As San Jose continues to study the feasibility of creating its own utility to service future growth areas, PG&E has proposed an agreement with the city to build out its grid amid concerns over rising costs, reliability, and the impact of delays on economic development.
PG&E officials say the utility company is ready to offer firm commitments and specific deadlines to meet San Jose’s goals for the downtown and northern parts of the city, eschewing the need for a new power service.
“We’ve made great progress, but we agree that there’s more that we can do to meet the city’s aggressive economic development goals,” PG&E vice president of South Bay delivery Mike Medeiros said at Monday’s Transportation and Environment Committee meeting. “We understand the city’s interest in attracting new loads and the tax benefits and the economic growth that it brings to the city. PG&E wants to be a partner with the city to meet those economic development needs in a timely manner and help grow the economy here in the South Bay, and San Jose city staff has expressed concerns with our ability to deliver infrastructure on time and at the scale needed to meet the city’s aspirations.”
San Jose city leaders had sought to improve the delivery of electric services for years before the City Council approved exploring a municipal utility last year.
With a massive chunk of PG&E’s budget allocated toward wildfire mitigation, concerns started to mount over delays or cancellations of housing, hospital, and renewable energy projects.
One of the added perks of creating a municipal utility is the estimated cost savings for customers, which city staff estimated could reach up to 25%.
If San Jose creates a public utility, it would join at least 2,000 other jurisdictions throughout the country, including Palo Alto and the city of Santa Clara.
The Council’s decision last year did not have any binding action; instead, it wanted to explore whether the city could offer a reliable source of power to the city at lower rates without affecting jobs.
The proposed utility would not impact PG&E’s current services but focus more on new customers in specific locations like downtown and North San Jose, where the city envisioned future housing and job growth.
In anticipation of servicing those areas in the future, the city has requested connections to the two major high-voltage transmission lines that LS Power, a Missouri-based utility development company, is constructing over the next few years to improve electrical reliability in the area. The first transmission line runs through North San Jose, coming down from Fremont on a path near the regional wastewater facility. The second line runs from Metcalf substation, just north of the Coyote Valley, to downtown San Jose.
The California Independent System Operator — the entity that oversees most of the long-distance transmission lines in the state — recently approved doubling the power capacity for LS Power’s project to 2,000 megawatts, highlighting the need for more power in the San Jose area.
However, one of the biggest outstanding questions is how the city could finance building the infrastructure of a new utility.
Officials said one of the likelier scenarios was for a developer or customer to cover the costs before turning it over to the city.
“The success and desirability of this effort will depend in part on a reliable customer developer, who can cover the upfront costs for the infrastructure in exchange for long-term access to the power,” Deputy City Manager Kip Harkness said.
But while San Jose considered its options, PG&E Regional Vice President Teresa Alvarado reiterated the utility’s commitment to the city and willingness to address concerns and respond to future needs.
Alvarado pointed out that PG&E launched a first-ever study to examine data center loads in North San Jose and also reached an agreement with mega-developer West Bank on the creation of a net zero community in downtown San Jose that uses energy from data centers to heat and cool thousands of housing units.
She also noted performance improvements during the heat wave that saw limited interruptions this year.
“We really focused when we knew the weather was coming,” Alvardo said. “We proactively swapped out some of our equipment and we saw a tremendous improvement of reliability for our customers in San Jose.”
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Under the agreement PG&E has proposed, it would provide concrete, enforceable milestones for the construction and operation of infrastructure.
It has also proposed dedicating a project development team to support economic growth. City staff intends to present the municipal utility options and proposal from PG&E to the City Council next year.
“As San Jose is preparing for the rapid growth of tech and (artificial intelligence), city staff has been upfront with their concerns about the electric capacity needs to serve these new large loads and have been vocal about needing the timely build-out of our infrastructure to entice economic growth in San Jose,” Medeiros said. “The anticipated growth in electric demand in San Jose is unprecedented. For 30 years, we’ve had no growth in California (and) now it has significantly increased, and we recognize that we need to take an unprecedented approach to prepare for the growth. Waiting until we receive applications for service to build infrastructure is not going to meet your needs.”
