In a potential game changer for San Jose’s energy market, the City Council is set to decide whether to lay the early groundwork for creating its own utility company, a project sparked by mounting concerns over Pacific Gas & Electric’s reliability and the need to ramp up power supply in an increasingly electrified economy.
On Tuesday, councilmembers will vote on whether to establish a new department called “San Jose Power” and submit an application for access to a forthcoming underground transmission line that would become the beating heart of the city’s new service. If the council forges ahead with the idea — still likely years away from becoming a reality — the city would build out and operate its own power lines to serve future housing, transportation and industrial hubs around downtown and north San Jose.
But there’s already strong opposition to the high-stakes plan. Unsurprisingly, PG&E is against it — along with the regional utility workers’ union.
Why would the city embark on this endeavor? Early estimates show the city’s offering could be anywhere from 15 to 25 percent cheaper than investor-owned utility PG&E as San Jose Power’s nonprofit status wouldn’t require it to fork over state or federal taxes — or be beholden to shareholders.
In addition to the potential cost savings for San Jose utility users, the city could possibly connect residents and manufacturers much faster to its own power grid, city officials say. There have been numerous reported instances in which housing projects are left waiting to get linked up to power from PG&E.
“We could forestall greater problems (with San Jose Power),” said Nanci Klein, who oversees economic development at the city. “We could facilitate development if we can control our own destiny on a limited basis.”
Klein said the proposal’s fiscal impact is still being studied and insisted that San Jose is nowhere close to even considering eventually taking over PG&E’s infrastructure.
But Councilmember David Cohen said that if all goes according to plan, it could be a possibility.
“The long-term vision could be different,” said Councilmember David Cohen in an interview. “And who knows? In 20 years, the city could decide our system works better than PG&E’s.”
If the plan goes through, San Jose would join the cities of Santa Clara and Palo Alto, which both operate their own electric utilities.
San Jose first began looking at alternatives to PG&E in January 2019 when the utility filed for Chapter 11 bankruptcy after facing billions in liabilities from previous wildfires. The movement gained momentum in the fall after hundreds of thousands of PG&E customers endured blackouts as a preventative measure by the utility company to prevent a power line from sparking a wildfire. Former San Jose Mayor Sam Liccardo led the charge against the utility, calling for it to be converted to a customer-owned cooperative, though that plan never came to fruition.
More recently, doubts have been raised over whether PG&E can successfully upgrade its infrastructure; the city’s brief analysis for San Jose Power points out that the utility giant recently asked for a loan from the federal government to cover future projects. The company also decreased its goal for how many power lines it was going to bury for wildfire prevention.
In March, the nonprofit that oversees most of the state’s electricity market, California Independent System Operator (CAISO), put Missouri-based LS Power in charge of building and operating a major transmission line that will run through San Jose and increase electricity capacity. The project is set to be completed by 2028 — and the city intends to take advantage of the opportunity by linking up to the new line, which Cohen described as a “once-in-a-generation opportunity.”
“Given that those are being built now, it’s an opportunity for the city to get in early,” said Cohen.
But Hunter Stern, a member of the regional utility workers’ union IBEW 1245, is concerned about the city’s proposal. Stern doubts whether San Jose understands the complexity and capital it would take to establish a city-run utility, especially considering the fact that the city has historically been constrained by a tight budget. He also said the city’s idea could also end up taking away PG&E jobs filled by current union members. [related_articles location=”left” show_article_date=”false” article_type=”automatic-primary-tag”]
“I’ve talked to a few councilmembers. They’ve all said, ‘We’re gonna figure this out later.’ That’s not comforting,” said Stern. “I have no confidence the city of San Jose can create an electric utility at all.”
PG&E is also pressing the city on their idea. When asked to provide comment on the matter, the utility deferred to a letter it sent to the city this week outlining its opposition and requesting that the city delay any discussion.
“Voters in San Jose have routinely identified topics such as homelessness, housing affordability and public safety as their top priorities,” the letter read. “Exploring an unnecessary, and potentially risky creation of a municipal utility diverts precious city resources away from these more pressing issues.”