MUD money - Page 5

A public power agency can cut rates by 20 percent - and still operate with a budget surplus.

The power the city would import can't exceed the amount that can be carried along the one transmission line leading into San Francisco, and our projection meets that criterion. PG&E pays a substantial amount of taxes to the city, and almost all of the San Francisco-<\d>Brisbane MUD Board candidates have pledged to make sure that, at the very least, the city's General Fund doesn't lose any money if the private utility is replaced with a public agency. So part of the MUD's expense would be the payment of a fee to replace what PG&E paid in taxes. The utility pays three major taxes: property taxes, a franchise fee, and business taxes. Based on the Board of Equalization's assessed value for PG&E ($962 million) and the city's property tax rate, PG&E's property taxes are about $1 million. The franchise fee - 1.5 percent of sales - adds another $8.4 million. It's impossible to say how much PG&E pays San Francisco in business taxes, since that figure is not public, but even at several million dollars a year, it wouldn't significantly change our bottom line. Unanswered questions There are plenty of questions our analysis doesn't - and can't - answer, factors that are impossible at this point to predict with any accuracy. PG&E customers, for example, have to pay a substantial surcharge on their electric bills for what's known as the CTC, or competitive transition charge. In essence, that's the money ratepayers have been forced to cough up to cover the cost of PG&E's bad investments in nuclear power. It's possible that a San Francisco power agency would have to include some of those charges in its bills - but according to Mindy Spatt, media director at TURN, it's unlikely. The CTC is expected to end next year and probably wouldn't be a factor by the time the MUD or WPA was up and running. It's also unclear whether the MUD or WPA would have to pay a share of the costs of the expensive long-term power contracts that the state Department of Water Resources has signed to buy power for the bankrupt PG&E. There would almost certainly be some substantial legal fees, possibly in the millions of dollars, that would reduce the surplus during the first few years (but not once the eminent domain issues were settled). Most of the MUD candidates have voted to shut down PG&E's Hunters Point plant, and it's unclear how much it will cost to decommission that facility. The MUD or WPA could also buy the Potrero plant (it recently sold for $330 million) and pay less for the power generated there. And, of course, it's uncertain how much electricity will cost on the open market in the next few years. That's why the MUD or WPA would probably want to move aggressively to increase its own generating capacity. But if power prices go up, one thing is clear: PG&E's prices will go up higher, and faster, than the prices of a public power agency. Voters won't have to take our word alone on the subject. The public will have more information on San Francisco's energy plans in the coming weeks. The county's Local Agency Formation Commission is planning to bring in experts on public power and energy for hearings, and Smeloff is hiring Amory Lovins's Rocky Mountain Institute to assess the city's energy alternatives. Both reports are expected before the Nov. 6 election. Our analysis isn't that radical or unusual; it just confirms the experience of every other major public power agency in the state. We've found what just about everyone who's gotten out from under the private utilities already knows: public power is cheaper. It's that simple.

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