Power politics
The new public power measure is crucial to the city's energy plan. Will the mayor support it?

By Rachel Brahinsky

THE CITY'S NEW energy plan, scheduled to be released to the public Aug. 15, will contain sweeping new language that sets environmental justice goals for city energy projects, sources familiar with the document say. The plan, in concert with the public power charter amendment that will be on the Nov. 5 ballot as Proposition D, will offer an opportunity for the city to become less dependent on the private power companies that have proved themselves morally and financially bankrupt over the past few years.

For the plan (which is a set of recommendations and is not binding like an ordinance) to be carried out, Prop. D must pass, Greg Asay, legislative aide to Sup. Sophie Maxwell told us. "Part of implementation [of the energy plan] is passing the public power measure," he said. "For us to move on building new generation, it's very difficult without the powers delineated in that charter amendment. Also, we have to look at staffing and funding for the [San Francisco Public Utilities Commission]." Maxwell wrote the ordinance that mandated the energy plan and is cosponsoring the charter amendment with Sup. Tom Ammiano.

Ed Smeloff, Mayor Willie Brown's chief energy advisor, said that implementing the energy plan would not be impossible without the passage of Prop. D, but its approval "sure would make it a lot easier" because the measure provides the plan with a source of revenue.

The tie between the energy plan and the ballot measure raises an interesting political question for Brown, who has never backed a public power proposal. If the energy plan's immediate success depends on the public power measure's success, where does that leave Brown? Brown's press secretary, P.J. Johnston, said the mayor has yet to decide his position on the measure.

The plan's release will culminate nearly a year of research and review by city energy and environmental planners, whose work was set in motion by Maxwell's ordinance in May 2001. Maxwell's goal was to put in writing suggested alternatives to the aging Hunters Point power plant, which remains open under a state order to maintain energy grid reliability. The state insists that until there are viable alternatives to provide power within the city limits, the plant cannot be shut down.

Along with laying out the city's vision for what sort of energy sources its residents and businesses want to use (that is, fossil fuels or renewables), the plan defines which neighborhoods should benefit from new renewable energy projects first and shows how the city could finally reach its longtime goal of closing the highly polluting Pacific Gas and Electric Co. plant at Hunters Point.

The clock is ticking on efforts to find alternatives. If the plant remains open beyond 2005, it will require retrofitting to meet federal Clean Air Act requirements. Officials are concerned that PG&E, if it is forced to invest in a retrofit, might refuse to close the plant for many more years. PG&E did not respond to a request for comment by press time.

Residents of the community neighboring the plant suffer from high rates of asthma, heart disease, and cancers, which some believe are tied to the facility's emissions (see "PG&E's Poison Power," 10/24/01).

The plan will be available on the Department of the Environment's Web site and will be the subject of a public hearing before the Board of Supervisors in the next two months.

PG&E's strategy

PG&E revealed its plans for fighting public power last week when its cadre of attorneys and P.R. flacks appeared before the city's Ballot Simplification Committee, the group charged with distilling complex ballot measures into simple language for the general public. The committee's decision on how to write the ballot measure summaries can hurt a campaign if it paints a ballot initiative as too scary or expensive.

Last year PG&E sought to raise doubts about public power with billboards and posters trumpeting the slogan "Too Risky! Too Costly!" One year later they're at it again.

At the committee's Aug. 7 meeting, according to sources who attended, PG&E's representatives and flacks for its front group, San Franciscans Against the Blank Check, pushed for the description of the public power measure to emphasize that it would empower the SFPUC to issue revenue bonds without voter approval. If it were that simple, PG&E might have a stronger case. A poll commissioned by the San Francisco Chamber of Commerce April 22 found that 49 percent of voters opposed giving up their right to regulate bond issues.

But Prop. D is really not all that unusual. Eight city agencies have the authority to issue revenue bonds – which are not tied to tax hikes – without voter approval, including the airport and the port.

With regard to the charter changes proposed by Ammiano and Maxwell, in certain cases there would be hurdles the SFPUC would have to clear before issuing new bonds. The legislation states that if the agency decides to issue bonds to pay for a takeover of PG&E's grid, rates cannot be raised higher than PG&E's to pay that money back. That means that if a system takeover would force the city to raise rates higher than PG&E's, the city couldn't proceed without putting the matter before the voters.

For other purposes, such as building new power plants, that restriction wouldn't apply – but that still wouldn't mean additional costs to ratepayers or taxpayers. When PG&E builds new facilities, it passes the cost on to ratepayers – and then adds in a significant profit. One example: in 1998 the state forced voters to cover the $30 billion California's three major utilities calculated they lost investing in nuclear power plants.

And in fact, recent history shows that turning a private power system into a public asset can save money. The four-year-old Long Island Power Authority has cut rates by 20 percent, directly pumping an estimated $2 billion into the local economy, according to a May 24 press release put out by New York governor George Pataki's office. That translated into a $10 billion expansion of the local economy, Hofstra University professor of economics Irwin Kellner concluded in a report done for the LIPA. Part of the impact: Long Island's unemployment rate is 3.4 percent lower than that of New York City.

Where's Mirant?

So far, one of the companies that would be most affected by passage of the public power charter amendment has been politically invisible. While PG&E sends staffers to track each meeting that could hurt its business, the Mirant Corp. has been missing in action. Some insiders say that could be because the company is in terrible financial shape. There's also the fact that it has bigger battles to fight these days: after Mirant revealed that it may have misstated certain assets and liabilities by $253 million, the Securities and Exchange Commission opened an investigation into the Atlanta-based company.

Mirant hopes to win permission from the state of California to expand its Potrero Hill plant, but with its stock price having fallen to less than $3 (from nearly $34.24 just one year ago), insiders have long wondered whether the company could in fact find the financing to build the plant, even if the state agrees to let it.

As the New York Times reported Aug. 11, investors are taking a dim view of the prospects of unregulated energy companies like Mirant, which "the market seems to assume ... are prime candidates for bankruptcy."

Market Insight columnist Ken Gilpin quoted Jonathan C. Raleigh, a Goldman Sachs analyst who covers the energy industry, as saying that Mirant almost certainly won't survive on its own. "Mirant, Calpine and Reliant Energy are distressed stocks that we think will survive to be bought," Raleigh noted.

That means if Mirant can actually finance the expansion of its plant, the facility would ultimately be owned by some other entity – which may or may not be economically stable.

Taking sides

Last week a committee of the San Francisco Chamber of Commerce met and debated the power measure and cast a preliminary recommendation. The verdict? By a 2-1 vote the committee urged opposition to the measure. That's according to Bruce B. Brugmann, editor and publisher of the Bay Guardian, a chamber member, who cast the lone "yes" vote. Brugmann said Lester Olmstead-Rose of PG&E, which is also a member, argued that the city could close the dirty power plant now without the power measure. Brugmann countered that the closure could happen faster if the city were in control of the system.

Chamber spokesperson Jim Mathias did not respond to our request for comment on the meeting. The vote, and the possibility that the full chamber may follow suit in its final vote Aug. 22, is no surprise. The business association was one of the more powerful opponents to last year's public power measures.

While Brugmann has been publicly and openly pushing the measure, columnist Samson Wong of the San Francisco Independent has been awfully quiet about his position as a member of the board of the San Francisco Planning and Urban Research Association, which in the past has been a vehement opponent of public power. Wong – who has not written all that much about the issue – was present as a member of SPUR's ballot committee when it voted 6-4 to support the measure two weeks ago (the final SPUR vote is Aug. 21). SPUR director Jim Chappell said he didn't know whether Wong voted on the endorsement recommendation. We called both Wong and his editor Florence Fang to ask if he had voted on the issue, whether he was going to disclose his SPUR role and his vote on this issue in the paper, whether he would vote in the final vote and how, and whether Fang or any other manager at the paper had instructed him on what position to take on the issue. Neither returned our phone calls or e-mails by press time.

But we know this much: Wong has written nothing on the SPUR vote – yet in the past week the Independent, the Fang-owned Examiner, and the Fang-owned Asian Week have run a series of lucrative ads from PG&E. No surprise here: last year PG&E placed full-page "thank you" ads in the Fang papers after the papers backed the utility against the two public power measures. P.S.: Just as the public power campaign is beginning heating up for the fall, the San Jose Mercury News reported Aug. 11 on a new campaign to tear down the city's hydropower dam at Hetch Hetchy – a move that would have dubious environmental benefits but would be a huge help to PG&E's efforts to kill public power. See "Save the Dam!," page 11. P.P.S. The pro-public power campaign is now known as San Franciscans for Affordable, Clean Energy, which can be reached at P.O. Box 2273, S.F. 94126 or (415) 441-0375. Savannah Blackwell contributed to this report. E-mail Rachel Brahinsky at rachel@sfbg.com.