Some Californians to Pick Their Utility at the Polls
Gene Stille, chairman of Nugget Markets, based in Woodland, Calif.
By DAVID CAY JOHNSTON
Published: November 3, 2006
WOODLAND, Calif., Nov. 1 — Gene Stille says he is tired of paying the Pacific Gas and Electric Company roughly $300,000 a year in extra electricity bills for his small chain of Nugget supermarkets. If his stores were just a few miles east, in the Sacramento Municipal Utility District, he said, his costs would be that much lower.
“I can’t see any reason to pay all that extra money” to P.G.&E., he said, considering that it charges roughly 40 percent more than its publicly owned counterpart based in the state capital.
Mr. Stille cannot move his stores, but he hopes to do the next best thing: swap the utilities.
On Tuesday, voters will decide whether Mr. Stille’s stores and 77,000 other Yolo County customers will switch to the municipal utility. Such a move is a rare event these days in California, where corporate-owned and publicly owned power systems fought long and bitter battles going back more than a century over the role of electricity in state politics and the economy.
If the switch takes place, Mr. Stille, like other residents of this table-flat farming area, will not necessarily enjoy significantly lower electricity costs right away.
But he and many others here are tempted enough to abandon P.G.&E. that the company has poured $10.4 million of its shareholders’ money into trying to defeat the plan, even though it would lose just 1.5 percent of its customers. The utility, which is worried about Yolo County setting a precedent, is the sole donor to the no campaign.
“I am confident that we will win this,” said Peter A. Darbee, chief executive of the PG&E Corporation. PG&E owns the utility Pacific Gas and Electric, which supplies power to about 15 million people in Northern California.
Advocates for the switch — a coalition of business owners, local officeholders and a few dedicated public power advocates — have spent less than $1 million, most of it raised in small amounts. Volunteer crews have gone door to door seeking votes.
The election here is a small but significant sign of modern-day efforts around the nation to expand publicly owned power, which achieved its greatest gains in the Progressive era early in the 20th century and during the New Deal of the 1930s, but has grown little since.
The movements are fueled in good part by discontent in many areas where electricity rates are on the rise and the power industry has failed to deliver on its promise of lower prices from restructuring.
Drives to make the switch are under way in much of Massachusetts. Six towns in Iowa are studying the idea, along with cities in Colorado, Connecticut and Louisiana, according to the American Public Power Association, a trade group for public power agencies.
In Oregon, the Portland City Council made an offer for the Portland General Electric unit of the bankrupt Enron, but its offer was rejected in 2004, even though it was willing to pay more than the top bid.
One main reason municipal utilities can offer lower rates is that they are able to borrow tax-free, giving them lower interest rates than corporate utilities. They also often get cheap hydroelectric power from government dams, pay much smaller salaries to executives and do not have to pay dividends to shareholders.
In the California fight, the Sacramento utility district has promised to cut rates by 30 percent, but it will take back all but two percentage points of that in a surcharge to pay P.G.&E. for its equipment. The district also promises benefits to local governments and nonprofits equal to the property taxes that P.G.&E. now pays.
The Sacramento district says that the surcharge could end in as little as five years, but P.G.&E. says the charge may last for a quarter-century.
Mr. Darbee said that if voters approved the switch, his company might demand as much as $567 million for its poles, wires, transformers and other distribution equipment. That is about five times the $110 million to $130 million that three reports for local government agencies estimated they are worth.
“We think a jury would award us $400 million,” he said.
Mr. Darbee argued that “it is inappropriate for politicians” to take away part of P.G.&E.’s business “just because they think they can do a better job.”
The state Constitution gives elected city councils and county boards of supervisors authority to grant exclusive franchises to utilities, like those P.G.&E. obtained here more than a century ago. But it also allows voters to terminate those franchises.
The Sacramento district is the second-largest public power operation in the state, after the municipal power agency that serves the city of Los Angeles.
For the switch to occur, two ballot measures in Yolo County and one in Sacramento County must be approved by majorities. With no hot races, turnouts are expected to be low, both sides say.
The Yolo County vote grows out of the economic wreckage left behind by Enron, which was one of the PG&E Corporation’s biggest trading partners at the height of the California energy crisis in 2000.
Enron’s manipulations of California’s flawed electricity restructuring plan helped send state electricity prices soaring and caused blackouts and brownouts. The debacle pushed the P.G.&E. utility into bankruptcy and forced the state to take on $11 billion in debt that, with interest, is expected to weigh on taxpayers for about two decades.
“That’s when our reputation fell,” Mr. Darbee said.
In the latest J. D. Power survey of residential customers’ satisfaction, the Sacramento district ranked second among 55 large utilities in America, while P.G.&E. was at the edge of the bottom fourth.
Enron was one of the most aggressive champions of replacing government-regulated prices. These provide an established profit for utilities on their investments but can lead at times to wasteful spending because there is no built-in incentive to seek the lowest cost or the most efficient way to meet the energy needs of customers.
A switch to the Sacramento district is supported by the councils of all three cities in the area — Woodland, the college town of Davis and industrial West Sacramento — as well as the boards of supervisors in Sacramento and Yolo Counties. All three daily newspapers in the area also favor the move.
Eleni Tsakopoulos-Kounalakis, president of the largest land development firm in the Sacramento area, said that “support for the annexation among business leaders is overwhelming.”
She donated $300,000, saying she regards the utility district as a benefit to the community in many ways, from helping plant trees and quickly restoring power after blackouts to serving as a training ground for up-and-coming government leaders.
“The district has drawn smart people who care about our community, put all the upside back into our community and are at the cutting edge of utility service,” she said.
But not everybody is persuaded that the municipal utility offers a substantial advantage over P.G.&E.
One P.G.&E. supporter, Dudley Holman, president of the Yolo County Taxpayers Association, said that he objected to allowing the government to seize the utility’s distribution system through eminent domain.
Another opponent of the switch is Peter Defty, president of Vanguard Inflatables, which makes rafts for running whitewater rivers.
The real issue, Mr. Defty said, is that “the politicians botched deregulation and we had deregulation in name only,” on terms that gave utilities, generating companies and market traders opportunities to increase their profits and pass the costs on to customers.
He said it was difficult to see how the Sacramento district could achieve long-run savings as long as it would have to buy much of the power for Yolo customers in the same markets.
“The politicians are going for this because the disparity in rates” between P.G.&E. and the Sacramento utility district “is at an all-time high,” Mr. Defty said. But “it won’t last because the era of cheap energy is over.”