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San Francisco Wins Sweeping Appellate Court Ruling Against FERC

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  • John Coté

NEWS RELEASE 
SFPUC Contact:                                                                 
John Coté
415-417-9319
jcote@sfwater.org
 
FOR IMMEDIATE RELEASE
January 26, 2022
 

San Francisco Wins Sweeping Appellate Court Ruling Against PG&E, FERC

Court rejects PG&E’s justification for trying to force SF to construct unnecessary and expensive equipment to hook up public projects likes schools, libraries and housing to the PG&E-owned electricity grid
 
SAN FRANCISCO – The San Francisco Public Utilities Commission (SFPUC) and City Attorney David Chiu announced today that a federal appeals court in Washington D.C. has awarded the City a broad victory against PG&E and the Federal Energy Regulatory Commission (FERC) over PG&E’s predatory efforts to deny basic power hookups to public facilities like schools, libraries and transit projects. 

“This is a clear victory for fairness,” SFPUC General Manager Dennis Herrera said. “For years, PG&E has been unlawfully trying to stymie competition by holding affordable housing, medical facilities, and other public projects hostage, denying them access to PG&E’s grid. This ruling sends a clear message that PG&E’s obstruction wasn’t justified. It also underscores why we should own our local electric distribution network rather than be subject to the whims of PG&E, a repeat convicted felon.”

For years, PG&E has been refusing to connect many public facilities across San Francisco to the electric grid it owns unless unnecessary and wildly expensive equipment is added. In June 2018, 31 different public projects, from a homeless shelter to a children’s museum, faced PG&E roadblocks. Since then, over 100 projects have faced obstruction by PG&E. As shown by an SFPUC report submitted to the Board of Supervisors in September 2021, there are still 68 active projects that have faced PG&E roadblocks that need to be connected. 

PG&E’s obstruction has hampered City priorities like affordable housing, homeless centers, and climate change goals. It has also cost the City more than $13 million over the last three years in additional equipment costs, delay costs, redesign costs, lost SFPUC revenue when projects are forced to become PG&E customers, and higher energy costs due to PG&E’s higher rates. 

“This ruling recognizes that PG&E has spent years obstructing San Francisco’s efforts to power our own municipal services using our own clean power,” said City Attorney David Chiu. “The Court requires FERC to ensure PG&E’s rules are actually needed for safety and reliability so that PG&E cannot use its monopoly to derail San Francisco’s efforts to provide affordable, public power. This victory would not be possible without the doggedness of our hardworking attorneys and former City Attorney Dennis Herrera.”

The dispute is centered on PG&E’s wholesale service to SFPUC under rules approved by FERC. The SFPUC purchases access to PG&E’s distribution system in San Francisco – paying PG&E about $20 million per year – to serve facilities providing City services. PG&E, in an attempt to stymie competition from the SFPUC, has been obstructing public projects for years, demanding the installation of unnecessary and expensive equipment before hooking up those projects to the electric grid. In one example, PG&E demanded equipment that would have required 30-feet by 20-feet by 12-feet of space – the size of equipment needed to serve San Francisco General Hospital – to power a light and a hand dryer in a stand-alone restroom for SFMTA transit operators. The cost for the equipment PG&E was demanding was $500,000; the appropriate electrical equipment costs about $5,000.

The court’s decision covers two separate appeals from San Francisco, challenging a series of FERC orders.  One, a San Francisco complaint in January 2019 about PG&E’s demands for the costly and unnecessary equipment, which is designed for high-voltage primary power connections. San Francisco argued that secondary connections, which carry lower voltages, are the appropriate connection types for these projects. FERC sided with PG&E, and San Francisco appealed to the D.C. Circuit Court, which ruled decisively in the City’s favor. 

The appellate court, in a unanimous ruling by a three-judge panel, found that FERC’s decision-making was flawed, noting in different spots in the ruling that FERC “does not provide sufficient justification for its conclusion,” “does not meet its burden of reasoned decision-making,” and that FERC’s “ ‘passing reference to relevant factors,’ … “is not sufficient to satisfy [FERC]’s obligation to carry out ‘reasoned’ and ‘principled’ decision making.”

The court also noted that:

 “… the orders on review present a troubling pattern of inattentiveness to potential anti-competitive effects of PG&E’s administration of its open-access Tariff. More than a century ago, Congress authorized the Hetch Hetchy System not only to provide San Francisco with a source of cheap power but also to ensure competition in its retail power market. Faced with claims that PG&E was frustrating that competition by treating its own retail service preferentially and refusing service for customers San Francisco had served for decades, [FERC] fell short of meeting its ‘duty’ to ensure that rules or practices affecting wholesale rates are ‘just and reasonable.’ ”

The second case addressed by the court started with a San Francisco complaint in 2013 regarding grandfathered customers who were served up until 1992. The court found that FERC’s orders on grandfathering, which limited the City’s ability to continue to serve many of the customers it was serving in 1992, “are arbitrary and capricious.”

The court’s decision invalidated FERC’s orders on these topics and sent the matters back to FERC for “further proceedings consistent with this opinion.”

Read the full decision here.

The court decision comes as the San Francisco Board of Supervisors’ Land Use and Transportation Committee is set to hold a hearing on PG&E’s obstruction of public projects at 1:30 p.m. on Monday, January 31, 2022.

About the San Francisco Public Utilities Commission 
The San Francisco Public Utilities Commission (SFPUC) is a department of the City and County of San Francisco. It delivers drinking water to 2.7 million people in the San Francisco Bay Area, collects and treats wastewater for the City and County of San Francisco, and generates clean power for municipal buildings, residents, and businesses. Our mission is to provide our customers with high quality, efficient and reliable water, power, and sewer services in a manner that values environmental and community interests and sustains the resources entrusted to our care. Learn more at www.sfpuc.org. 

John Coté