Staff is seeking Council direction as to whether the City should commence formal exploration of the possibility of replacing PG&E service in Rocklin with another service provider. The initial exploratory steps include: (1) conducting a feasibility study; and (2) retaining counsel to prepare a legal analysis.

Electric service is currently provided to Rocklin residents by PG&E.  It is commonly known that PG&E rates are consistently higher than the rates charged by other providers in the area (e.g., Roseville Electric and SMUD).   In response to citizen concerns about the rate disparities between Rocklin and Roseville utilities, and the potential for PG&E public safety power shutdowns, several Councilmembers have expressed an interested in the possibility of exploring the delivery of electric service to Rocklin from another service provider.

Following discussions amongst City Managers, key staff and 2X2X2 representatives of the cities of Rocklin, Roseville and Lincoln, we have gathered the following information for consideration by the City Council.

ALTERNATIVE ELECTRIC PROVIDERS:

SMUD and Roseville Electric are the two potential alternative electric providers identified by staff. As of August 27, 2019, SMUD has not responded to inquiries. An update on any discussions with SMUD will be provided at the Council meeting.

City staff has had preliminary discussions with Roseville Electric. Roseville expressed a willingness to explore providing electricity to Rocklin residents through one of the following approaches:

1. Roseville annexes the territory.  This option requires Roseville voter approval, which may be difficult to accomplish unless we can identify a strong benefit to Roseville residents from serving Rocklin residents. Roseville would negotiate with PG&E for the purchase of their infrastructure. Financing for this purchase would be secured by Roseville. The cost of acquiring the infrastructure would be passed onto Rocklin residents in the form of a reimbursement surcharge on their monthly bills.
2. Rocklin forms a public power utility and contracts with Roseville for Service. This option does not require Roseville voter approval, but most likely would require Rocklin voter approval. Rocklin would negotiate with PG&E for the purchase of their infrastructure, and would need to secure financing for the purchase. Public utility commission and/or bankruptcy court approval may be required. Rocklin would negotiate with Roseville to provide service to Rocklin residents, which terms would include a method for Rocklin to recoup the cost of acquiring the PG&E infrastructure through a reimbursement surcharge on resident monthly bills. While Roseville has not ruled out Option 1 above, they prefer this approach.

DISCUSSION:

With either approach, the transition from PG&E to another service provider will not be a quick and easy process. It will require the commitment of the community and its elected officials, as well as an acceptance of a long-term view of solving problems. Not only could it take several years to form a public power utility, but with any option Rocklin residents can expect to have reimbursement surcharges on their monthly electrical bills for many years in order to repay the electric revenue bonds likely to be issued to purchase the infrastructure.

Regardless of the method pursued, the following preliminary steps will be necessary to explore whether making a change is advisable.


Preliminary Steps:

    STEP 1 – Feasibility Study:

    A feasibility study would need to be conducted to determine economic viability. The study would include an examination of capital and operating costs, and would factor in various options for power supply. In addition, the study would identify a range of expected savings, benefits, risks, and recommended next steps. We would also expect some preliminary outreach to PG&E to occur during this feasibility phase – in order to determine PG&E’s interest in selling its electricity delivery infrastructure to Rocklin.

    STEP 2 – Legal Analysis:

    In addition to a feasibility study, a legal analysis would need to be prepared that outlines the steps for proceeding with either Option 1 or Option 2. Outside Counsel would need to be retained to perform this work.

    ADDITIONAL STEPS

    Further to the preliminary steps above, additional steps MAY include, but are not limited to:

1. Determining value and physical condition of the current electric distribution system.
2. Obtaining voter approval.
3. Negotiating a service agreement with another service provider.
4. Negotiating a purchase agreement with PG&E.
5. Obtaining bankruptcy court approval.
6. Obtaining CPUC approval.
   

Should the Council direct staff to proceed, we will seek quotes for a Feasibility Study (Step 1) and Legal Analysis (Step 2) to be presented to Council for its consideration.