Public power in San Francisco: Best-case scenario October 10, 2001 | SFBG News (Low rates, extensive renewable energy) Revenue (1) Residential sales 1.481 billion kwh @ 11.5¢ per kwh $170 million Commercial/industrial sales 3.942 billion kwh @ 9.5¢ per kwh $374 million TOTAL $544 million Expenses Payment on revenue bonds $578.9 million @ 8 percent (2) $50.9 million Cost of power • Hetch Hetchy 425 million kwh @ 4¢ per kwh (3) $17 million • Solar, wind, efficiencies 500 million kwh (4) $38 million • Potrero Hill plant 1.6 billion kwh @ 6.9¢ per kwh $110 million • Contract purchases 2.90 billion kwh @ 5.5¢ per kwh (5) $160 million Operations and maintenance (6) $131 million Replace PG's city taxes (7) $9.4 million Public benefits (8) $10 million TOTAL $526 million Surplus $18 million This chart shows how a San Francisco public power agency could take over Pacific Gas and Electric Co., reduce the city's reliance on fossil fuels, provide all of the electricity the city needs, and still have money left over. The analysis would apply to either a municipal utility district or a city water and power agency. Proposals for both are on the November ballot. (The MUD proposal would include both San Francisco and Brisbane, but since Brisbane is a very small area – only about 4,000 residents – and since it's difficult to get accurate data on Brisbane's current usage, our numbers include only San Francisco. The cost of providing service to Brisbane and the revenue from that jurisdiction would not significantly change the analysis.) The scenario presented here is an optimistic one – although, based on our research, the figures are quite realistic. All of the figures we've used are conservative – if anything, our analysis underestimates the financial viability of the MUD or a city WPA. The bottom line: Even with residential rates 20 percent below what PG currently charges, and with a huge investment in solar and wind power (five times the size of what the city is currently planning), the MUD or WPA would run a large surplus. This study reflects what a MUD or WPA would be facing several years into its existence. In the first few years, the agency would probably have to buy more power on the open market and would generate less from solar and wind (which take time to set up). But on balance that probably lowers the cost of power (solar is comparatively expensive). There are certain to be factors that we missed – although our cost and revenue projections are very similar to what we found in the annual reports of other large public power agencies such as the Sacramento Municipal Utility District (SMUD) and the Los Angeles Department of Water and Power (LADWP). But we've accounted for every foreseeable big-ticket item, and the projected surplus is large enough to cover unexpected costs. (1) Revenue is based on sales of 5.4 billion kilowatt-hours: the amount PG currently sells in San Francisco, according to the state Energy Commission. A MUD or WPA could set rates at any level it wanted; for this analysis, we set residential rates at 20 percent below PG's current rate of 14¢ a kilowatt-hour rate (which is projected to rise sharply). We assumed that commercial and industrial rates would be at the low end of PG's scale. (2) This assumes the MUD or WPA can buy PG's assets at current market value, as assessed by the state Board of Equalization as of Jan. 1, 2001 (see story for details). Ken Bruce of the Board of Supervisors' Budget Analysts Office told the Bay Guardian that 8 percent would be a reasonable projection for the interest on revenue bonds. (3) Hetch Hetchy currently generates about 1.7 billion kilowatt-hours a year, and half of that goes for city government needs -- Muni, the lights at City Hall, etc. We assumed that the city would pay the MUD what it pays now -- the actual cost of generating the power -- so the power sold to the city would be a financial wash. Thus it's not in our analysis as either a cost or a revenue item The cost we project for Hetch Hetchy power is high – it includes unfavorable contracts that will expire in five years (see story). The actual future cost would be closer to 2¢ a kilowatt-hour. (4) The cost of solar and wind is based on financial estimates for Prop. B. (5) It's impossible to determine exactly what it would cost the MUD or WPA to purchase power in the future, but future contracts currently listed on the New York Mercantile Exchange are going for less than 4¢ a kilowatt-hour, and that price is expected to drop. Again, we took a conservative estimate; actual costs might be lower. (6) Based on the cost per customer of operations and maintenance at LADWP (see story). (7) The MUD would have no obligation to pay city taxes, but almost all of the candidates for MUD director have pledged to make sure the city doesn't lose money -- in other words, the MUD would almost certainly pay fees equivalent to what PG was paying in taxes (see story). (8) The state mandates that power companies or agencies spend 2 percent of revenues on "public benefits" -- conservation, environmental programs, and the like. [http://www.sfbg.com/searchit.html]