Cleaner and cheaper - Page 4

The Clean Energy Act could mean lower carbon emissions — and lower electric bills
Illustration by Wong Illustration

That's almost as much as the current budget deficit.

Of course, a public power agency — run by accountable public officials — might decide to cut rates instead of banking cash. So we ran a scenario in which the city would cut rates by 15 percent. The bottom line: San Francisco still comes out $107 million ahead.

How can a city agency sell power so much cheaper and still make money?

For starters, PG&E has a guaranteed profit margin of 11.7 percent, approved by the state. A city-owned system doesn't have to please shareholders with its profit — any surplus here could be folded into the general fund, remain in the San Francisco PUC piggy bank for future infrastructure needs, or be refunded to taxpayers. This is the basic difference between public and private ownership of a utility — and it translates into lower, more stable rates over time.

"For a number of years, we had no rate increases at all," said SMUD's Chris Capra, who explained that the agency was able to stave off rising natural gas prices because of bulk purchases locked in at low rates. Last year the elected SMUD Board voted for a 7 percent rate increase to cover rising power costs and replace equipment.

The agency's rates are still far lower than what San Franciscans pay to PG&E — and the private utility has announced it will seek a 6.5 percent rate increase in January.