SF takes another step toward public power

San Francisco is taking another big step on the path to create a municipal public power system, a plan that would reduce carbon emissions, bring in hundreds of millions a year in revenue—and fulfill a legal mandate that dates back to 1913.

The Planning Department just released its Draft Environmental Impact Report for the project, which will come before the commission for a public hearing April 17.

Much of the material in the DEIR is technical, and involves how the city would take over, rebuild, or connect to the Martin Substation on the border with Daly City. That’s the facility that turns high voltage power from the city’s own Hetch Hetchy generating facility and other sources into commercial and residential electricity.

The report suggests several options for that facility, and for the modest amount of trenching that might be needed to connect power lines.

But the real information is here:

Since 1913, the City attempted several times to purchase PG&E’s electric grid, portions of which have been in place since 1879, so the City could provide power throughout San Francisco. Since 1945, PG&E’s cooperation with the City to allow Hetch Hetchy Power to serve City facilities has been limited. The City and PG&E have frequently disagreed about whether PG&E or the City is entitled to serve specific customers and whether PG&E’s terms of service are reasonable. Although federal law requires that grid owners like PG&E provide “open access” to their electric grids, confirming the City’s right to connect to PG&E’s grid at reasonable rates and under non-discriminatory terms of service, and prohibiting anti-competitive behavior by PG&E, PG&E has continued to obstruct City electric service by raising rates, delaying or denying service, and requiring the City to install large, expensive electric equipment to serve even its smallest customers. More broadly, there has been growing concern amongst many government and financial institutions regarding PG&E’s near- and long-term ability to manage its system in a safe, responsible, and transparent manner, not just in San Francisco, but across PG&E’s service territory. San Francisco voters and policy makers have established their preference that electric service be provided to City projects and new developments by the City’s own utility, Hetch Hetchy Power, when feasible. Hetch Hetchy Power has worked with customers, City departments, and developers, partnering to invest in distribution facilities and distributed energy resources Although these investments have furthered the goal of the City’s independence from PG&E’s grid, PG&E continues to be the monopoly distribution service provider. The City’s proposed acquisition of the PG&E electrical Assets in San Francisco would allow the City to provide electric services to all end-users in San Francisco and reduce reliance on PG&E for electric service in San Francisco.

I have been writing about this since 1983. Yes, 1983. The Bay Guardian, where I used to work, has been on the story since 1969. You can see some of my work on the history of PG&E in San Francisco here. The quick summary:

After the 1906 earthquake and the failure of the private Spring Valley Water Company to maintain its infrastructure at a level that would fight the ensuing fire, the city needed a municipal water source. But other cities and farmers had already claimed water rights on most of the available rivers.

But a perfect site for a dam and reservoir existed on the Tuolumne River—at Hetch Hetchy Valley in the newly created Yosemite National Park.

Building a dam in a national park violated every law and concept, and John Muir formed the Sierra Club to fight the idea. But along with the emerging conservationist movement was another movement, arguing that electric power should never be controlled by private entities.

Rep. John Edward Raker, who represented the Yosemite area, struck a deal: the city could build a dam for water, but also had to generate hydropower that could only be sold at the cheapest rates to San Francisco residents and business—in direct competition with the emerging and growing PG&E monopoly.

The dam got built, the water arrived—and thanks to PG&E manipulation and probably bribes, the city supervisors never completed the power cable across the bay. So today, although 75 percent of San Franciscans get their power through Clean Power SF, PG&E still controls the transmission and distribution lines—and makes billions of dollars from its operations in San Francisco.

The company also has fought to block or make more expensive distributed solar and other carbon-free alternatives, which make no money for the private utility.

The city has asked the state Public Utilities Commission to come up with a number for the value of PG&E’s assets. When that happens (and it keeps getting delayed, now we are hearing 2026), San Francisco can go to court, condemn the property under eminent domain, and buy it at the market price.

None of this will cost the taxpayers a penny, and will have no negative impact on the city budget. The SFPUC can issue revenue bonds, backed only by the projected income from retail electricity sales. There would be zero financial risk to the city; if the project doesn’t pencil out, Wall Street’s not going to buy the bonds anyway.

But the upside is huge, both in terms of clean energy and finances. PG&E has just asked the state PUC to allow it to raise rates, yet again—this time to offer more profit to the shareholders. The Budget Analyst and the Controller would have to run the numbers, but every time I’ve looked at this, the data shows the city would net more than $500 million a year—after paying the interest on the bonds, and paying to move PG&E workers into the city system in the same union at the same pay, and maintaining the lines and every other cost. And rates could be much lower.

Meanwhile, the city could move quickly to encourage solar panels on roofs and develop wind power and head toward a carbon-free grid.

Every city and county in California that has a public power system makes money from it. The Santa Clara City system was so flush with cash that it helped finance the 49ers stadium (not a great use of money, but still: Imagine if we put that into affordable housing).

PG&E will fight this at every step, and it might take a few years to get through the courts. But if the city had done this in the 1980s, or 1990s, over 2000s, there might be no budget deficit today.

As the old saying goes, the best time to plant a tree is 20 years ago. The second best time is now.

The Planning Commission will consider Thursday/27 what seems to be a minor change in zoning laws—but it’s actually a sign of the city’s historic failure to protect light industry and blue-collar jobs.

The proposal, by Sup. Matt Dorsey, would create the “600 Townsend Street West Special Use District.” That district would consist of exactly one building, a five-story industrial structure that has long been zoned for wholesale sales, part of a district with zoning known as “PDR,” for Production, Distribution, and Repair.

The idea of PDR zoning is simple: It protects the ability of light industry to exist in the city. Office rents are way higher than PRD rents, in part because office use generally allocated about 250 square feet to each employee and PDR uses need about 900 square feet. Also: Warehouses, repair shops, small manufacturing, printing … those aren’t a lucrative as tech and finance, which can pay more for the space.

There are parts of Soma that have long been set aside for PDR—and the city has routinely looked the other way when landlords break the law and rent to tech companies anyway.

This costs the city millions in lost fees.

The building that used to house Twitter is a classic example: It was never zoned for office space, but Twitter snuck in—costing the city  $25 million.

So now we have 600 Townsend.

According to the planning staff report:

The proposed project (“Project”) would convert up to 213,400 square feet of gross floor area at the existing five-story building from Wholesale Sales to Office Use. The Project Site was converted to Office Use in the 1990s without benefit of Planning Department approval, and has maintained Office Use since that time. The Project would legalize the longstanding Office uses at the Project Site.

In other words: the landlord cheated, violated the zoning laws, and now is getting rewarded with a retroactive “special district.”

The building sold last year for $62 million. From The Real Deal:

The offices have been renovated with “high-end creative improvements,” including a solar overhaul, upgraded lobby and outdoor patio/lounge.

There’s no way that place was worth $62 million as wholesale space. The seller and buyer apparently just assumed that the city would legalize the office use, and now the Planning Commission is poised to do that.

The fees for converting 213,000 square feet of PDR space to office space are substantial, including money for Muni and affordable housing. The owners, under the proposed ordinance, would not have to pay anything at all.

I know, the tech mantra has always been that it’s easier to ask forgiveness than permission. But at the very least, with Muni in such desperate conditions, one would think the planners could require the impact fees as the cost of this “special district” giveaway.