End PG&E's shakedown

FOR YEARS, whenever Pacific Gas and Electric Co. would spit, the local business establishment would swim. The San Francisco Chamber of Commerce, the Committee on JOBS, and the San Francisco Planning and Urban Research Association (all of which took in tens of thousands of dollars in PG&E dues and contributions), along with just about every other big-business group, have consistently lined up behind the local private utility to oppose public power.

The argument: What's good for PG&E is good for San Francisco business.

But there's new evidence that PG&E is not only hurting local consumers, who pay some of the highest electric rates in the country, it's also hurting local businesses, and the entire local economy.

As Savannah Blackwell, Rachel Brahinsky, and Tim Redmond report on page 20, a prominent economist on Long Island has demonstrated that public power helped two counties there recover more quickly from the recession. Nassau and Suffolk Counties have unemployment rates three percentage points lower than that of adjacent New York City – and a big part of the reason, Professor Irwin Kellner reports, is that those two counties have cheap public power, while New York pays high rates to a private company.

Kellner is hardly some kind of radical leftist. He's the former chief economist for Manufacturers Hanover Trust and now the chief economist for CBS's Marketwatch.com. When we applied Kellner's analysis to San Francisco, we got some staggering results: San Francisco's economy is losing as much as $620 million a year from PG&E's latest rate hike. And if the city created a public power agency that could cut rates 20 percent (the amount a city consultant estimates would be possible), San Francisco's economy would pick up a $550 million boost.

Our analysis is fairly simple, based on a basic application of Kellner's model to this community. But it raises a profound question: if a respected, mainstream economist is arguing that low-cost public power is good for the economy – and if all evidence suggests that San Francisco could take over PG&E's system and still sell power for 20 percent less – why isn't every single person concerned with the health of local business and the San Francisco economy lining up to support Proposition D?

Meanwhile, as we report in this issue, high rates aren't the only problem facing local residents and businesses: the bankrupt PG&E has been providing terrible service across the board. Small businesses and residents are getting billed improperly and can't get the problems ironed out. New businesses wait months and months to get their power hooked up. Power outages continue to plague the system. And since PG&E is a private monopoly utility in bankruptcy, it's almost impossible to make a successful complaint.

That will only get worse, if the Aug. 30 decision by federal Judge Vaughn Walker, who is overseeing the PG&E bankruptcy case, holds. Walker cleared the way for PG&E to institute its own bankruptcy plan, which could call for continued rate hikes of as much as $18 billion. The PG&E plan would also transfer some of the company's assets to subsidiaries that are out of the control of California regulators (see "The $620 Shakedown," page 20).

Then there's the dangerous and polluting power plant at Hunters Point – and the fact that PG&E has never built adequate transmission facilities into the city. All told, PG&E has put the city and its economy at serious risk.

Instead of lining up like ducks behind PG&E, businesses in town ought to be screaming about this. That's what happened in Long Island, where business leaders are thrilled that a public power agency has replaced the old Long Island Lighting Co.

At the very least, the Small Business Commission and the San Francisco Board of Supervisors should hold hearings on the issue, and every business group that has sided with PG&E on Prop. D should reconsider its decision. The supervisors (or the Local Agency Formation Commission) should immediately commission a comprehensive study on the impact of high electric rates on the local economy – and if Kellner is correct, this isn't that complicated an issue, and such a study could easily be completed before the November election.

At the very least, the city ought to set up a special PG&E complaints hotline, staffed by a deputy city attorney who can track the number of complaints and help local businesses and residents get some action on their problems with PG&E.

And from now on, nobody in town should take anyone in any business group the least bit seriously when they complain about the local business climate unless they're willing to stand up to PG&E and talk about a simple way the city could help turn the economy around: public power.