The $2.8 billion rate hike - Page 2

PG&E's higher electric rates will suck vast sums from SF's economy
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Based on her calculations, PG&E would be yanking $283 million out of the local economy.

Either way, it's a huge sum of money, particularly in a bad economy.

A PATTERN OF RATE HIKES

This latest rate hike, Mindy Spatt, communications director of the Utility Reform Network told us, is only part of a pattern of attempts by PG&E to raise rates. Every three years, utility companies present a general rate case to the California Public Utilities Commission. But Spatt said utilities can come to the PUC in between to ask for other rate hikes.

"They're constantly coming back to the commission for this that and the other thing," she said. "[PG&E] came back after they got money for smart meters to get money for smarter meters.

"Overall, the pattern is that rates continue to go up," she continued. "The only other thing going up is executive compensation. We are still plagued with blackouts, we still get crappy service."

She's right: data from other local utilities show that PG&E rates are anywhere from 20 percent to 40 percent higher than cities that have public power. PG&E would like its customers to believe that higher rates will improve service and reliability — but that's not what's happening.

"They don't spend the money on giving us good service, instead [they focus] on convincing us they are giving us good service," Spatt said.

In its announcement of the proposed hike, PG&E claimed the rate hikes are to maintain infrastructure and reliability. A further $1.1 billion is also being asked for as part of a Cornerstone Improvement Project to increase reliability.

"Reliability" is an old battle horse trotted out every few years as the justification for rate hikes. PG&E is consistently less reliable than other local utilities and even less reliable than other large private utilities. So the company constantly asks for money to upgrade its system — except that reliability doesn't seem to improve much, and it hasn't improved much in the past decade, according to California Public Utilities Commission data.

"It's interesting to compare their rates to municipal utilities and how much higher they are," Spatt said. "What do we get for the extra money we pay? Because by most measures they're not doing a great job."

In fact, Guardian research shows that local municipal utilities have consistently better reliability records than PG&E (see "The blackout factor," 8/5/09).

PUBLIC POWER SAVINGS

The direct cost of PG&E's high rates costs the local economy — and those losses are compounded by the money that could have been saved with public power.

A detailed Guardian analysis concluded last year that San Francisco would be able to cut electric rates by 15 percent if it ran its own utility (see "Cleaner and cheaper," 9/10/2008). That's an entirely reasonable estimate, according to Jeff Shields, general manager of the South San Joaquin Irrigation District, which is fighting with PG&E to take over electricity distribution in its service area. He projects similar savings for his customers.

Shields thinks his system (and one in San Francisco) could cut rates even further. As nonprofit, he explained, SSJID can save money in multiple areas and pass those savings onto customers.

"We don't pay taxes on earnings," he told us. "PG&E, as a shareholder company, can collect an 11.45 percent margin of profit. We don't pay that. We don't have the same overhead. We don't have high-rises or corporate jets."

Public power agencies pay less to borrow money, are eligible for tax-exempt financing, typically have a higher credit rating and often keep a substantial cash reserve.

"[Selling electricity] will continue to produce substantial income," he said.

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