October 16, 2002

By Rachel Brahinsky. Illustrations by Gus D'Angelo

IN AN ERA when the public is focused on corporate crime and the high salaries of manipulative company CEOs, San Francisco is in a unique situation. There are two primary competing proposals for San Francisco's energy future – and the public can decide the outcome.

There's the corporate vision, dreamed up by Pacific Gas and Electric Co. and detailed in its proposed bankruptcy reorganization plan. The plan, according to a report by consumer advocates at the Utility Reform Network (TURN), represents PG&E's "long denied corporate agenda," which "seeks to convert valuable portions of its state regulated facilities into cash machines capable of delivering spectacular profits to its shareholders."

It's remarkable that PG&E would push this sort of agenda when it has already failed those shareholders. PG&E Co. is bankrupt, and National Energy Group, a major PG&E subsidiary, has had its bond rating slashed several times recently, and Standard and Poor's has suggested it may have to file for bankruptcy.

Under PG&E's plan, which has yet to be approved by the bankruptcy court, there will be more pollution, less state control over PG&E's Sierra Nevada mountain dams, and high power rates for more than a decade to come.

But there's another plan. Crafted by the San Francisco Public Utilities Commission and the Department of the Environment with input from the public, the city's draft energy plan pictures a San Francisco with clean, reliable, decentralized power and affordable energy bills. It's a solid vision of a healthier, smarter energy future in which PG&E's polluting Hunters Point power plant can be shuttered for good.

The fate of the draft energy plan doesn't entirely hinge on passage of Proposition D, the public power and energy efficiency measure on the Nov. 5 ballot. But implementing the plan would be far faster with the financing authority and public power mandate of the measure. In combination, the city's energy plan and Prop. D represent a different hope for San Francisco, one in which residents are participants in energy decisions and environmental justice is at the forefront of policy making.

Below is our annotated illustration of the world under each vision. The public has little say over PG&E's plan – its fate is in the hands of a federal bankruptcy judge (who may reject it in favor of a state plan for PG&E's future). But voters do have the right to vote for Prop. D, which will help the city implement its energy plan with the necessary speed. And without the city's plan, we'll probably be stuck solely with PG&E's.

PG&E's vision: profits first

1. Nuclear power plants deregulated Under PG&E's bankruptcy plan, four new subsidiaries – all exempt from state regulation – would be created and some of PG&E's most valuable assets, which were originally paid for by PG&E ratepayers, would be transferred to those subsidiaries. That includes the Diablo Canyon nuclear power plant, which would no longer be subject to regulation by the California Public Utilities Commission. Of course, there's still federal regulation, but as the recent energy crisis showed us, many federal agencies are more interested in fostering "free" markets than they are in looking out for consumer interests. Some aren't even required to consider consumer interests, as the state is. Under federal rules, it may be far easier for PG&E to raise rates.

2. Dams deregulated Over the years, PG&E customers have paid for the development and maintenance of PG&E's extensive chain of hydroelectric dams, which produce extremely cheap power for the company. Now it wants to transfer those plants to an unregulated subsidiary, so it can raise rates even higher and avoid state environmental laws, which are some of the strictest in the nation. With the direction of federal environmental policy being what it is today, it's not hard to imagine what could happen to the property surrounding the dams in PG&E's new world order.

3. Rates soar The key to PG&E's plan: make more money – for the shareholders and top executives of PG&E. Under its plan, consumers will pay far more than the actual cost of power for at least a dozen years. According to an analysis by the office of house speaker pro tem Fred Keeley, in the next 12 years, consumers will pay a minimum of $8.4 billion to PG&E. That's above and beyond what the company will spend to operate its power plants – and the vast majority of it will go straight into shareholders' pockets. In other words, it's pure profit.

PG&E claims its plan doesn't raise rates. But according to the TURN report "Highway Robbery," the company's plan to transfer gas pipelines out of state could cost small PG&E gas customers more than $900 million over the next 12 years – and even more in the future.

4. Corporate profits soar The numbers can be dizzying, and after all the news over the past year of billion-dollar bankruptcies, it's easy enough to be numb when you're told that PG&E's plan could cost consumers as much as $18.5 billion. But don't fall asleep. That's billion, with a big B.

Beyond the overcharges for electricity, which could total $8.4 billion, there's the natural-gas rate hikes, at another $900 million. And then there's PG&E's ace in the hole, the $9.2 billion it's currently seeking as payback from the state: PG&E says that since the state didn't lift the rate freeze when power prices first began to soar in 2000, the company was forced to absorb the excess costs, which caused it to go bankrupt. And if PG&E wins in court, that's $9.2 billion more out of consumers' pockets.

An alternative: the people in charge

1. Cleaner, smaller power plants The draft city energy plan proposes that San Francisco get its power from multiple sources – many of them renewable and all of them smaller and more reliable than the large plants the city has counted on for years. Under the plan, the city would build windmills on Altamont Pass near Livermore, would depend more on its relatively clean Hetch Hetchy hydropower, and would install solar panels on public and private buildings in San Francisco. Solar and wind projects could produce 200 megawatts of energy by 2012.

Key to the plan is a series of cogeneration plants, which are more efficient than standard combined-cycle natural-gas plants. These plants would produce about 50 megawatts of electricity and would be disbursed throughout the city, which would reduce the historic burden of pollution that the city's two large power plants have placed on the Bayview-Hunters Point and Potrero communities. Small-scale turbines would produce 72 megawatts by 2012. The Mirant Corp.'s proposal to build a huge new power plant near Potrero Hill is not included in the plan.

2. Old plants closed down The ultimate goal of the city's plan, which was written in response to an ordinance by Sup. Sophie Maxwell, is to allow the closure of the Hunters Point plant by 2005. The Independent System Operator is currently reviewing the city's proposal, and the San Francisco Board of Supervisors is expected to approve it sometime this fall. If it's enacted quickly, the community's long unrealized demand that the polluting old plant be closed can finally be met (until there are alternatives to provide the city with power, state regulators insist that it stays operational).

3. Rates drop Across the country, public power agencies charge an average of 20 percent less than private companies like PG&E, according to the American Public Power Association. With local control over rates, and with no shareholders or CEOs to pay, San Franciscans would pay less for electricity. High dependency on solar power could slow the drop in rates for a period, but as the city, along with other green-minded California communities, moves forward with bulk purchases of solar-power systems, the price is expected to fall dramatically.

Lower electric rates would be a boon to economic development – as would the construction of small local power projects and alternative energy systems.

4. Local control of energy One of the energy plan's main goals is to increase local control – and it's about time the city began to move that direction. With PG&E in charge of building the energy system, San Francisco has been left in an extremely vulnerable position. There is only one transmission line bringing power into San Francisco, so 40 percent of the power the city uses has to be produced within city limits. In technical terms, the situation has left San Francisco as the least reliable, most blackout-prone city in the state, according to the California Energy Commission.

But the human cost has also been great. The city has been forced to depend on two aging power plants near residential neighborhoods – and that has put pressure on the low-income communities surrounding the plants. Many Bayview and Hunters Point residents believe the plants are responsible for their high rates of asthma, cancer, and heart disease, and they want the plants shut down. The unreliable system structure has, sadly, pitted the city's need for reliable power against residents' health.

What you can do

The key element to all of this: passing Prop. D. It would bring even more local control over the city's energy future and provide a key financing mechanism so that the city can quickly move ahead with its energy plan. First, it has to be approved by voters Nov. 5. And it's also important that the supervisors and the mayor hear from the public so that the energy plan can be passed in its current, compassionate form.