Presentation — San Jose City Council, March 21, 2025

City Council Special Meeting: San José Municipal Electric Utility Exploration
March 21, 2025
1 TODAY’S AGENDA

1. Background and Overview – The Role of Electrical Infrastructure in San José’s Economic Development

2. San José Power Opportunity

3. PG&E Partnership Opportunity

4. Evaluation of Options

5. Recommended Path Forward (Implementation Agreement with PG&E) and Key Deal Points a. Joint Planning and Economic Development
b. Building the Team
c. Driving Delivery – Transparency, Accountability, and Objectives as Measured by Key Results d. New Ways of Doing Business – Process and Design Improvements e. Workforce Development

6. Best Alternative to a Negotiated Agreement

7. Conclusion
2 Strengthening PG&E Partnership
• Initial discussions on
municipal electric utility
feasibility.
• Evaluation of existing city
energy programs and
regulatory landscape.
• Lessons learned from past
efforts, including
Downtown West (2021).
• October 3, 2023: Council
adopted Municipal Code
changes and directed staff
to explore standing up a
municipal energy utility
and keep engaging with

IBEW/PG&E
• Partner engagement to
assess governance,
financial, and operational
structures.
• Refinement of key
questions: cost savings,
innovation, resilience, and
workforce.
• Public and stakeholder
outreach to assess
support and feasibility.
• Development of a
business case, staffing
model, and financing
approach for San Jose
Power.
• Honing PG&E Partnership
Agreement (alternative to
San José Power)
Exploring Municipal Electric Utility (San José Power)

TIMELINE
Establishing recurring monthly meetings to coordinate:
• Emergency Response and Preparedness,
• Electrical Connection to Development/Permitting,
• Resilience and Innovation,
• PG&E Distribution Infrastructure,
• PG&E Load Forecasting/Future Planning
Coordinating with IBEW
• Execution of Cooperation
Agreement
• Negotiating Implementation
Agreement for terms on
speed, certainty, and
accountability of
interconnections
Improving Emergency
Management response and
coordination, especially in
response to Power Safety
Shutoff and weather events
2021-2023 2023 2024 2025
3 October 3, 2023 City Council directed staff to explore the feasibility of San José Power, and answer these four key questions…
If the City were to provide municipal utility for electric service in limited areas of the city, could that be done in a way that would:

1. Reduce electricity energy costs?

2. Allow the development of more innovative and energy efficient buildings such as that envisioned in the planned Downtown West development?

3. Increase the electrical resilience of the City of San José and our critical infrastructure for both climate change and emergency response?

4. Enable us to attract and retain the skilled and trained talent required to perform this work effectively and reliably?

BACKGROUND
4 On March 4, 2025, City Council directed staff to enter into a non- binding cooperation agreement with PG&E focusing on…

1. Funding for a City team to accelerate work and improve coordination,

2. Commitment to joint planning, and exploring options for financing, and development of new electric infrastructure,

3. Commitment to define milestones for interconnection of large load customers,

4. Process improvements and innovations in design and delivery of infrastructure,

5. Workforce development initiatives and community engagement through a PG&E demonstration facility, and

6. The commitment to cooperate on negotiating more detailed implementation agreement(s), which will include greater detail on all issues above including an approach to joint planning, load forecasting, transmission and distribution capital projects and budget teams, funding of staff, workforce development, and design and process improvements.

BACKGROUND
5 EXISTING SYSTEM
6 Electricity
Generation
San José Clean Energy
or
PG&E
Electrical
Distribution
PG&E
CustomerHigh Voltage
Transmission
Owned by PG&E
New Segments Built and
Owned by LS Power
Planned/Operated by CAISO

POTENTIAL CITY ROLE
7 Electricity
Generation
San José Clean Energy
or
PG&E
High Voltage
Transmission
New Segments Built and
Owned by LS Power
Planned/Operated by CAISO
Electrical
Distribution
PG&E
and
Customer
San José Power
For limited new
development &
key City Facilities
or
San José Power
THE ROLE OF ELECTRICAL INFRASTRUCTURE IN SAN JOSÉ’S

ECONOMIC DEVELOPMENT
A reliable electricity supply underpins San José’s growth Rising interest in:
• Energy-intensive industries such as data
centers, advanced manufacturing, and
emerging artificial intelligence applications
• Ambitious decarbonization goals and building
electrification aligned with City’s Climate Smart
San José initiative
Requires:
• Modernizing transmission and distribution
capacity
~1000 MW
Current
Energy Load
~800 MW in
planning stages
Projected Future
Energy Load
~1000 MW in
potential interest
8 FISCAL IMPACT OF DATA CENTERS
9 Estimated City annual General Fund revenue from Data Centers (per MW) Note: Revenue estimates are for a fully ramped-up data center, which could take up to 5 years from project completion.
per MW
50 MW Data
Center
75 MW Data
Center
99 MW Data
Center
Low Estimate
Utility Taxes $ 29,000 $ 1,450,000 $ 2,175,000 $ 2,871,000 Property Taxes $ 6,890 $ 344,500 $ 516,750 $ 682,110 ANNUALLY $ 35,890 $ 1,794,500 $ 2,691,750 $ 3,553,110 High Estimate
Utility Taxes $ 50,000 $ 2,500,000 $ 3,750,000 $ 4,950,000 Property Taxes $ 14,950 $ 747,500 $ 1,121,250 $ 1,480,050 ANNUALLY $ 64,950 $ 3,247,500 $ 4,871,250 $ 6,430,050 10 Expansion
of Purified
Water
Economic
Development
Land
SAN JOSÉ POWER

OPPORTUNITY
The proposed electric utility could deliver
service in limited areas of the City, connecting
to one or both of the two new LS Power
Transmission Lines:
• Transmission Line #1 (North San José):

High voltage AC line running from Fremont
to Santa Clara past Regional Wastewater
Facility.
• Transmission Line #2 (Downtown San
José): High voltage DC line running from
Coyote Valley to Downtown San José.

Staff evaluated the feasibility and desirability
of standing up this new City utility.

Proposed LS Power
Transmission Line #2
Proposed LS Power
Transmission Line #1
NewGen Strategies
• Developed a Business
Case and Proforma
• Evaluated projected San
José Power costs and
compared to PG&E
• San José Power could
be at least 14% to 26%
lower than PG&E’s rates
Mercer
• Staffing Analysis for build
out of San José Power
• Identified key positions
and benchmarked
salaries
• Salary ranges exceed
those within the City of
San José’s current pay
plan
SAN JOSÉ POWER OPPORTUNITY
Worley
• Provided electrical
engineering expertise for
technical evaluation
• Prepared the Interconnection
Application to LS Power
Transmission Lines
• Concluded that connecting to
the transmission is feasible
and offered approaches to
ease interconnection

BUSINESS CASE STAFFING ANALYSIS TECHNICAL FEASIBILITY
11 © 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC
SAN JOSE POWER – BUSINESS CASE MODELING
Cost assumptions included in SJ Power financial feasibility analysis:
• Large customer(s) fund delivery infrastructure needed for interconnection to SJ Power assets • SJ Power purchases power, energy, renewables, and CAISO network transmission for delivery • Small initial team to manage operations
• City transfer applied
• PG&E non-bypassable charges or current power charge indifference adjustment (PCIA) applied (conservative assumption)
12 SJ Power Service Offering:
• Large Industrial Rate: 10,000 kilo-watts (kW)
or more
• Full service:
o Power supply
o Delivery at transmission voltage
(69 kilovolts or higher)
SJ Power Operations:
• Own, operate, and maintain electric delivery
infrastructure connected to California
Independent System Operator (CAISO)
• Utility executive team
• Purchase and deliver power to customer(s)
© 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC
SAN JOSÉ POWER BENCHMARK TO PG&E RATES
13 * The PCIA is a fee ensuring that customers who leave their original utility still pay their fair share of that utility’s past sunk electricity costs.
*w/PCIA*
Rates range from
-14% to -20% lower than
PG&E
w/o PCIA*
Rates range from
-23% to -27% lower than
PG&E
For a typical 99MW
Data Center, this
amounts to roughly
$16-34M
in potential annual
energy bill savings.

San José Power Potential
Initial Service Area
14 Proposed LS
Power
Transmission
Line
San José/Santa
Clara Regional
Wastewater Facility
Water
Purification
Expansion
ECONOMIC IMPACT OF SAN JOSÉ POWER
15 Alternative to PG&E for
Economic
Development and local
control for Critical City
Infrastructure
North San José Served
(Regional Wastewater Facility,
Purified Water, 159 Acres of
Economic Dev land)
Lower Rates than
PG&E
Considerable effort on
the part of the City to
stand up new line of
business
Catalyst to accelerate
additional private
development in North
San José
CITY IMPACT OF SAN JOSÉ POWER
New municipal electric
utility with all startup
costs paid for by
private developer
San José Power Bottom Line - The City has a viable opportunity to start up San José Power and service limited areas of North San Jose at lower cost to those customers than PG&E 16 Funding for a City team
to accelerate work and
improve coordination.

Workforce development
initiatives and a PG&E
demonstration facility
Process improvements to
speed delivery and
innovations in design and
delivery of infrastructure
Commitment to joint planning,
and exploring options for
financing, and development
of new electric infrastructure
The commitment to cooperate on negotiating a more detailed Implementation Agreement which will include greater detail on all issues above including an approach to joint planning, load forecasting, transmission and distribution capital projects and budget teams, funding of staff, workforce development, and design and process improvements
Key Provisions In The Executed
Cooperation Agreement With PG&E
Commitment to define
milestones for speed and
certainty of interconnection
for large load customers
(e.g. data centers, labs)

PG&E PARTNERSHIP

OPPORTUNITY
Answering the initial four key questions…
If the City were to provide municipal utility for electric service in limited areas of the city, could that be done in a way that would:

1. Reduce electricity energy costs? YES, only for a small number of customers.

2. Allow the development of more innovative and energy efficient buildings such as that envisioned in the planned Downtown West development? YES, only for a small number of customers.

3. Increase the electrical resilience of the City of San José and our critical infrastructure for both climate change and emergency response? YES, for select infrastructure.

4. Enable us to attract and retain the skilled and trained talent required to perform this work effectively and reliably? UNCERTAIN.

EVALUATION OF OPTIONS
17 KEY CONSIDERATIONS AND TRADEOFFS
Key Criteria
PG&E
Status Quo
(pre-2021)
PG&E
Implementation
Agreement
San José
Power
A. Certainty of Power
B. Speed of Interconnection
C. Customer Electricity Rates (Cost)
D. Resilience
E. Innovation/Design
F. Emergency Preparedness & Response
G. PG&E/City Relationship
H. Risk to the City
I. City Level of Effort
Worse Better 18

KEY CONSIDERATIONS AND TRADEOFFS
Key Criteria
PG&E
Status Quo
(pre-2021)
PG&E
Implementation
Agreement
San José
Power
A. Certainty of Power
B. Speed of Interconnection
C. Customer Electricity Rates (Cost)
D. Resilience
E. Innovation/Design
F. Emergency Preparedness & Response
G. PG&E/City Relationship
H. Risk to the City
I. City Level of Effort
Worse Better 19

1. A City Energy Development Team

2. Clear and enforceable Objectives and Key
Results (OKRs) for large load
interconnections.

3. Flexibility in Design and Delivery

4. Potential expansion of PG&E’s annual
permit

5. 250MW capacity in Phase 1 development
of the Regional Wastewater Facility 159
Acres of economic lands

6. Deepened investment in San José-based
workforce programs

7. An immediate surge of resources
Key elements in the
Implementation Agreement:
• Joint Planning and Economic
Development
• Building the Team
• Driving Delivery – Transparency,
Accountability, and Objectives as
Measured by Key Results
• New Ways of Doing Business –
Process and Design Improvements
• Workforce Development
RECOMMENDED PATH FORWARD:

IMPLEMENTATION AGREEMENT WITH PG&E
22 JOINT PLANNING AND ECONOMIC

DEVELOPMENT
23 To attract and retain large load customers, PG&E and City will implement:

Collaborative,
agile approach
Consult
stakeholders
early
Coordinate
advanced
design
PG&E provides
load forecast
& capital plans
Expedite
timelines

JOINT PLANNING AND ECONOMIC

DEVELOPMENT
• Facility owned land planned for industrial
and R&D use
• City preparing Request for Qualification
(RFQ) solicitation to secure master
development partner
• ~1,000MW of potential demand in the long
term
• $30M-$60M in potential revenue annually
24 159 Acres Economic Development Lands –
south of the San José-Santa Clara Regional
Wastewater Facility
San José-Santa Clara
Regional Wastewater Facility
Plant Master Plan
Public
PG&E and LS Power Transmission
Source: LS Power CPUC Application

City Energy Development Team

BUILDING THE TEAM
26 Economic Development:

Lead the partnership to success
and monitor and track PG&E
performance obligations and
milestones
Public Works:

Drive delivery in the field and
facilitate permit streamlining.

Large Load Customers
DRIVING DELIVERY – TRANSPARENCY, ACCOUNTABILITY, AND

OBJECTIVES AS MEASURED BY KEY RESULTS
• Quarterly Objectives as Measured
by Key Results (OKRs)
• Dashboards for:
• Downtown San José,
• North San José (w/ specific KRs for
the 159 Acres of Economic
Development Lands)
• Citywide Metrics
• Monthly coordination meetings +
6-month progress report tracking
on OKRs 27
NEW WAYS OF DOING BUSINESS – PROCESS

AND DESIGN IMPROVEMENTS
• Permit status dashboard across all PG&E
business units and City utility permit
• Weekly PG&E permit priority list
• 5-week PG&E construction forecast
• Co-location of utility and City review staff
• Piloting and standardized equipment
specifications for new distribution projects
28 Committment to addressing the critical need for a skilled and highly qualified electrical workforce.
• work2future serves a total of 2,000 clients annually; 85% are placed in high-wage, high-growth jobs; 65% have two or more barriers to employment.
• Partnership with PG&E Power Pathways, serving up to 50 clients annually with 90% placement rate and earning $35 per hour.
• Collaborate with IBEW and PG&E to develop customized training and career awareness programs.

WORKFORCE DEVELOPMENT
29 Key elements in the Implementation Agreement:
• Joint Planning and Economic Development
• Building the Team
• Driving Delivery – Transparency, Accountability, and Objectives as Measured by Key Results
• New Ways of Doing Business – Process and Design Improvements • Workforce Development
RECOMMENDED PATH FORWARD:

IMPLEMENTATION AGREEMENT WITH PG&E
30 BEST ALTERNATIVE TO A NEGOTIATED

AGREEMENT (BATNA)
• Retain the option to
stand up San José
Power should PG&E
not achieve the
performance
obligations in the
Implementation
Agreement
31 RECOMMENDATION
a) Accept the results of the municipal electric utility exploration studies and the outcome of staff’s evaluation of the desirability and viability of the City establishing a municipal electric utility.
b) Adopt a resolution authorizing the City Manager or her designee to negotiate and execute the PG&E City of San José Implementation Agreement, including funding for key positions and consultant support.
c) Authorize the City Manager or her designee to continue efforts to evaluate a municipal electric utility if PG&E does not meet the terms and performance outlined in the Implementation Agreement.
32 City Council Special Meeting: San José Municipal Electric Utility Exploration
March 21, 2025
33

San Jose City CouncilMarch 21, 2025

San Jose City Council
March 21, 2025