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Court of Appeal Unanimously Denies South San Joaquin Irrigation District’s Bid to Takeover PG&E without Approval

Release Date: April 23, 2008
Contact: PG&E External Communications (415) 973-5930

SAN FRANCISCO – California’s 3rd District Court of Appeal issued two unanimous decisions supporting Pacific Gas and Electric Company regarding attempts by the South San Joaquin Irrigation District (SSJID) to enter the retail electric business by seizing the utility’s assets.

The first decision rejects SSJID’s plans to condemn PG&E’s assets through eminent domain in order to provide retail electric service without authorization from the San Joaquin County Local Area Formation Commission (SJ LAFCo). The second rejects attempts by SSJID to depose two former SJ LAFCo commissioners and the commission’s former executive director. The Court also ruled that the District is responsible for all court costs associated with the appeals for both PG&E and SJ LAFCo.

“This decision confirms that SSJID must abide by state law, and obtain LAFCo approval in order to enter into the retail electric business,” said Nancy McFadden, PG&E senior vice president of public affairs. “This law exists for good reason: Before any special district can take over a service as important as a community's electric power, it ought to be able to make a good case, and prove the public benefit to the region, by winning approval at LAFCo. This decision preserves the checks and balances contained in state law.”

PG&E has consistently maintained that SSJID needs approval by SJ LAFCo to enter into the retail electric business. The irrigation district effectively acknowledged the commission’s authority by applying to SJ LAFCo in 2006 and actively participating in the commission’s proceedings on its application. Only after the SJ LAFCo rejected the application did SSJID claim the commission’s approval was merely permissive, not mandatory.

“Interpreting Article 1.5 (SJ LAFCo’s authority) as entirely permissive would be nonsensical,” wrote California 3rd District Court of Appeal Justice Fred K. Morrison. “There would be no point in establishing a detailed, timely and costly procedure for LAFCO approval if a disappointed applicant could simply disregard the decision of LAFCO and proceed with its plan to provide a new or different service. In interpreting a statute we avoid an interpretation that would lead to absurd results.”

In yesterday’s second ruling, the 3rd District Court of Appeal overturned the Superior Court’s original ruling, which would have allowed depositions of LAFCo commissioners and staff, thereby preserving the sanctity of public office and protecting officeholders from interrogation by a disgruntled applicant. The commission hears arguments, considers testimony and makes decisions as a body, thereby making the depositions of individual commissioners unwarranted.

PG&E has consistently maintained that SSJID carries the burden to prove it is qualified to enter the retail electric business. The district submitted an unpersuasive application, resulting in its rejection by SJ LAFCo.

“The denial was on the merits,” wrote Justice Fred K. Morrison. “If the District had a stronger case to make, reasonable diligence required the District to make that case at the (SJ LAFCo) hearing.”

It is unfortunate for the residents of South San Joaquin County that its governmental water agency has frivolously squandered more than $8 million since 2006 and is committing more than $11.5 million more of public dollars to pursue an unsound business plan that has been denied by multiple regulatory and judicial bodies in which it has applied.

Should SSJID choose to reopen its application with SJ LAFCo, PG&E’s position remains firm that the company’s facilities are not for sale and that we will vigorously contest a hostile eminent domain takeover.

PG&E has served northern and central California for more than 100 years and is committed to providing clean, safe and reliable energy to our customers in South San Joaquin County. PG&E has provided millions of dollars in energy efficiency savings and innovative services such as ClimateSmart™, energy partnerships and solar generation incentives and rebates for local residents and businesses, including SSJID’s water and irrigation facilities, to help reduce their energy bills and carbon footprint.

For the California 3rd District Court of Appeal complete decisions, please visit: http://www.courtinfo.ca.gov/opinions/documents/C056661.PDF

About Pacific Gas and Electric Company
Pacific Gas and Electric Company, a subsidiary of PG&E Corporation, is one of the largest combined natural gas and electric utilities in the United States. Based in San Francisco, with 20,000 employees, the company delivers some of the nation’s cleanest energy to 15 million people in northern and central California. For more information, visit www.pge.com/about/

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