Application for New or Different Service South San Joaquin Irrigation District (SSJID) Case Study San Joaquin LAFCo CALAFCO 2010 Annual Conference October 8, 2010

SSJI Vicinity Map

South San Joaquin Irrigation District (SSJID) Formed in 1909 to bring water from the Sierras to the Central Valley for irrigation purposes Constructed Goodwin Dam (1913), Woodward Reservoir (1916) and Mellones Dam (1926) In the 1950’s SSJID in conjunction with Oakdale Irrigation District constructed Donnells, Beardsley, and Tulloch Dams (Tri-Dam Project) Added three times the water and 120 megawatts of power Financing for the $52 million project was secured when PG&E agreed to buy electricity through 2005 San Joaquin LAFCo

SSJID’s Objectives for Providing Electric Power Reinvest the growing cash reserves (>$10 million annually) back into the community SSJID proposes 15% lower rates than PG&E Reliable retail electric service Increase jobs Increase funding for public benefit programs San Joaquin LAFCo

First Application June 2006 PG&E facilities not for sale Eminent domain discussion ensued Denied on the basis that the applicant did “not demonstrate its administrative, technical and financial capabilities to provide retail electric service LAFCo relied on § San Joaquin LAFCo

LAFCo Litigation SSJID sues San Joaquin LAFCo Third District Court of Appeals settles issues: Irrigation District was required to obtain approval from LAFCo A disappointed applicant can not take depositions of Commissioners after the decision to learn extra record information the Commission had when they denied the application and what additional information they needed to approve the application

Changes in Cortese-Knox-Hertzberg 2008 changes No longer called “latent power” but now “new or different service” The request becomes a “reorganization” Same original determination required plus all of the factors of a reorganization San Joaquin LAFCo

Processing Steps Gov. Code §56658 requires hearing within 90 days Gov. Code §55131 requires report from CPUC within 90 days regarding their opinion as to impairment to the remaining service area MSR complete or amended Environmental document-Host County as lead agency involving the construction of transmission or distribution facilities by irrigation districts-Public Utilities Code §9607(e) Plan for Services Application

Financial Evaluation Can not approve unless the Commission determines that the “special district will have sufficient revenues to carry out the proposed new or different function or class service” (§ ) San Joaquin LAFCo

Independent Financial Review Accredited Appraiser-specializing in public utilities Independent appraisal of the assets Review of SSJID and PG&E appraisals Review of the Business Plan –Purchase Price –Operation costs –Costs of Power San Joaquin LAFCo

Appraisal of the Assets Income Approach -Municipal vs. Investor Owned Cost Approach -original cost less deprecation (Not relevant) -replacement cost new less deprecation Market approach Other factors - severance costs, stranded investment, on-going concern (maps, new markets, costs to attract customers Upfront costs- SSJID - $ 87 million PG&E - $ 448 million PA - $ million

Environmental Assessment LAFCo as a responsible agency can require a subsequent EIR Greenhouse gas emissions must be addressed Must compare PG&E energy portfolio vs. SSJID portfolio San Joaquin LAFCo

Current Status Financial review conclude that SSJID’s proposal not economically viable SSJID files an amended business plan for new review San Joaquin LAFCo

Issues Eminent domain Reliability of services Rate setting-CPUC vs. Board of Directors Community Choice Aggregation (CCA) for districts? CCA for Cities and/or County Do lower rates promote Conservation? Greenhouse gas emissions

Summary County lead agency environment review Requires report from CPUC 90 day requirement to get to hearing after Certificate of Filing or application accepted Independent financial review New and different service is now a reorganization San Joaquin LAFCo