesday afternoon at a joint meeting of TUD staff and the Tuolumne County Board of Supervisors, the Sonora City Council, the Tuolumne Band of Mi-Wuk Indians, and the Chicken Ranch Rancheria of Mi-Wuk Indians of California.
Leaders of TUD, the water and sewer agency that serves more than 40,000 Tuolumne County residents, are currently in what they describe as exclusive negotiations with PG&E to acquire water rights, Pinecrest and Lyons reservoirs, the Tuolumne Main Canal flumes and ditches, and Phoenix hydropower facilities.
The TUD board — Barbara Balen, David Boatright, Jeff Kerns, Lisa Murphy and Ron Ringen — heard criticisms of the plan from John Buckley, executive director of the Central Sierra Environmental Resource Center in Twain Harte, and a defense of the plan from TUD lawyer Jesse Barton, who recommended the TUD board and TUD staff “stay the course” and pursue the acquisition.
District staff have emphasized the ongoing negotiations with PG&E are a “once-in-a-century opportunity to secure reliable water supplies” since they publicly announced the effort in March 2020, because TUD and the county currently have zero water rights, and the county is the only one in the state without its own water rights.
All five TUD board members were present Monday, in person or on Zoom.
The TUD-hired consultant Nancy Phan with Raftelis, who has business economics experience with water, wastewater, stormwater and solid waste utilities, took part in Monday’s meeting. Raftelis Environmental Consulting Group was founded in 1993 in Charlotte, North Carolina.
Don Perkins, TUD general manager, with 30 years in water resources management in the county, shared some background on TUD’s negotiations with PG&E, which began in 2017 when PG&E informed TUD that it intends to divest itself of significant water rights and infrastructure in the county.
The investor-owned utility and TUD rely on the 67-square-mile South Fork Stanislaus River watershed for water. Parts of the infrastructure intended to capture, hold, and convey water from the watershed date back to the 1850s and the Gold Rush. Perkins said PG&E owns an 1851 water right on the South Fork Stanislaus, the oldest water right for the watershed.
If TUD doesn’t acquire the water system in the South Fork Stanislaus watershed, someone else will, Perkins said, repeating a key point in the district’s campaign to close a deal with PG&E.
For nearly four decades, TUD and the county have benefited from a 1983 agreement with PG&E that provides South Fork Stanislaus River water to TUD each year for free.
However, “the days of free water in Tuolumne County are going to come to an end, regardless of whether TUD or some other entity outside of our county owns the system,” Perkins said Monday.
The opportunity to acquire water rights and infrastructure from PG&E will come with costs, including more operational and maintenance costs, and higher bills for customers, Perkins said.
Financial analysis shows that, in order for TUD to acquire PG&E water rights and infrastructure, TUD finances are going to have to increase by about $4.5 million per year through 2027, Perkins said. This means rates for the district’s customers will have to increase, Perkins said.
“We know this is a tough pill to swallow,” he said, “but we truly see this as a worthwhile investment.”
Being first in line for water with senior water rights, having local control over the water system, improved drought responses and wildfire protection, as well as greater flexibility to respond to unforeseen variables, together outweigh the increased costs TUD and its ratepayers will take on in order to acquire the water rights and infrastructure, Perkins said.
Phan said the district hired her firm to develop a financial model and water rates to deliver sufficient revenues to responsibly operate and maintain the water system TUD hopes to acquire from PG&E.
“Put simply, the district (TUD) needs an average of $4.5 million in additional revenue a year,” she said.
Increased operations and maintenance costs, as well as building additional cash reserves and a $450,000 rate-stabilization fund by 2027 will account for the additional revenue needs over the next five years, Phan said. Profits from hydropower generation are expected to “contribute modestly to the bottom line each year,” Phan said.
The district’s water rates will need to contribute an additional $4.5 million annually to make the acquisitions from PG&E financially feasible, Phan said.
Phan presented a five-year table for TUD revenue needs showing that from fiscal year 2023 through fiscal year 2027, the district will need an additional $22.5 million to make a deal with PG&E work.
Later in the meeting, Buckley tried to deflate TUD’s claims that its water supply is in danger, stating that a perpetual contract guarantees the district access to free water from any owner/operator of the Spring Gap infrastructure that includes Pinecrest, conveyance to Lyons, Lyons itself, and the Tuolumne Main Canal ditches and flumes.
Buckley added that expenses to maintain PG&E infrastructure make any acquisition deal less than lucrative.
“It's frustrating to see TUD use ratepayers’ money to advertise and propagandize this,” Buckley said.
Barton took into account Buckley’s concerns and recommended TUD stay the course because “it’s a certainty” that any new entity owning PGE infrastructure, specifically the Phoenix Project, will attempt to get out of the 1983 agreement that currently provides free water to TUD.
“It's not speculative,” Barton said.
The Federal Energy Regulatory Commission doesn't care about TUD or its water supply, Barton said, adding that FERC is an energy agency, not a water agency or water supply agency.
“Criticism like this will continue,” Barton said. “The board should listen, but don’t let criticism alone divert the board from the task at hand.”
Buckley added later that for Barton to claim anything is a certainty — such as It being a certainty that a new owner would attempt to get out of the 1983 agreement that currently means free water for TUD — is Barton’s opinion, nothing more.
“There is no ‘potential new owner’ even in the discussion,” Buckley said. “It is all conjecture.”
Barton insisted that FERC doesn’t care about water supply, it cares only about energy. That was “one of a number of statements (Barton) made that are not correct,” Buckley said. FERC has legal authority for federal hydroelectric processes that are mandated to provide a balance of public benefits for power generation, recreation, environmental and wildlife values, and water supply, Buckley said.
“So it is just part of the rhetoric and misinformation being promoted by TUD and consultants that the FERC doesn’t care about ensuring that water supply needs are met,” Buckley said. “In truth, one of the FERC’s key objectives is ensuring that water supply needs are balanced and considered in FERC license decisions.”
Buckley said CSERC’s concern about the acquisition of PG&E’s elaborate and complicated hydroelectric and water storage system “is both conservation focused and ratepayer focused.”
Specifics Buckley raised Monday included:
• TUD does not have the biologists, botanists, and other resource consultants that PG&E has to deal frequently with resource issues that arise in water management of the PG&E system. TUD does not have biologists to do mandated surveys such as those that are required for monitoring the status of bald eagles, or to assess whether rare plants are being adequately protected within what is now PG&E’s FERC license property.
• TUD does not have the deep pockets that PG&E has if Strawberry Dam or Lyons Dam begin to deteriorate and require tens of millions of dollars in repairs.
• TUD ratepayers will end up paying roughly $1,000 more for each family over the next five years in extra water charges for each residence. Ratepayers could end up paying millions of dollars more than now estimated if aged historic dam facilities develop leaks, subside, or otherwise begin to deteriorate.
“The real question for this moment,” Buckley said, “is whether there is a lurking, truly significant threat of some water agency wanting to spend $20 million or more for a marginal hydroelectric system.”
The best response to that concern is that there is a solid, clear legal contract with PG&E that guarantees TUD water perpetually, so there is no financial incentive for another entity to aim to strip TUD of its water supply, Buckley said.
Also later Monday afternoon, Perkins and Lisa Westbrook with TUD public affairs confirmed that TUD finances are going to have to increase by about $4.5 million per year through 2027 to cover the following: PG&E water rights, infrastructure, operations and maintenance, and to fund reserves.
“This means rates for TUD customers will have to increase,” Perkins said. “TUD is working closely with PG&E regarding the complex water system. We consider it a partnership that will benefit Tuolumne County and its residents, TUD customers, and PG&E customers.”
PG&E’s incentives to divest itself of water rights and infrastructure in Tuolumne County include its recent history of utility-caused wildfires, fines from regulators, and the troubled utility giant’s flirtations with bankruptcy.
The utility declared itself bankrupt in January 2019 and emerged from Chapter 11 proceedings in July 2020.
In December 2019, PG&E proposed $13.5 billion settlement for all claims from the 2015 Butte Fire in Calaveras County; the December 2016 Ghost Ship warehouse fire that resulted in 36 deaths in Oakland; the October 2017 Tubbs Fire that burned more than 5,600 structures and killed at least 22 people in Wine Country; and the November 2018 Camp Fire that destroyed 18,800 buildings and killed at least 85 people in Butte County.
The last TUD update on its negotiations with PG&E in a joint meeting with other government agencies, the tribes, and other stakeholders occurred in February 2021.
Tuesday’s joint meeting is expected to begin at 2 p.m. in the county board’s chambers venue at 2 S. Green St. in downtown Sonora. The meeting will be streamed live online via the county’s website at www.tuolumnecounty.ca.gov, or www.accesstuolumne.org.
For more information about TUD’s efforts to negotiate with PG&E, go to www.tuocoourwater.com.
Contact Guy McCarthy at firstname.lastname@example.org or (209) 770-0405. Follow him on Twitter at @GuyMcCarthy.