TUD on Facts About PG&E Acquisition

Facts On PG&E Acquisition And Response To John Buckley, CSERC

Imagine being presented with an opportunity to own an asset you, your family, and others have depended upon for generations. Now imagine that while you wait to make a decision, someone else buys that asset out from underneath you and then uses that ownership to exploit and take advantage of you and your family for decades. Why would anyone pass up the opportunity to protect themselves and their family from being taken advantage of in such a way – especially when the asset in question is our water supply?

Unfortunately, this is precisely what Mr. John Buckley, Central Sierra Environmental Resource Center, proposes for the Tuolumne Utilities District (TUD) and its ratepayers in recent public comments circulated on May 16, 2020.

In that column, Mr. Buckley sharply criticizes TUD and its Board for exploring the opportunity to secure its local water supply by owning Lyons Reservoir, Pinecrest Lake, the Tuolumne Main Canal, the Phoenix Powerhouse, and the water rights associated with all four facilities, calling it a “boondoggle.” In truth, his opinion is loose with the facts and creates a false comparison between free water forever versus ownership in an attempt to disparage TUD’s and its Board’s efforts. Mr. Buckley’s comparison is false because he believes TUD and its ratepayers have only a binary choice – free water forever, or ownership of the Phoenix system that will cost money to operate and maintain.

The reality of the situation is that PG&E has unequivocally stated that it will sell the Phoenix system and all the associated water rights to anyone who wants it, but prior to putting it on the open market, PG&E offered it to TUD first as TUD is the most logical owner of the system.

If TUD passes on this offer, then the entire system, and the water rights on which TUD and much of Tuolumne County depend, will be sold to the highest bidder or abandoned. This is not hyperbole as PG&E has done this with several other facilities over the years: Merced Falls, Deer Creek, Narrows 1 were sold to local water agencies while the Kern, Tule and DeSabla-Centerville projects were sold to the highest bidder. PG&E is currently in the process of abandoning the Potter Valley Project, in PG&E’s attempt to shed facilities that no longer fit within PG&E’s electrical generating portfolio. Other water agencies across the state have indeed acquired water facilities and water rights from PG&E, with tremendous local benefit.

If TUD sits back and allows the Phoenix system to fall into an investor’s hands, the 1983 contract which Mr. Buckley holds so dear will be subject to “interpretation” by the new investor. This is a gamble we cannot afford to take. While the 1983 contract has served TUD and Tuolumne County well for decades, it is fantasy to think a new owner will not try to monetize the water and maximize the profits from the system at the expense of TUD, its rate payers, and Tuolumne County. Mr. Buckley may be comfortable rolling the dice with the new owner and Tuolumne County’s future, but the TUD Board is not.

The 1983 contract – and hence, TUD’s water supply – is not as ironclad as Mr. Buckley suggests. Contrary to Mr. Buckley’s statements: (a) the 1983 contract is not “perpetual” as there is no such thing as a “perpetual” contract under the law; (b) the contract does not “mandate” that TUD can request as much water as it desires, there are numerous limitations on water deliveries and there are in most years struggles between TUD’s water supply and PG&E’s desire to generate electricity at the expense of that supply; (c) despite the contract, TUD was unable to meet customer water needs in 2012, 2014, and 2015, forcing TUD to implement strict water conservation measures under an unfunded state mandate, which Mr. Buckley, even though he lives in Tuolumne County and was subject to mandatory conservation measures during this time, oddly omits from his opinion; (d) even if the 1983 contract is on file at the State Water Resources Control Board and the FERC, this has zero impact on its enforceability or interpretation because the SWRCB and the FERC do not enforce or interpret contracts, judges do; and (e) TUD’s water deliveries are not “assured” by “whoever may control the PG&E system in the future,” because Mr. Buckley does not know who the new owner may be, Mr. Buckley is not a lawyer or an expert on the assignability of contracts, and Mr. Buckley cannot pretend to know the terms and conditions under which that new owner may acquire the Phoenix system.

One thing is true: owning and operating the Phoenix system will involve costs. If TUD does acquire the system, which TUD believes is the right thing to do and in the rate payer’s long-term interests, TUD will undertake every effort to keep costs down.

However, if Mr. Buckley’s argument is that the mere existence of these costs is enough to pass on this opportunity, then that is unrealistic and by analogy calls into question why anyone would buy and own their own home for their family. Of course, there are costs associated with homeownership, but that does not, and should not, deter one from the privileges and advantages associated with owning their home, and neither should it deter TUD and its customers from owning the Phoenix system.

My family has lived in this community for generations. TUD’s staff, its leadership, and its Board of Directors live here. We care a great deal about protecting and sustaining our way of life. We have – and will always – act in what we believe are the best interests of the communities we serve. Before us is a chance to secure a reliable water supply, to secure our future. It is our duty to explore that opportunity for the benefit of Tuolumne County.

For more information on this effort, we invite you to visit TUD’s website at www.tuocoourwater.com.

Jeff Kerns, Vice-President
Tuolumne Utilities District