Despite its historically fraught relationship with PG&E, San Jose is inching toward an agreement that would hold the utility provider more accountable by requiring concrete, enforceable milestones for the construction and operation of the company’s electric infrastructure in the city.
While the City Council has given the green light to negotiate binding terms, San Jose has not yet shut the door on the possibility of starting up its own utility to service future growth areas should PG&E fail to live up to its commitments.
“I feel stronger about our relationship with PG&E now than I have at any time since I’ve been on council, and I know there’s been some growing pains in getting here,” District 4 Councilmember David Cohen said. “A lot of these are difficult discussions about whether PG&E is capable of providing us with the energy resources we need, but I’m hopeful that moving forward with an agreement like this will allow us to be able to be successful. As a councilmember who represents North San Jose, where a lot of large development is planned, and a lot of tech companies are very reliant on reliable and a large amount of energy, it is important to me, just like it is to our whole city, that PG&E is able to deliver for them.”
San Jose’s frustrations with PG&E have lingered for years, leaving investors skeptical on whether the utility provider would be able to provide service quickly and reliably.
Those concerns were not limited to San Jose, as developers throughout the state blamed PG&E for delays or cancellations of housing, hospital, and renewable energy projects.
Adding complexity to the situation, some of San Jose’s neighbors, like the city of Santa Clara, operate a municipal utility, granting them a competitive advantage in the ability to attract investment by offering a more reliable service at significantly lower rates.
These reasons prompted San Jose to study the feasibility of creating its own municipally-run utility, dubbed San Jose Power, to service new customers in targeted locations like downtown and North San Jose, where the city has envisioned housing and business growth.
Along with Santa Clara, Palo Alto also runs its own utility, which is one of at least 2,000 other jurisdictions to do in the country. One of the perks touted by San Jose officials when they revealed the possibility of a city-run utility was cost savings, which could run up to 25%.
The city’s power play is also buoyed by the construction of two major high-voltage transmission lines that LS Power, a Missouri-based utility development company, is adding over the next few years to improve electrical reliability in the area. City officials want to leave an open pathway to connect to the new lines as they believe the flexibility to connect to another energy source other than PG&E will help San Jose secure better rates and reliability.
The city intends to reveal the feasibility study results on March 21 as part of a special meeting where it could approve a more fleshed-out implementation agreement.
However, as San Jose has flirted with the municipal utility option, PG&E has stepped up its performance and commitment to serving San Jose better in the future.
As part of the binding agreement, city officials have asked for several provisions, including creating a city energy development team funded by PG&E to coordinate and accelerate large-load projects.
The proposed team would include two economic development and oversight positions and at least four positions in Public Works. Other provisions involve tracking enforceable performance metrics for large load and regular customers, investing in workforce development programs and providing 250MW of electrical capacity for the first phase of developing the Regional Wastewater Facility’s economic lands.
“This agreement provides assurance for the city and the commitment PG&E needs to make the necessary investments,” said Christina Ramos, a senior government affairs representative at PG&E. “We are looking forward to building and investing here and with the city of San Jose because we believe that delivering for our hometowns is what will lead us all to success.”
While acknowledging that the city’s relationship with PG&E has improved, San Jose Mayor Matt Mahan said lingering questions remain as the city assesses its options.
For him, part of the litmus test for how San Jose should proceed will be based on the market’s perception of the agreement and its confidence that PG&E can address the core issues.
“The market is there, and we’re seeing investment in massive data centers in Texas, Virginia, and all over the country,” Mahan said. “If we don’t have real interest that’s leading to real commitments, that’s leading to shovels in the ground soon, then clearly, something about our certainty, speed and cost triangle is not optimized how it needs to be. There is no excuse for this capital investment to not flow into San Jose very quickly as this new load, this new capacity, comes online to serve that demand.”
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