An exploration of publicly owned utilities
The long drawn-out saga of Pacific Gas & Electric’s controversial SmartMeter program has some in Santa Cruz looking for alternatives to the for-profit utility. One idea being floated is starting government-run municipal power companies, although there is little chance this change is on the immediate horizon.
Even most people in support of this shift say it is not currently high on their priority list.
StopSmartMeters! Director Josh Hart says he favors a publicly owned power grid, but that it’s not something he has time to push for right now. Hart’s group is occupied just keeping up the fight against wireless meters they say cause health problem for some local residents.
“We have been focusing fairly narrowly on getting through this SmartMeter crisis,” he says. “There has been talk but there are significant barriers to it.”
PG&E currently supplies power to all of Santa Cruz County with no competition. The only option is to go off the power grid by using generators or other sources. This was made clear in December when the utility shut off the power at several local homes when residents removed their SmartMeters without PG&E’s permission.
Hart says paying portions of their profits to shareholders drains cash out of the system, which is in need of safety and efficiency upgrades.
“PG&E’s shareholders get [a share] of the revenue from consumers and they are not spending what they need to on gas line safety and [protecting] people’s health,” Hart says.
He says that the San Bruno natural gas pipeline explosion in September 2010 is an example of prioritizing profits above the safety of energy infrastructure which public ownership advocates point to. The utility’s 2010 Financial Report estimates that the explosion—which killed eight people—will cost them $283 million. This amount includes $220 million for “property damage, personal injury, and other third-party claims.” The remaining $63 million is described as a fund for rebuilding the affected neighborhood and “re-inspecting natural gas lines.” The company’s failure to produce thousands of documents that they claim proved the pipelines had been properly tested in recent years was a huge news story last year.
“Third party claims” refers to lawsuits filed by the families of people who died. The next sentence in the report says “most of the costs the utility incurs for third-party claims relating to the accident will ultimately be recovered through insurance,” before describing how this will affect investor payments.
Hart also sees a connection between the need for publicly owned utilities and the recent Occupy movement, which has brought attention to a myriad of economic issues.
“Why would the 99 percent want money generated from a public system going into rich people’s pockets?” he says. “We should put the money into making the system safer and more affordable.”
Local governments taking over services used by the whole population out of private hands dates back more than a century in California.
In the late 19th and early 20th centuries, at the height of the Progressive Era, local leaders pushed for public ownership of electricity, water and even railroads, according to local historian Randall Brown. In 1916, Santa Cruz’s water supply came under government ownership after several failed attempts to buy out privately owned water companies.
Local businessman Fred Swanton was a leading promoter of these proposals. He led an effort as mayor in the 1920s to buy the privately owned Santa Cruz Electric And Light Company that he had co-founded decades earlier.
“Swanton was a major player in Santa Cruz history for many reasons,” says Brown. “ [He and his partners] were building some of the first hydro-electric dams in the state.”
His plan to buy the company—which was later swallowed up by PG&E—fell apart when the New York bond house financing the purchase went out of business.
“It was appropriate that he put in the original roller coaster, the Scenic Railway, at the Boardwalk. His career was very up and down … always speculating on over-the-top projects,” says Brown.
There are successful examples, however, of municipal energy systems in the Bay Area, including Marin Clean Energy and Alameda Municipal Power. The publicly run operation in Alameda now serves about 50,000 customers and has been around since the late 19th century.
Marin Clean Energy, though, is paving the way for others hoping for a public alternative. Marin County residents have become leading rebels against PG&E, acting as vocal opponents to SmartMeters as well as the private utility’s bankrolling of Proposition 16 in 2010. The proposition would have required a two-thirds majority in a popular vote to buy bonds for the purchase, maintenance or expansion of a publicly owned utility system. This was sure to put Marin Clean Energy out of business in their first year and risked Alameda Municipal Power’s ability to maintain and improve their system in the future.
Private energy interests, led by PG&E, spent $40.5 million in support of the ballot measure that threatened to put Marin Clean Energy out of business just as they were starting operations. Despite outspending the opposition’s $83,187 by a margin of 500 to one, Proposition 16 failed by a vote of 52 percent in opposition and 47 percent in favor.
PG&E Spokesperson Andrew Souvall says their bankrolling of Prop 16 was not intended to stop the process of forming municipal electric companies known as community choice aggregation (CCA).
“Prop. 16 wouldn’t stop CCA. It would give voters the right to decide when public spending or debt was involved,” Souvall says.
After the measure was defeated, Marin Energy Authority Communications Director Jamie Tuckey says the tension with PG&E lightened.
“It’s gotten much better, there hasn’t been any direct anti-marketing against our program,” says Tuckey. “We are now sharing customers.”
Marin Clean Energy selects and buys electricity for the 14,000 homes currently in their system, but PG&E still owns the electric and gas lines as well as the meters. PG&E also bills customers after Marin Clean Energy fills in the amount owed for the actual energy. Tuckey says production accounts for about 50 percent of the bill depending on the time of year and power source. As a result of being a nonprofit system, customers’ rates dropped 14 percent in 2011, according to Tuckey.
“We are a nonprofit system, so the money funnels back to Marin Clean Energy,” she says. “We have no shareholders to pay out and very low overhead, so it supports itself.”
It cost about $2 million to begin operations, and that amount was paid off in the first year. By selecting their own power sources with emphasis on wind and solar, they have reduced their greenhouse gas emissions by 34.4 percent, according to EPA.gov. This tops standards laid out by AB 32—California’s greenhouse gas reduction law—which requires utilities and other polluters to reduce their carbon footprint 25 percent by 2020. Marin Clean Energy hopes to expand their customer base to about 95,000 homes in the North Bay by next year.
Despite the possible benefits of a shift to publicly owned utilities, the prospect seems unlikely in Santa Cruz at this time because of annually contracting budgets in city and county government. Several county employees say they haven’t had discussions about it recently, but are open to the idea.
“It hasn’t come up recently,” says County Supervisor Ellen Pirie. “It is a topic worth talking about [but] I think it might be extremely difficult.”
And although Hart is encouraged by the progress Marin has made, he is concerned with the large role PG&E still plays in their system—especially regarding SmartMeters.
“Unfortunately the meter is part of the billing system and our goal is to get out from under the thumb of PG&E entirely,” he says.