FILE - In this Dec. 12, 2017 file photo, city attorney Dennis Herrera, center, speaks at a news conference next to acting mayor London Breed, left, at City Hall in San Francisco. San Francisco officials are offering to buy Pacific Gas & Electric's power lines and other infrastructure in the city for $2.5 billion. Mayor London Breed and City Attorney Dennis Herrera presented the offer in a letter sent to the utility Friday, Sept. 6, 2019. (AP Photo/Jeff Chiu, file)

San Francisco offers $2.5B for PG&E's power grid in the city

September 09, 2019 - 6:03 pm

SAN FRANCISCO (AP) — With Pacific Gas & Electric in bankruptcy as it faces billions of dollars in claims over wildfires started by its equipment, San Francisco is offering to buy pieces of the utility's assets for $2.5 billion so the city can run parts of the power system on its own.

Mayor London Breed and City Attorney Dennis Herrera said in a statement that the offer was "competitive, fair and equitable" and would lead to financial stability for the beleaguered investor-owned utility.

"We look forward to positive, collaborative discussions with PG&E on this critical issue," the statement issued Sunday said. "Throughout this process we will protect the best interests of our city as we strive toward the independent energy future that San Francisco deserves."

The offer was presented before PG&E submitted its plan Monday for reorganizing its finances to get out of bankruptcy.

PG&E said in a statement that it doesn't believe the sale would be "in the best interests of our customers and stakeholders." About 452,000 of the utility's 5.4 million electric customers are in San Francisco.

San Francisco, where PG&E was founded more than a century ago, began examining options for taking over pieces of the utility after it filed for bankruptcy protection in January. The city isn't looking to buy any part of PG&E's gas system.

A May report by the San Francisco Public Utilities Commission said public ownership of the electric grid could help the city become carbon neutral by 2030 and stabilize electricity rates.

The city already has its own power system but relies on PG&E to deliver electricity to many customers.

Money for the purchase would come from a bond that voters agreed last year the city could use. State and federal regulators would need to sign off on any deal.

Cities previously could use eminent domain to take ownership of assets at fair market value. But under a new law passed by state lawmakers in July, the California Public Utilities Commission will get to consider other costs in deciding any local government's purchase of utility assets.

Breed, along with San Jose Mayor Sam Liccardo and Oakland Mayor Libby Schaaf, told lawmakers that expanding regulators' oversight would infringe on cities' authority to provide electric service in the future.

A provision in the legislation also requires new owners to protect PG&E workers' jobs for three years. San Francisco said it would recruit PG&E employees to operate the proposed municipal system and honor their union contracts.

PG&E filed for bankruptcy because it said it could not afford billions in damages from recent deadly wildfires caused by downed power lines and other company equipment, including a November fire that killed 86 people and largely destroyed the town of Paradise.

The new law creates a fund of up to $21 billion to help PG&E and the state's other major utilities — Southern California Edison and San Diego Gas & Electric — pay out future claims as climate change makes wildfires across the U.S. West more frequent and more destructive.

To use the fund, companies would have to meet new safety standards to be set by state regulators and take steps such as tying executive compensation to safety.

PG&E also must emerge from its bankruptcy proceedings and settle its pending lawsuits from homeowners, insurance companies and local governments by June 30 of next year to tap into the fund.

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