As electricity crisis eases, so does push for public ownership

San Diego Union Tribune

SACRAMENTO — As California slid into the electricity crisis last year, a move toward a publicly owned power system gathered steam as the solution to failed deregulation and runaway prices.

An influential consumer advocate, Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights, began drafting an initiative that would replace investor-owned utilities with a state-owned power system.

Gov. Gray Davis expressed concern that a rate increase would trigger a voter backlash that could reshape the California energy landscape, resulting in a risky public takeover of the power system.

But the electricity crisis eased this past summer when the state avoided blackouts and prices dropped sharply, and the public spotlight has shifted to the struggling economy and the war on terrorism. Now the push for public power appears to be waning.

A poll released by the Public Policy Institute of California this week found that Californians regard the economy as the most important issue facing the state, followed by terrorism, and then the electricity crisis.

In one of the first tests of whether the public wants to move toward public power in the wake of the disastrous attempt at deregulation, voters in San Francisco last week narrowly rejected two public power proposals.

One measure failed by just 533 votes out of nearly 130,000 votes cast in the heavily Democratic city that often favors liberal or progressive issues and candidates.

Pacific Gas and Electric, which spent more than $1 million to defeat the two San Francisco measures, issued a statement saying that the vote shows “there is no strong sentiment in favor of municipalization in San Francisco.”

But Rosenfield, who is still working on an initiative, said the vote was influenced by a number of factors: the distractions of terrorism and a weak economy, two competing proposals, and well-financed opposition.

“I think public power is the future of California,” he said. “I’m not deterred by that at all.”

Rosenfield said he can wait until January or later to begin a drive for the November ballot. Among other things, he is awaiting court decisions on rescue plans for Southern California Edison and PG&E.

The San Francisco vote is having little impact in San Diego, where county officials had already dropped their push for public power. The cities of San Marcos and Chula Vista are continuing to study their options.

An official of the California Municipal Utilities Association said he thinks the close vote in San Francisco will do little to dim interest in creating new public power systems.

“In a sense it’s encouraging by not being discouraging,” said Stu Wilson of the association, which represents 31 publicly owned utilities serving about 25 percent of Californians, including Los Angeles and Sacramento.

The well-publicized failure of deregulation, resulting in the state stepping in to buy power for utility customers, helped create new interest in public power not only in California but also in other parts of the nation.

“We have had an unprecedented interest in public power and city officials who call us,” said Madalyn Cafruny, spokeswoman for the American Public Power Association. “I don’t think they have reached the referendum stage yet.”

Few new public power systems have been created in recent years. Cafruny could only think of one — the Long Island Power Authority in New York — which was formed by state legislation in 1986 after a huge cost overrun at the Shoreham nuclear power plant sank the privately owned Long Island Lighting Co.

In California, the last municipal utility district formed despite opposition from a privately owned utility was in Sacramento in 1947. Voters approved the Sacramento Municipal Utility District 23 years earlier, but it was delayed by PG&E in a lengthy court battle.

Some argue that it is more difficult to create a public power system in this era because cheap power from federal dams has been spoken for and the cost of lines and generators is high.

A public-power feasibility study done for San Francisco in 1997, before the deregulation fiasco, concluded that rates were likely to be reduced by 5 percent, mainly because the public system would be tax exempt and could borrow money at lower interest rates.

Historically, the established public power systems have had rates 15 percent to 20 percent lower than privately owned utilities that aim to make a profit for shareholders, says the municipal utilities association.

Backers of public power in San Diego have talked about beginning with small steps. The chairman of the San Diego County Board of Supervisors, Bill Horn, wanted to create a municipal utility district that could contract for cheap power or expand the county water agency’s small hydroelectric facility.

But a bill sponsored by San Diego supervisors to help create a municipal utility district was vetoed last month by Gov. Davis. He said he would only sign a bill that spelled out how San Diegans would pay their share of a $10 billion state power bill.

“If the horizon changes or the governorship changes I may try to tackle this again,” Horn said. “But at the moment, I don’t think I have the horizon there.”

Escondido dropped a push for a municipal utility district because state regulators in September banned new “direct-access” contracts with generators that bypass the existing utilities, said Jerry Van Leuwen, Escondido community development director.

As with the governor’s veto, the ban on new direct-access contracts, enacted by the Public Utilities Commission under legislation signed in February, is intended to preserve the ratepayer base needed to pay off the state debt.

In San Marcos, officials are pursuing the creation of a municipal utility district called for under a new city charter adopted nearly a decade ago. The city is seeking a partner to help build a new power plant.

“It’s not really established yet,” said San Marcos Mayor F.H. “Corky” Smith. “We are looking into one, trying to figure out which way to go.”

Chula Vista officials, who have talked to the state and national public power associations as well as San Diego Gas & Electric, are looking at a number of options, including long-term contracts and buying a power plant owned by the San Diego Port District.

Michael Meacham, Chula Vista special operations manager, said the situation in San Francisco will be watched if officials there, who may contest the vote or go to the ballot again, eventually form a municipal utility district.

“It would be useful to have a more modern example to determine whether this process is going to be a feasible one in the short run,” Meacham said.