How S.F. voters can replace PG with cleaner, greener, cheaper, public
power by establishing a municipal utility district.                                             
 	 		 		
SFBG News | The green choice | June 7, 2000
 		 		 		 		
The green choice

By Rachel Brahinsky
 						
ED SMELLOF, an energy law professor who now lives in New York, 
remembers when the Sacramento Municipal Utility District took the 
highly unusual step of shutting down its nuclear power plant.
 						
It was 1989, 10 years after the accident at Three Mile Island and 
three years after Chernobyl. Activists around the state had been 
trying to shut down privately run nukes at Diablo Canyon and San 
Onofre for years. But in Sacramento they had an advantage: the 
electrical system is publicly owned, and its board had to respond 
to the voters.
 						
The Rancho Seco nuclear plant, which SMUD had built itself, had 
been plagued with problems for years. Smellof, who was then on 
the elected SMUD board, told us that initially the board and 
management, after spending $400 million on repairs in two years, 
wanted to keep the plant operational. "I was the lone voice out 
of five," he said.
 						
In 1989 a citizens group put a measure on the ballot to shut down 
the nuke. It was a major campaign that attracted statewide 
attention. "The issue had reached a level where the public was 
really quite well informed," Smellof recalled. "It was the only 
thing on the ballot in June. People were so energized that it was 
close to a fifty percent turnout."
 						
Shortly before the election, Rancho Seco caused a major blackout, 
which helped turn the tide. The voters approved a shutdown, and 
the plant was closed the very next day.
 						
"Closing the plant was the result of direct democracy in 
Sacramento," Smellof said. "The reason they could do that is 
because it's publicly owned. You couldn't do it with a plant 
owned by a private company."
 						
Ten years later, San Francisco faces a different sort of energy 
crisis. Utility deregulation has been a disaster for consumers. 
Pacific Gas and Electric, which is the major power supplier in 
the city, is publicly under fire for recurring blackouts, ever 
higher rates, poor service, and an increasingly spotty 
environmental record. Local and state officials are demanding 
that PG pay large fines to the city, the California Public 
Utilities Commission, and the Independent System Operator, which 
controls the state's power grid.
 						
And a local coalition of consumer, environmental, neighborhood, 
and public power advocates (including the Bay Guardian) is 
promoting an initiative to bring public power to San Francisco 
residents.
 						
Members of the Coalition for Lower Utility Bills hope that their 
petition – which would create a municipal utility district, or 
MUD, with the ability to sell electricity in San Francisco and 
Brisbane – will make it to the ballot box in November. A Yes vote 
for a MUD, they say, would mean that residents would have a 
public power agency managed by a five-member elected board, which 
could vote to offer lower rates than PG and could develop 
renewable energy sources to reduce our dependency on fossil fuels 
and nuclear power.
 						
With the formation of a MUD in San Francisco, the city could 
finally live up to the mandate of the federal Raker Act of 1913. 
That law allowed the city to build a dam in the Hetch Hetchy 
Valley of Yosemite National Park – on the condition that it be 
used to provide water and power to San Franciscans through a 
nonprofit, public power agency at the lowest possible rates. The 
city built a public water system and an electric generating 
station, and it uses some of the power for city departments. But 
since the dam was built, PG has used its political influence to 
keep Hetch Hetchy power from local residents and businesses and 
to maintain its monopoly in San Francisco (see "How PG Robs S.F. 
of Cheap Power").
 						
Into the MUD
 						
The idea of bringing public power to San Francisco is nothing 
new. Between the early 1920s, when the dam at Hetch Hetchy was 
completed, and the beginning of World War II, the issue was at 
the forefront of local politics, and Harold Ickes, who was 
secretary of the Interior under President Roosevelt, repeatedly 
demanded that San Francisco stop allowing PG to sell private 
power in the city and build the public power system mandated by 
the Raker Act.
 						
In the 1970s and 1980s San Francisco activists launched several 
municipalization drives, but in every case PG spent huge sums of 
money and twisted political arms to squash the efforts (see 
chronology).
 						
Plenty of other northern California cities have created 
successful municipal utilities. The Palo Alto utility charges 
some of the lowest rates in the state and paid $11.8 million to 
the city last year to support city services. On Earth Day the 
utility initiated a new program whereby residents can elect to 
pay a few extra cents per kilowatt-hour to add green power to 
their energy mix and to support the development of new green 
projects for future generations.
 						
The move for a San Francisco MUD, however, is a relatively recent 
strategy. Previous efforts involved direct city takeovers of PG 
facilities. They were all buried under a mound of PG money. In 
1998, after the defeat of the statewide pro-consumer ballot 
measure Proposition 9, which would have overturned deregulation, 
consultant and former PG engineer Jim Simpson recommended that 
the San Francisco coalition try using a populist section of the 
state code that allows for the formation of municipal utility 
districts by petition (see "San Francisco MUD?," 2/11/98).
 						
"If you want to [get cheaper and cleaner power] for the city ... 
you have got to get in the power business," he said at the time.
 						
Simpson served 24 years as a PG employee, followed by 6 years as 
the general manager of the public utility in Redding. For the 
past 20 years Simpson has helped California communities form 
public power districts of their own. He was instrumental in 
organizing districts in Susanville (Lassen MUD), Hayfork Valley, 
and Trinity County.
 						
With his help, the San Francisco coalition began circulating its 
petition in March. But when an informal opinion from the City 
Attorney's Office revealed a potential legal hurdle, the group 
decided to expand the coalition to include the neighboring city 
of Brisbane (see "Public Power Advocates Expand MUD Petition 
[http://www.sfbg.com/News/34/33/ogmud.html] ," 5/17/00).
 						
Public power democracy
 						
Approximately 2,000 public power agencies serve about 40 million, 
or 15 percent, of the nation's electric customers, according to 
the American Public Power Association. In California the 
percentage is higher – between 25 and 30 percent of Golden State 
electric customers purchase their power from 45 publicly run 
utility companies.
 						
One of the largest in the state is SMUD, which serves 1.1 million 
people, all of whom have the option to participate in the 
democratic structure used to run the utility. And when there's a 
controversial issue on the table, like Rancho Seco, or a proposed 
change in rates, the SMUD board hears a lot from its customers.
 						
"You have a say through your vote because you elect one of your 
board members," Jim Shetler, SMUD's assistant general manager for 
customer services, told us. "All of our meetings, with the 
exception of legal issues, are open meetings with time for public 
comment. Our ratepayers are our shareholders, so the way to show 
a 'return' on their investment isn't only through offering low 
rates and good service, but by encouraging participation."
 						
When it came time to review the utility's rate structure last 
fall, Shetler said, the board solicited its membership for help. 
"Our rate advisory committee consists of fourteen members of the 
public.... They have met twice a month since September, and they 
made recommendations to our board in May regarding high-level 
policy ideas." The next step, Shetler explained, is to hold 
public workshops and then hearings in front of the full board, 
whose members will then debate the proposal publicly before 
casting their votes.
 						
After its customers demanded that it prioritize renewable-energy 
research and development, SMUD responded, developing one of the 
leading solar-energy programs in the world. SMUD helps residents 
offset the cost of solar panels, thus reducing the demand for 
energy from the agency. It's the kind of program that a private 
utility beholden to shareholders is less likely to offer; private 
utilities want to sell more power, not less. To date, SMUD has 
installed panels on more than 500 roofs in the region and is 
developing a partnership with Davis to expand the program.
 						
And last year SMUD opened a biomass plant, which uses the methane 
produced by rotting garbage in one of the county's landfills to 
make electricity.
 						
"We're one-tenth the size of PG," Don Osborne, superintendent of 
renewable generation at SMUD, told us. "Yet we have people coming 
literally from all over the world because they want to find out 
about our solar programs. Why? We've had the combination of a 
broad-based public interest with leadership at the executive and 
board level. We're really making a commitment to commercialize 
the technology and make it affordable to our customer-owners."
 						
SMUD's customers are so convinced of the value of renewables that 
more than 6,000 of them voluntarily pay an extra penny per 
kilowatt-hour to accelerate SMUD's renewable-energy program. 
That, activists say, is a key advantage of public power: the 
users can decide whether they would rather have cheap rates, 
green power (at a slightly higher cost), or extra money left over 
to put into other public activities.
 						
PG: 1 percent renewable?
 						
The percentage of renewable energy, including solar, wind, and 
fuel cells, in SMUD's total energy mix in 1998 was 10.2 percent. 
It's hard to come up with an accurate figure for the PG energy 
mix, because PG is in the process of selling some of its 
generation facilities, as mandated by the 1996 state 
electricity-deregulation bill, A.B. 1890.
 						
PG regularly publishes information about where the company's 
power is generated (as it must under state law). In May PG 
reported that 11 percent of its power came from renewable 
sources. But the California Energy Commission – the entity that 
requires utilities to publish this information – doesn't monitor 
that data for accuracy, so there's no way to tell if it's true.
 						
When we called the PG Energy Center, a PG affiliate that 
encourages energy-efficient building, a staffer told us that, as 
of earlier this year, the mix of power generated by PG included 
less than 1 percent renewable energy. (She then told us she 
wasn't sure that that information should be publicly released, 
and she refused to confirm it when we called back.)
 						
PG buys and sells power through the state's power exchange, so 
the mix of power it delivers to customers isn't exactly the same 
as what it generates.
 						
MUD proponents point out that with a publicly controlled utility, 
customers would be able to use San Francisco's open-records laws 
to acquire information about the energy mix. It's the potential 
for this kind of progress toward environmentally sustainable 
solutions that encouraged Ralph Nader to endorse the MUD effort 
in the Bay Area.
 						
"Look, SMUD is not the perfect utility," Nader said in a recent 
interview with Bay Guardian staff. "But look what it has done. It 
shut down the nuclear plant. It pushed a big program on energy 
conservation. It is moving more and more renewable energy. You 
think that would have happened with PG? No. They're interested in 
buying electric plants in Indonesia and South America. This is 
where their ratepayer profits are going."
 						
PG's high rates
 						
Public power proponents point out that public utilities generally 
charge less than private utilities. SMUD charges 8.49 cents per 
kilowatt-hour, about 21 percent less than PG. PG's year-round 
average is 10.7 cents, but it goes as high as 12 cents for some 
users at some times of the year.
 						
Of the 17 publicly owned utilities in northern California, 13 
charged less for power than PG in 1998, according to the U.S. 
Energy Information Administration. Nationally, public agencies 
average about 30 percent less than privately held utilities, 
according to the American Public Power Association.
 						
Where does the money go? "PG has been serving San Francisco for 
almost a hundred years," former PG engineer Simpson told us 
recently. "If you take their San Francisco revenue at about three 
hundred and fifty million dollars per year, and you know that 
stockholders, many of whom are miles away, are entitled to eleven 
percent, that's about forty-five million dollars each year 
shipped out of San Francisco. Over time, that gets to be a lot of 
money."
 						
And PG executives get their share of the largesse as well. 
According to the Utility Reform Network, PG CEO and president 
Robert D. Glynn earned more than $1.6 million in 1998, including 
bonuses. Glynn's salary is right in line with those of other 
private utility executives in the state. Public power executives 
make far less. Jan Schori, the general manager of SMUD, makes 
$240,000 a year, about one-seventh as much as PG's chief. To 
continue paying such high salaries, and to keep stockholders 
happy, PG will charge as much for power as it can get away with.
 						
And it's not likely that consumers will get relief anytime soon. 
In 1996 California approved A.B. 1890, the state law that 
released electric generation – but not transmission or 
distribution – to the free market. The law made it difficult for 
residents to aggregate to get cheaper power or form municipal 
districts to do so. That's because the law, thanks to intense 
lobbying by the state's three big incumbent utilities – PG, San 
Diego Gas and Electric Co., and Southern California Edison (now 
"Sempra") – says that the "default provider" in the case of 
current customers of private utilities is the private utility.
 						
That means that the private utilities automatically get all of 
the business within their service territory, unless a customer 
actively chooses another provider. So far, only 3 percent of 
California electric customers have chosen an alternate provider.
 						
(In Massachusetts the deregulation legislation called for the 
default provider to be the local government agency. That way, 
customers had to choose specifically to opt out, giving public 
power an advantage. See "You Lose," 8/13/97.)
 						
In the fall of 1997 California legislators began to require all 
customers of private utilities, regardless of whether they choose 
another provider, to pay the cost of the three utilities' failed 
investments in nuclear power, amounting to some $30 billion. This 
competitive transition cost makes it extremely difficult for new 
providers to beat the cost of electricity offered by PG.
 						
So, though lawmakers promised Californians cheaper rates and more 
choice from deregulation, the opposite has become true. Rates are 
frozen at an artificially high level so that the private 
utilities can get to the point where they can compete.
 						
But this hasn't stopped PG from asking the California Public 
Utilities Commission to allow the company to raise its rates.
 						
In its 1999 rate case PG asked the CPUC for permission to collect 
an additional $1 billion from customers. But even after 
concentrated lobbying of city and state officials by PG, the San 
Francisco City Attorney's Office opposed the steep hike. And, 
after loud protest from the Utility Reform Network, the CPUC cut 
the rate request in half, conceding to a $452 million rate hike 
Jan 13.
 						
And now one city hall source tells us PG wants to raise rates 
again, this time to pay for a partial cleanup of the toxic mess 
the company created at the Hunters Point power plant.
 						
Some utility experts say PG is using the money it gets from high 
rates not to upgrade its local infrastructure or to provide 
better service but to help sustain efforts to expand business 
outside of California, including extensive investments in the 
Third World.
 						
Since deregulation began, PG has been buying power plants in the 
northeastern United States under the name of an affiliate, the 
Energy Group.
 						
PG's 1999 report to stockholders reveals that by December 1999 
the Energy Group had "ownership interests in 30 operating plants 
in 10 states." These include large hydro, coal oil, and natural 
gas plants.
 						
Protesters who showed up in Boston April 19 for a PG shareholders 
meeting said that PG's facilities were among the filthiest plants 
in New England.
 						
Erin Brockovich has made PG's environmental problems 
internationally famous; in the Bay Area communities have charged 
that PG is poisoning them as well. Residents of Daly City's 
Midway Village suffer from cancer and other illnesses from 
contaminated soil. PG has been fighting the charge in court and 
recently convinced the California Court of Appeals to throw the 
case out.
 						
Environmental activists in Hunters Point have charged that the 
high rates of cancer and asthma in the southeast neighborhoods of 
San Francisco are directly related to the pollution spewed from 
PG's two neighboring power plants. In a backroom deal negotiated 
by Mayor Willie Brown July 13, 1998, PG agreed to close the 
Hunters Point plant, but because PG lacks sufficient generating 
capacity, until San Francisco finds alternative sources for power 
generation, the plant will continue to pollute the neighborhood 
(see "Dirty Deal," 7/15/98).
 						
The other power plant, on Potrero Hill, was sold in 1998 to 
Southern Energy, which is currently in the process of building an 
additional plant on the site.
 						
MUD proponent Joel Ventresca, cochair of the Coalition for Lower 
Utility Bills and a former S.F. environment commissioner, told us 
that with a San Francisco-Brisbane MUD, citizens would have a 
forum to take part in decision making about these plants. "The 
city should aggressively pursue shutting both of them down," he 
said.
 						
And PG is still dependent on nuclear power, which currently 
provides about one-third of the energy the company generates in 
this state. We asked PG representative Ron Low if PG would 
consider closing down the Diablo Canyon nuclear power plant. 
"Pacific Gas and Electric Company has no plans to shut down 
Diablo Canyon prior to the expiration of its NRC [Nuclear 
Regulatory Commission]-approved license, which will not occur 
until 2025," he told us.
 						
That means that San Franciscans – who have voted overwhelmingly 
against nuclear power in the past – are dependent on a nuke for 
their energy.
 						
Last fall we reported that the Diablo Canyon plant has repeatedly 
violated government safety standards. The Nader-founded group 
Public Citizen in Washington, D.C., reported that the plant 
operated outside of its safety parameters 14 times between 1996 
and 1998 (see "Diablo Debacle 
[http://www.sfbg.com/News/33/49/49nuke.html] ," 9/8/99).
 						
Too many blackouts
 						
There's another major problem with PG: the company's power-supply 
system isn't reliable. In the month of March alone, the Bay City 
News Service reported five blackouts in San Francisco, affecting 
a total of more than 5,900 customers (see "Feeling Powerless?," 
4/5/00).
 						
Even the San Francisco Chronicle – not generally a major critic 
of PG – reported Jan. 31 that officials fear the design and age 
of the local power system could make more blackouts a future 
danger.
 						
It was just 18 months ago that a huge blackout in San Francisco 
was caused by a PG crew's neglect in removing a ground wire 
before installing a new transformer. That left more that 375,000 
customers in the dark for as long as eight hours.
 						
That disaster followed a string of PG blunders. The company's 
S.F. peninsula system, once heralded for its reliability, has 
become increasingly unreliable.
 						
The reason? Under deregulation PG has every incentive to cut back 
on safety and repair crews to fatten the bottom line. As Simpson 
told us at the time of the big blackout, "You don't make a 
mistake like that. PG has been cutting back; this is the price 
they pay" (see "Still in the Dark," 12/16/98).
 						
The city settled for just $1.1 million in damages from PG for the 
blackout, even though independent consultants hired by the 
consumer-services division of the CPUC estimated the damage to be 
between $200 to $400 million.
 						
The company paid $8.3 million in private claims and was fined 
$440,000 by the Independent System Operator.
 						
Meanwhile, the Diablo Canyon plant had an electrical shortage and 
fire May 14, and the ISO declared a stage II emergency May 22, 
meaning that the state's energy reserves slipped below 5 percent 
of customer demand, owing in part to the fact that Diablo was 
down and that PG doesn't have sufficient renewable backup.
 						
City officials are concerned enough that they've been meeting 
with PG to demand that the utility build another transmission 
line into San Francisco. (Of course, that would simply add to 
PG's monopoly power in the city. A new power line built by a MUD 
would add reliability and give the city energy independence.)
 						
Blackouts are only one sign of how PG is cutting costs and 
risking public safety. In 1997 a Nevada County jury found PG 
guilty of endangering the public by failing to trim tree limbs 
far enough away from high-voltage wires.
 						
The assistant district attorney, Jenny Ross, proved that PG took 
$80 million from ratepayers that the company said under oath was 
needed for trimming trees. But it didn't use the money for that 
purpose. Instead, it was put into fattening up its bottom line – 
for shareholders and salaries of high-ranking officials.
 						
On April 2, 1999, PG agreed to pay about $29 million to settle 
similar charges filed by the CPUC in the same case.
 						
A MUD for S.F.
 						
At the turn of the century, public power was among the defining 
political battles in the West. That's when California first 
passed laws allowing municipalization and when the federal 
government signed off on the Raker Act. Getting permission to 
build the Hetch Hetchy Dam was supposed to have been a major 
victory for public power at the time (although it was certainly 
seen as a loss for environmentalists).
 						
But through manipulation of the media, bribery of public 
officials, and power politics, PG has kept public power off of 
the progressive agenda in San Francisco, just as the other 
privately held utilities have throughout the West.
 						
PG has already begun to fight both the local and Davis MUD 
campaigns (see "Nader Endorses Local Public Power Effort," 
5/31/00). With a coalition of regular people taking on the most 
powerful corporation in town, the campaign is shaping up to be a 
classic David and Goliath struggle – and it won't be an easy 
fight.
 						
But despite all the propaganda and lies PG will be putting out, 
the bottom line is simple: a new public power system could 
provide reliable, nonpolluting energy and could further 
decentralize energy generation by encouraging residents and 
businesses to use solar energy.
 						
And, as Nader said in his interview with Bay Guardian staff, time 
is running out. "The existing [investor owned utilities] are 
stuck with fossil fuels and nuclear and are not moving fast 
enough," he said. "And look at what price they exact – if you 
look at stranded costs. We can't wait anymore. The global 
environment is too serious. How do we have any credibility with 
countries like China if we don't take a dramatic advance?
 						
"The original impulse for [establishing] publicly owned utilities 
was the price, and accessibility, [for] rural electricity. 
Accessibility is key. So is price accessibility. And now it has 
got to be very much renewability and efficiency. This is what you 
have got to do."
 						
As Simpson put it, "In the long run there is no way that public 
ownership of the power industry is not going to make you many 
dollars. And the strongest proof of that is the money that PG 
will commit to fight to keep that business, even though they will 
continually say that a MUD would not be a moneymaker for the 
city." 
						
Savannah Blackwell, Elizabeth Hille, and Sarah Mueller 
contributed to this story.
 						
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