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Some S.F. supervisors want to use city windfall to purchase PG&E equipment, reducing reliance on utility.
When San Francisco received a multimillion-dollar windfall recently, several supervisors proposed using some of the money in an unexpected way: a $50 million down payment on PG&E electrical transmission equipment, so the city could reduce its reliance on the beleaguered utility.
Even after Pacific Gas and Electric Co.’s bankruptcy announcement this week, Mayor London Breed and other city officials remain skeptical that is the best use of the cash. But some of those supervisors are sticking with their idea, even expanding it by looking at a part of the windfall that was supposed to be off-limits to discretionary spending.
The total windfall, which comes from excess property tax revenue in a county education fund, is $415 million. But the City Charter requires that more than half the money go toward “baseline” contributions, pools of money for budget reserves and city agencies such as the Municipal Transportation Agency. After those allocations, the mayor and the Board of Supervisors have $185 million to spend as they wish.
The supervisors originally were looking at the $185 million in general fund money as the source of the $50 million down payment.
But on Wednesday, Supervisor Aaron Peskin said he had asked Controller Ben Rosenfield to determine whether any portion of the baseline contributions could also be used toward moving the city away from PG&E and toward a public power system.
“It’s important, whether it comes from one part of the windfall or another, that everyone realizes that the city is very serious about this,” said Peskin, a frequent critic of PG&E who spearheaded the supervisors’ original proposal.
Supervisor Hillary Ronen said the city needs to identify numerous sources of funding for a potential acquisition of PG&E assets, which experts say could run into billions of dollars.
Another potential funding source is June’s Proposition A, which authorizes the San Francisco Public Utilities Commission, with approval from the Board of Supervisors, to sell bonds to pay for clean-energy infrastructure.
But both Peskin and Ronen said they would still like to use the windfall money to help offset the costs.
“It’s not that we’re not willing to be flexible around the amount and where it comes from, but I do believe that we need to start building up a funding source to be ready to act sooner rather than later,” Ronen said Wednesday.
A PG&E spokeswoman had no comment on the idea.
So far, the mayor and the group of supervisors have proposed different visions of how to spend the windfall.
While Breed wants to use the money exclusively for homelessness and housing initiatives, five supervisors — Peskin, Ronen, Rafael Mandelman, Norman Yee, Sandra Lee Fewer — and former Supervisor Jane Kim proposed splitting the money among homeless initiatives, municipal energy independence and child care. There is also growing support for spending some of the money on public schools.
Although Breed asked the SFPUC to study the possibility of taking over some or all of PG&E’s local operations and infrastructure, she is not willing to surrender any of the windfall’s $185 million for that effort.
“Right now the funding should be going toward homelessness, behavioral health and affordable housing, because that is a need we can address today,” Jeff Cretan, the mayor’s spokesman, said.
Other supervisors say they are open to altering their $50 million proposal, or scrapping it all together if the city can come up with an alternative.
“I am not certain $50 million is the right figure, and I’m not even completely certain that this money must come out of (the windfall),” Mandelman said. “But I do think we need to move this power conversation forward, and the (windfall) is a place I’m willing to do that.”
Official discussions on how to spend the money will likely begin at the Board of Supervisors Budget and Finance Committee this month and continue for several weeks — if not months.
San Francisco’s desire to create a fully independent municipal electricity program is nothing new. But the idea gained significant momentum this week after PG&E announced both its parent company and utility subsidiary would file for bankruptcy protection at the end of the month, following two seasons of devastating California wildfires for which it may be held accountable.
The city would have to buy PG&E equipment that includes underground transformers, distribution lines and other infrastructure in addition to utility poles, some of which may not be located within the city.
But $50 million wouldn’t get the city very far in actually purchasing any of those assets, experts say.
“Fifty million dollars is not even a down payment on the cost,” said Michael Wara, director of Stanford University’s climate and energy policy program. He has estimated the price tag would run well into billions of dollars.
Still, the city could use some money to study the potential move toward more energy independence — a complex analysis that would likely require bringing in outside help, Wara said.
“Get a thorough assessment, one by somebody who actually knows what they’re doing,” he said. “I don’t know how much money that costs, but it’s a lot less than $50 million, and it’s a lot more than the (SFPUC) probably has sloshing around in their rainy-day fund.”
Financing the full purchase — should San Francisco decide to take that drastic step — could require another bond campaign, Wara said.
Taking over PG&E’s electric system is an attractive option to energy independence advocates who want the city to reduce its reliance on an investor-owned utility, viewing a not-for-profit municipal power provider as more transparent and accountable to the people.
Doing so is a “perfectly reasonable thing for San Francisco to be looking at,” said Severin Borenstein, a UC Berkeley energy economist. He predicted the city won’t be alone in exploring that option, which could be a problem.
“We’re going to have to do it in an organized fashion — not just San Francisco opting out of the system or some group of cities opting out,” Borenstein said. “I think we’re going to have to talk about what’s the optimal way to organize the entire PG&E system.”