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Delusions of Power 

Is it smart to jump into the Bay Guardian's version of public power, without even studying whether it will save money?

Wednesday, Apr 4 2001
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Page 3 of 8

These Raker Act-mandated uses absorb most Hetch Hetchy electricity generated during the dry summer and fall seasons. During the wet season, however, the reservoir fills up, and the turbines spin full blast, generating "excess" electricity. Modesto and Turlock have first claim on buying that excess. After their needs are met, the Raker Act allows San Francisco to sell the remaining power.

The act forbids the city from ever selling, or giving, Hetch Hetchy electricity to a private individual or corporation for resale. In other words, a private entity may buy Hetch Hetchy power from the city for its own use. It cannot resell the power. If it does, the federal government can take Hetch Hetchy back.

The Hetch Hetchy public power system came on line in 1923. San Francisco quickly fell afoul of the Raker Act by agreeing to let PG&E sell Hetch Hetchy electricity. In 1937, the United States Department of the Interior sued, claiming that the city's contract with PG&E violated the Raker Act. The case was litigated all the way to the United States Supreme Court, which ruled, in 1940, that the contract was invalid because it broke the Raker Act's prohibition against the resale of Hetch Hetchy power by a private entity. The city and PG&E negotiated a new contract in 1945, which allowed PG&E to charge the city a "wheeling" fee for transmitting high-voltage Hetch Hetchy power from an East Bay substation to the city of San Francisco, which uses the power in municipal buildings and to run streetcars and trolleys.

As technology evolved, San Francisco's relationship with PG&E became increasingly complex and intertwined. The city engages in multiple energy transactions worth tens of millions of dollars with the utility company and private-sector customers. Public records show, however, that the city Public Utilities Commission scrupulously monitors sales to avoid selling Hetch Hetchy power to PG&E, or anyone else, for resale.

In 1969, the San Francisco Bay Guardian published its first "exposé" in regard to PG&E's electricity monopoly. The story, "How PG&E Robs S.F. of Cheap Power," was written by J.B. Neilands, a biochemistry professor at UC Berkeley. The article contained assertions that the Bay Guardian has repeated -- and repeated -- for 32 years. Neilands claimed that the Raker Act requires San Francisco to municipalize the distribution of all electric power in San Francisco; that is, Neilands said, the law requires the city to seize PG&E's distribution wires in the city and its power plants by the right of eminent domain. Neilands also said that the Raker Act requires the city to sell Hetch Hetchy power to its residents. And Neilands suggested that PG&E buys Hetch Hetchy power for resale.

During the last three decades, these accusations have been investigated, many times, by governmental authorities who found them to be essentially untrue. Some of those authorities had every reason to hope the city was violating the Raker Act.

In the waning days of Ronald Reagan's presidency, for instance, U.S. Department of the Interior Secretary Donald Hodel became intent on tearing down the O'Shaughnessy Dam and returning the Hetch Hetchy Valley to the arms of Mother Nature. The Interior Department launched an investigation to determine if San Francisco was violating the Raker Act. Hodel clearly hoped to show the city had been violating the law, so Interior could seize the dam. But Hodel abandoned his quest after his investigating attorney -- Ralph W. Tarr, the solicitor for the Interior Department -- reported to him that "we find nothing in the City's contracts with PG&E or the irrigation districts that suggestions a violation of the prescriptions of the Raker Act."

This report, dated Nov. 10, 1988, noted that the federal government had repeatedly investigated the accusations of San Francisco's public power advocates and "expressly disagreed with the proposition that the Raker Act requires the city to construct and operate its own system for the sale and distribution of Hetch Hetchy power for the citizens of San Francisco rather than contracting with PG&E."

Tarr affirmed a finding issued in 1971 by a predecessor: "Although some of the sponsors of the [Raker Act] legislation may have hoped that the city would take over the distribution system of the Pacific Gas and Electric Company within the city limits and furnish retail electric power service to the citizenry, Congress did not write such a requirement into the Act."

Outside the halls of the Bay Guardian and its close adherents, the meaning of the Raker Act is not really a matter of dispute. A wide range of attorneys and economists who specialize in energy matters were contacted recently by SF Weekly; those who were familiar with the Raker Act said that San Francisco is not, to their knowledge, violating the act. They all were quite direct in stating that the act does not require the city to set up a publicly owned electrical utility.

Robert C. McDiarmid is a partner in the Washington, D.C.-based law firm Spiegel & McDiarmid, which specializes in representing public power utilities that find themselves at odds with private utility companies. McDiarmid is nationally recognized as a top legal expert in California public utility law. In an interview last week, McDiarmid said, "The Raker Act does not pertain to setting up a public power system for the entire city of San Francisco. There is not enough power in Hetch Hetchy to do that anyway. There are other ways to achieve public power in San Francisco than by relying on the Raker Act."

Nonetheless, the Bay Guardian has insisted for decades that the Raker Act, and the 1940 Supreme Court ruling invalidating the original PG&E contract with the city, command San Francisco to displace PG&E and operate its own public power distribution system using Hetch Hetchy power. In January of this year, for example, the Bay Guardian wrote: "San Francisco is the only U.S. city mandated by federal law to run a public power system. ... For 87 years PG&E has maintained an illegal monopoly over the city's electric business."

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Peter Byrne

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