UPDATE: San Jose delays decision on city-run power grid

The San Jose City Council is holding off on creating a new, city-run power utility until officials are better informed to make a decision.

Councilmembers unanimously voted today to defer a decision to Oct. 3 that would amend city code to establish “San Jose Power” — a city-run electricity utility to capitalize on two new high voltage direct current transmission lines coming through San Jose.

Councilmember David Cohen said he didn’t have a problem deferring the vote, but he noted no financial decisions will be made for at least two to three years. The initial vote would be to get the ball rolling on an application that could benefit the city’s future development, he said.

“Santa Clara is the main city with data centers because Santa Clara has a municipal utility, and the cost is less for people to hook up,” Cohen said.

Microsoft is building a data center next to where the new transmission line will be in North San Jose, Cohen said.

“They would love to have an option potentially to have a different provider,” Cohen said. “Having that option in San Jose may be a good thing. We don’t know yet. We haven’t done the analysis, it will take two to three years for us to do the analysis… It’s important for us to have the conversation with the stakeholders between now and Oct. 3.”

There’s no indication yet as to how much the new city-run utility company would cost taxpayers. San Jose Economic Development Director Nanci Klein told San José Spotlight the city-run power utility needs to be created before any cost analysis can be done.

“You have to be a power entity to submit the application,” Klein said. “LS (Power) and CAISO will then tell us in detail what is required to connect and how much it would cost… we’re committed to working through the research and analysis that would take at least two to (even) five years.”

CAISO is the state-chartered nonprofit that manages the wholesale electricity market for 80% of California, and the organization that has approved and funded the new power lines. LS Power won the bid with CAISO.

“These lines are once-in-a-generation, if not longer than that,” Klein told San José Spotlight. “This application process is to directly take some of that (new) power… the city would be the distributor instead of PG&E, but in limited areas.”

This is not a utility residents will be selecting instead of Pacific Gas and Electric or San Jose Clean Energy, Klein clarified. Instead it will be used for key infrastructure sites like the San Jose Mineta International Airport and Diridon Station substations, which are in need of power, rebuilding and expansion.

“We’re really interested in making critical infrastructure like the airport get reliable, resilient, lower cost power,” Klein said.

The city’s initial study estimates 15% to 25% cost savings on electricity. In the fall of 2022, PG&E shifted its backlog for new loads to the electric grid to prioritize safety-related wildfire resistance projects; the backlog for new projects is as much as seven years, according to a city memo.

“If there were an ability to get power sooner and at lower cost, then that would mean housing units faster, jobs faster, revenues faster,” Klein said.

The new utility could be used in the future to entice new business and housing development, particularly in North San Jose, where one of the new high voltage power lines will run, she added.

Not everyone is on board with a city-owned power utility. The International Brotherhood of Electrical Workers Local Union 1245 said they have members working for PG&E in and around the city, and are unaware of how a city-owned utility would affect their work. They submitted a letter to the city on Aug. 8 expressing their concerns.

“Staff assured council (last September) that it would endeavor to analyze the impacts of starting a SJC municipal electric utility,” IBEW1245’s letter reads. “There is no analysis of the size and scale of this proposal. There is no estimate of costs.”

Klein said the city would not be taking over any of PG&E’s existing utilities.

The idea of forming a San Jose-owned public utility first came about during former Mayor Sam Liccardo’s term. The city had been struggling with rolling blackouts and leaders were looking for alternative solutions, but ultimately his plan fell short.

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