State - INACTIVE

Appraisal: Electric system worth triple SSJID's offer

The electricity system in and near Escalon, Ripon and Manteca is worth more than triple what the South San Joaquin Irrigation District has offered to pay for it, a new appraisal says.

The estimate of $201 million to $235 million came from a consultant hired by the San Joaquin Local Agency Formation Commission, which will consider the district's attempt to acquire the system from Pacific Gas & Electric Co. for $61 million.

The appraisal, released May 21, is far from the $388 million valuation last year by a consultant for PG&E, which does not want to sell.

Representatives of the two sides said last week that the report buttresses their arguments.

"The independent report supports PG&E's position that SSJID has drastically undervalued our facilities in Manteca, Ripon and Escalon," said Nicole Liebelt, a spokeswoman for the San Francisco-based utility.

Jeff Shields, the district's general manager, said the report overestimates several points, including the cost of borrowing money to finance the acquisition.

"Overall, I think we can work with it," Shields said. "It reaffirms a lot of the important things as far as I am concerned."

Shields said he still believes the acquisition would reduce power bills by about 15 percent for the 38,000 customers in the area.

He also noted that the report refutes PG&E's claim that the district does not have the technical knowledge to run a retail power system.

SSJID tried in 2006 to acquire the system but was rejected by the Local Agency Formation Commission, which rules on the boundaries and functions of local agencies in San Joaquin County.

SSJID applied again to the commission last year but does not have a hearing date.

Approval would allow the district to negotiate with PG&E. It could have to resort to condemnation, with the price set by a judge.

SSJID provides farm and city water from the Stanislaus River and wholesale power from three hydroelectric plants.

To become a power retailer, which the Modesto and Turlock irrigation districts have been since the 1920s, SSJID would have to acquire about 800 miles of wires and two substations from PG&E.

The latest appraisal was done by PA Consulting Group Inc., based in Denver. It says the appraisal done for the district last year used flawed assumptions in projecting future income from the system. This kind of projection is a common method used by appraisers.

The new report also says the appraisal done for PG&E overstated the replacement cost of the system, another common method.

The new appraisal says SSJID would face about $48 million in transition costs, including unhooking the area from the PG&E grid. This would bring the total to $249 million to $283 million.

The appraiser for SSJID had put the transition costs at just $4 million, for a total of $65 million. PG&E's consultant estimated $61 million in transition costs, for a total of $449 million.

Liebelt said PG&E experts will review the new appraisal to see why it differs from the company's figures, but it remains firm against selling.

A group called the Common Sense San Joaquin Coalition also urged SSJID to end the effort.

"It's predicated on being able to deliver lower rates based on ridiculously low assessments," spokesman Jon Tremayne said. "Now that the facts are clear and the true value of the local distribution system and power costs are known, it is plainly obvious to any observer that the SSJID can't meet its stated goal of lower rates."

On the Net:

www.co.san-joaquin.ca.us/lafco/ SJLAFCO_May%2021%202010.pdf

Bee staff writer John Holland can be reached at 578-2385 or jholland@modbee.com.

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