PG&E's poor reliability record costs businesses millions
This chart shows how customers of Pacific Gas and Electric Co. face far more power outages than customers of any of the public power agencies in the Bay Area
Noel Birbeck makes signs. In a low, nondescript building tucked into a south of Market side street, a printing machine spits out personal greetings and corporate messages in all colors, shapes, and sizes.
Until the power goes out.
"We print things that are up to 50 feet long," said Birbeck, the business manager of Budget Signs. "If the power goes out at foot 35, we have to start the printing process all over and throw out all that time and money that went into the initial printing."
And that, unfortunately, has been happening far too often. In fact, a Guardian review of available data shows that customers of Pacific Gas and Electric Co. lose power much more frequently than customers of municipally-owned and operated utilities.
That costs money and harms the local business climate.
"[Any disruption] is a huge deal," Birbeck said. "If we're in the middle of a deadline and a customer expects something at a certain time, that can cost Budget Signs a huge amount of money. No one is going to pay you for something that is only kinda done."
The last major outage cost Budget Signs more than $300 in employee and company time as Birbeck and her workers waited for the power to return. It's a manageable amount, but she insists she can't put a price on the inconvenience, the uncertainty, and the potential loss of business.
Reliable power is a basic requirement of most businesses. Restaurants and markets need refrigeration, factories need to power production lines, office buildings run large computing systems, retailers need to run cash registers, lights, and credit card machines. An unexpected power outage can cost San Francisco businesses thousands of dollars.
A 2001 study by the Electric Power Research Institute estimates the cost of power disruptions to California businesses is between $11.5 million and $17.8 million annually.
No utility can guarantee year-round power without disruptions, surges, brownouts, or severe weather-related outages. But reliability varies widely among California utilities.
PG&E breaks its service area into districts, and, according to reports it submits annually to the California Public Utilities Commission, San Francisco customers experienced an average of two hours of non-weather-related outages per year over the last six years. (Weather-related incidents are not reported at the district level.)
That's better than the three-hour average across PG&E's entire California service area. Still, PG&E customers in San Francisco lose power, on average, 2.5 times as often as customers of other Bay Area utilities.
The Palo Alto Utilities Department, Silicon Valley Power in Santa Clara, Alameda Municipal Power, and the Sacramento Municipal Utility District have dramatically better records, ranging from 82 minutes a year of outage time in Sacramento to only 16 minutes in Santa Clara and these numbers include all weather-related events.
In other words, the municipal utilities deliver power more consistently and at considerably lower rates even before factoring in PG&E's impending rate hike of 3.3 percent to 5.4 percent.
"We consider any widespread blackout a major event," said Larry Owens, division manager at Silicon Valley Power. "Systems can be managed to minimize storm related events we do [that]."
There are a number of reasons why these public power sources are more reliable than PG&E: size of the service area, age of the infrastructure, administration of the organization.
"The general concept is that the more complex the topography is and the older the urban areas are ... the more unreliable the system is going to be," said Mark Loy, a ratepayer advocate at the CPUC.
"For PG&E there are negative powers of scale," he continued. "They are so large and spread out that being bigger actually makes things more difficult for them to fix. In San Francisco, the circuitry PG&E uses hasn't even been mapped out in some places, so it is all haphazard and harder to keep on top of."
Public power agencies also have more incentive to invest in maintaining their infrastructure.
Patrick Valath, manager of electric engineering at the Palo Alto Utilities Department, attributes his city's annual average of only 65 minutes of power disruption to an "aggressive and sustained infrastructure replacement program that is spread over many years."
Alameda Municipal Power's Alan Hangar said the annual average of only 25 minutes of outage in that city is due to years of building stability and redundancy into the system.
Santa Clara is by far the most reliable utility company in the area, Owens said, and is often ranked second in the nation. "Our current operating philosophy is to load the system with only half of what it is capable of carrying," he said. "That allows us to switch a customer to another circuit quickly, so we restore their power and make repairs on our time, not their time."
He also noted that the vast majority of Santa Clara's power lines are underground, making them far less susceptible to damage from storms, accidents, and other interference.
Municipal utilities have more freedom than investor-owned companies like PG&E to shift the focus away from profits, revenue, and shareholder returns toward quality and customer satisfaction.
"We are customer-driven," Owens said. "They repeatedly tell us that reliability is the No. 1 priority. The cost of power is second. We have some customers who say they lose $1 million a minute in an outage, and that by far trumps the cost they pay for energy."
Business owners don't need studies to tell them they are losing money because of PG&E.
Arienne Landry, owner of Just for You Café in San Francisco's Dogpatch neighborhood, faced a blackout during lunch service at her café several months ago.
"The power was out for four or five hours," she said. "During that time I'm paying people to work, but I can't serve customers without power. I probably lost a couple of grand in sales. It's not a severe loss, but it takes a little while to catch up."
Birbeck of Budget Signs remembers a power disruption that occurred when she was in the middle of two large printing jobs. She and an employee returned to the shop at 10:30 p.m. after a neighbor alerted her that the power had returned. She said they worked through the night to complete the jobs on deadline.
"They were our two largest jobs for our two largest companies at the time," she said. "Both jobs were over $10,000. Potential loss of either or both of these companies would have been disastrous to a small company. I really couldn't even put a price on it."
And the cost of an outage doesn't stop at that initial business. If the power goes out at Birbeck's sign shop and a sign doesn't get finished and a deadline isn't met, Birbeck might lose money or even a client. But that client might have needed that sign for a business event, and that business event may have needed that client ... and the losses can go on and on.
Those ripples are larger and go farther in many high tech industries. Larry Owens of Silicon Valley Power said that consistent, reliable power is especially important for the high tech firms located in Santa Clara, including Applied Technologies, Inc., McAfee, Inc., and Intel Corp.
"There are some processes that require a 21-day burn in," he said. "If there is a power outage, they have to start all over again. An outage can cause a company to lose market share or dominance or preferred vendor status. It ripples out a long way."
Some companies have such sensitive systems that a drop in voltage for a mere fraction of a second can shut them down and require rebooting.
"Our customers have become power-quality sensitive," Larry Owens said. "It doesn't take an outage to harm a business. A fault on a transmission line causes the whole system to dip, a voltage dip. If you have a heavy load, it knocks the voltage down for milliseconds. If it drops enough, companies' systems drop out."
State Sen. Mark Leno is intimately familiar with the problem he owns Budget Signs. And he has called on the California Public Utilities Commission to investigate the problem.
"As a San Francisco small business owner, I am personally aware of the lost business I experience as a result of PG&E's performance failures," Leno said in a press release. A June 18 letter Leno sent to the CPUC noted: "As the commission considers PG&E's request to upgrade its grid, I would ask you to include both an investigation of these problems and PG&E's proposed solutions to them."
Almost a month later Michael R. Peevey, president of the CPUC, responded, arguing that PG&E's reliability rate in 2008 was better in the previous few years. He also pointed out that the utility has a formal process for filing claims and that the commission has no authority over system reliability.
That, Leno said, is unacceptable. "From reading that letter, one would never know that the mission of the California PUC is to be the protector of the ratepayer," he told us. "The ratepayers are being badly served by PG&E and the CPUC."
In theory, state law requires PG&E to reimburse businesses for losses caused by blackouts. A business owner or manager can find the claim form on PG&E's Web site or can call the claims office. Each case is assigned to one of the 21 claims investigators who cover the utility's service area. With the help of supporting documents, investigators look into the occurrence, determine PG&E's liability and the degree of monetary loss, and compensate the business accordingly. All, according the Web site, within an average of 30 days.
Emily Mitra, owner of Dosa, which operates Indian restaurants in the Mission District and the Fillmore District followed this process and it wasn't that simple.
On Dec. 18, 2008, a PG&E transformer blew and both locations of Dosa lost power. Mitra had to contend with food spoilage, staff costs, down equipment, lost business, all of which added up to about $12,000.
"We filed claims, but it was a long process," she said. "A check came for the Valencia Street location immediately but for the Fillmore location, PG&E didn't even have record of an outage."
After three months of badgering PG&E to no avail, Mitra said she contacted Sup. Ross Mirkarimi's office and the Small Business Commission.
"I was ready to sue them," she said. "I had dozens of witnesses, but that didn't seem to faze them. It could have been a coincidence that they found the data right after we talked to the Small Business Commission. But it was a pretty quick turnaround after that."
A check arrived for the full amount of the claim. But Mitra couldn't claim compensation for the time, energy, and frustration the claims process cost her over its three-month duration.
Birbeck told us PG&E never informed her that there was a formal claims process. "No one ever mentioned a claim to me that has never been offered at all," she said. That's a common complaint although the forms are on PG&E's Web site, the utility doesn't widely promote or advertise that fact.
PG&E also asks business owners to provide a slew of paperwork ranging from tax records and bank statements to payroll records, revenue and expense statements, and sales receipts.
"We had to give them a lot of data," Mitra said. Because Dosa's records are mostly digital and automated, supplying them to PG&E was the least of her problems. But, she conceded, "if you don't run your business in a way that keeps all that data, it would be a pain in the ass."
Of course, the claims process does nothing to address issues of reliability. Neither does it guarantee that Mitra's refrigerators won't fail without notice, leaving her without food to serve.
It is, however, another reminder that San Francisco is not being well-served by its private utility monopoly.