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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

Page 5 of 8

In an odd twist, the municipal utility district voters will consider in November is not specifically charged with running a public power system. Whether by design or ignorance, this MUD would have the authority to take over every utility service in the city, including telephone, water, power, sewage, garbage, and the Municipal Railway. If approved, the MUD could, as far as utilities are concerned, be a government in parallel with the city. And if the MUD is approved, its supporters will owe a debt of gratitude to the San Francisco Bay Guardian, which has backed the CLUB public power campaign committee with some $67,000 of loans and free or discounted advertising, campaign reports on file at the San Francisco Ethics Commission say.

The American Public Power Association is a national trade association that represents 2,000 municipal electric utilities serving 40 million consumers. It sets the industry standards for public power providers. The trade group has drawn up common-sense guidelines for a feasibility study that municipalities considering the creation of publicly owned utilities could commission. The group says such a study would:

- Identify the city's electric load;

- Project costs and revenues;

- Identify wholesale power suppliers;

- Evaluate and appraise the existing distribution system;

- Evaluate financing alternatives;

- Estimate annual costs of operation and maintenance; and

- Evaluate support from business, community, and political leaders.

The San Francisco LAFCO has not drawn up guidelines for doing a feasibility study, much less commissioned one.

But even without the basic information a feasibility study would provide -- in a recent presentation to a citizen's group, Eisenberg, the LAFCO chairman, admitted he did not know how much electricity San Francisco uses -- public power advocates propose to meet most of the city's electricity requirements with Hetch Hetchy-generated power.

Although the LAFCO is refusing to study the cost of municipalizing San Francisco's electric utility, during the past decade or so studies of the city's electric load needs and projections of costs related to municipalization have been performed several times: by city-hired consultants; by a team of utility company engineers and city and state officials; and by graduate students at the University of California. These studies, public documents, and interviews with a half-dozen experts who favor public power make it clear that: the Hetch Hetchy system can provide nowhere near the amount of power needed by San Francisco; taking over power supply and delivery for San Francisco would be both expensive and risky; and the city's existing electric delivery system has reliability problems that would be costly to fix.

MUD advocates have repeatedly claimed that once the electrical system is municipalized, Hetch Hetchy can generate 80 to 100 percent of San Francisco's electric needs. But Hetch Hetchy delivers just 120 megawatts of electricity to the city at any given time. (A megawatt is the amount of electricity consumed by approximately 1,000 homes.) During peak use, however, San Francisco consumes 950 megawatts of electricity. The peak load is expected to rise to 1,250 megawatts by 2009. Hetch Hetchy currently supplies about 13 percent of the city's load, and that electricity is reserved by the Raker Act for use by city agencies, including the Municipal Railway and San Francisco International Airport.

If it rained year-round, and if there were no Raker Act-mandated contracts with Modesto and Turlock, Hetch Hetchy, which is capable of generating 400 megawatts when water is available, could meet 32 percent of the city's projected peak load in 2009. Lacking miracles, though, Hetch Hetchy will only be able to meet about 10 percent of the 2009 peak load. And relatively little can be done to increase Hetch Hetchy's production. Studies have shown that due to watershed capacity, even a $100 million investment in Hetch Hetchy would produce only another 50 megawatts of capacity.

But Hetch Hetchy's lack of generating capacity does not appear to concern MUD proponents; they say a MUD could produce additional power by taking over two power plants located inside the city limits, near Potrero Hill and at Hunters Point. But such a takeover would be costly. PG&E's super-polluting Hunters Point plant is off line and due to be decommissioned. Right now, the owner of the Potrero plant, the Mirant Corp., plans to expand its production by 540 megawatts. But a spokesperson for Mirant said recently that the threat of seizure by a MUD would disincline his company to upgrade the Potrero plant, which has environmental problems and currently produces just 360 megawatts of power.

The upgrade planned by Mirant is estimated to cost $320 million. If the plant were seized by the MUD, that is $320 million the new district would have to raise, somehow.

Indeed, municipalizing the city's privately owned power system would carry an enormous price tag.

The centerpiece of the MUD supporters' plan involves using the power of eminent domain to seize the city's electrical distribution system from PG&E. Several studies, all done before 1996, valued this system of wires and poles at anywhere from $500 million to $1.4 billion. Such a seizure would almost certainly result in a lawsuit. The ultimate cost of purchasing the distribution system is difficult to estimate, but, with financing costs, it would certainly exceed a billion dollars.

Then again, some MUD proponents hope also to increase the public power system's capacity by condemning the Potrero and Hunters Point power plants and buying them at market value. Such a move would, according to studies by the California Energy Commission, probably end up costing the MUD $200 million for two plants that would immediately need a half-billion dollars in modernization improvements.

About The Author

Peter Byrne


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