Road map to public power
New study gives green light to local control of electric service

By Matthew Hirsch

A long-awaited report recommends San Francisco should aggressively move forward on a plan that would allow a city agency to buy electricity at wholesale rates on behalf of its citizens – a process known as community-choice aggregation – despite foot-dragging by the California Public Utilities Commission and Pacific Gas and Electric Co.

The city's Local Agency Formation Commission received the report June 20 from the Sacramento-based energy consulting firm R.W. Beck, which was commissioned by LAFCO five months ago, after the state approved a new law allowing aggregation.

The report says aggregation would allow San Francisco to control where and how its power is generated. As a result, it would enable the city to invest in more renewable resources while reducing its reliance on the old, polluting Hunters Point and Potrero Hill power plants. Aggregation would also bring considerable cost savings to consumers and offer protection from the uncertainty of the volatile, deregulated market that produced the California energy crisis.

Aggregation would break the PG&E monopoly over San Francisco electricity service, but it would fall short of municipalization because the city would continue to send its electricity through the company's transmission and distribution system. However, another R.W. Beck report due later this year may also recommend a takeover of PG&E's entire system.

Michael Bell, R.W. Beck principal and senior director for client services, who presented the study, said several cities have expressed interest in aggregation, but San Francisco is the closest to authorizing it. Bell said the city should expect an estimated $10 million to $35 million in annual savings as a result of aggregation. R.W. Beck's conclusions would have been more certain if not for indecision at the CPUC and the withholding of data by PG&E, Bell told LAFCO.

The study did not include city-owned hydroelectric power from the Hetch Hetchy reservoir or the four combustion turbine generators acquired in a settlement with Williams Co., which could increase the value of aggregation. If PG&E rates or increasingly unstable natural gas prices continue to rise as expected, the city stands to save even more.

R.W. Beck recommended the San Francisco Public Utilities Commission carry out the community aggregation plan, once approved. The SFPUC's experience in the complex power market, its staff, and its leadership in drafting the city's Electrical Resource Plan make it the best agency to administer an aggregated system, Bell said.

San Francisco is already working with an active coalition of California cities for community aggregation, including Berkeley, Oakland, Richmond, Pleasanton, and several others around the state. Ed Smeloff, SFPUC assistant general manager for power policy, said the group sent a letter to the CPUC recommending the commission begin studying the issue for all California cities that want to participate and to direct PG&E on what data it must make available to these cities.

Bell said it would take about six months to complete any plan authorized by the San Francisco Board of Supervisors and another six months to be approved by the CPUC. This authorization would then force PG&E to release valuable site-specific rate information to the city, something the private utility has thus far been unwilling to do.

The next LAFCO hearing on community-choice aggregation is scheduled for Aug. 15.

P.S. The shame of Hearst and the CPUC: On June l9, the day before the LAFCO hearing, CPUC staff handed PG&E a favorable bankruptcy settlement so that the private utility could force ratepayers to pay $8 billion and the company could then begin paying stock dividends as early as next year. As it has done so often through the decades, the Hearst Corp.-owned San Francisco Chronicle put PG&E first, playing up the settlement on its front page under the headline "Deal Could Put PG&E Back on Its Feet," without mentioning the PG&E-Raker Act scandal, the local public power movement, or even calling a local public power leader for comment. It then refused to cover the LAFCO hearing and blacked out the local scandal angles altogether.

P.P.S. The R.W. Beck report on community aggregation is available for $25 from the Clerk of the Board of Supervisors' Office, City Hall, 1 Carlton B. Goodlett Place, Room 244, S.F. The report can also be downloaded for free from the LAFCO Web site (www.sfgov.org/site/lafco_index.asp).

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