1 San Francisco deal: PG&E rejects the city’s $2.5 billion offer, calling it too low.
Pacific Gas and Electric Co. told San Francisco this week that it is rejecting the city’s offer to buy the utility’s local power lines for $2.5 billion.
Bill Johnson, CEO of the utility’s parent PG&E Corp., said in a letter to Mayor London Breed and City Attorney Dennis Herrera that the city’s offer was too low and would “unnecessarily and unfairly pass a large amount of costs” to remaining customers of the utility, among other reasons.
Johnson met with Breed and Herrera last month, a few weeks after they made PG&E a formal offer to buy its local electric equipment. He told them in his subsequent letter, which is dated Oct. 7, that his company appreciates the “effort San Francisco undertook to prepare its offer” but “we must decline to accept it.”
“As I indicated when we met, our San Franciscobased facilities are not for sale and to do so would not be consistent with our charter to operate our mission to serve Northern and Cen
tral California communities,” he wrote.
The city wants its offer approved as part of PG&E’s bankruptcy, but Johnson said the company’s “financing strategy” to resolve the case “does not envision selling off company assets.”
PG&E’s rejection is not a surprise, given the value of the city’s electric system, the fact that the company is headquartered in San Francisco and its past opposition to attempts to chip away at its customer base. City officials intend to continue their efforts. Breed and Herrera said in an opinion piece published on The Chronicle’s website Friday that they are “committed to this endeavor over the long term because it is in the best interests of all San Franciscans.”
Breed and Herrera said in a statement about Johnson’s letter that they were not surprised by the company’s response and are “also not giving up.”
“Now more than ever, it is clear that we must take back control of San Francisco’s electric service and achieve energy independence,” they said. “The benefits of affordable, clean, safe and reliable local power are too important.”
The mayor and city attorney said Johnson’s arguments are “inconsistent with the comprehensive analysis the city and its financial advisors have done on our proposal.”
Breed also addressed the subject at a recent meeting with The Chronicle’s editorial board. Regarding her recent meeting with Johnson, the mayor said, “It sounded like he wanted to work with us and wanted to be a better partner to San Francisco.”
“Part of the conversation made it clear that we were serious and didn’t want to be ignored,” Breed said. “Initially, they weren’t taking our offer seriously. I think that’s changed.”
But Johnson told Breed and Herrera that he did not think allowing San Francisco to transform the city’s Public Utilities Commission into the state’s thirdlargest governmentrun electric utility was in the best interests of PG&E customers.
“We disagree with the suggestion that PG&E’s San Francisco customers would be better served by another entity,” Johnson said. “Our San Francisco customers — and our customers in the rest of our service territory — rely upon us every day to deliver safe, reliable, affordable and clean power.”
The city has also underestimated the “substantial separation and impairment costs” it would incur if the deal went through, Johnson said.
Should San Francisco continue pressing its proposed acquisition, the city will face continued resistance from a major political force: IBEW Local 1245, PG&E’s largest union. The labor group thinks a transition would be bad for its members’ pensions and other contractual rights. IBEW even sponsored a website, www.sfprioritycheck.com, that outlines its opposition.