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Council considers governing energy supply

By John Geluardi Daily Planet Staff
Tuesday February 13, 2001

In an attempt to shield consumers from an unstable energy market, the City Council will consider two long-term measures to take control of the city’s energy supply. 

The two priority proposals on tonight’s council agenda could immunize Berkeley from future energy shortages. One is forming a city-owned utility and the other is creating a cooperative in which Berkeley would purchase wholesale power on behalf of residents.  

Both proposals would require extensive evaluation and will not likely provide any financial relief to ratepayers during the present statewide energy crisis, now in its fifth week of Stage 3 power alerts. Since the crisis began electricity rates have gone up 9 percent and natural gas prices have spiked 200 percent.  

One possibility the city will look into is Community Aggregation in which city residents would form a cooperative to purchase power on the wholesale market. The power would then be delivered by PG&E via the existing infrastructure. PG&E would continue to bill residents and maintain the poles and wires that deliver energy to Berkeley homes. 

Under this option, to be viable, the cooperative would have to negotiate a considerably cheaper wholesale price from energy suppliers than PG&E does.  

According to a staff report prepared by the city’s Energy Department and the Budget and Fiscal Management Office, Berkeley could gain negotiating leverage by isolating its energy use according to regional climate.  

For example, Berkeley doesn’t use as much energy for air conditioning during the summer as Walnut Creek does, but Berkeley pays an average rate that partially subsidizes communities that use more electricity during hot weather. 

“By subdividing rate classes into smaller, more homogeneous groups, the charges can be closer to the actual cost of service,” according to the report. 

Berkeley would also have to keep its overhead lower than PG&E and greatly reduce profit margin, according to the staff report. 

The other option is the city running its own utility company. In this case Berkeley would purchase the city’s power infrastructure from PG&E. The city utility would be similar to Alameda’s which has run its own utility successfully for years. 

Berkeley would purchase and deliver energy as well as maintain the power lines and poles. It would also be responsible for administration of the system, including billing. 

Again, according to the staff report, Berkeley would have to be able to negotiate better wholesale energy prices than PG&E and in addition keep the operating overhead and system maintenance down to make this a viable option. Berkeley’s electricity delivery system is very old and would be expensive to maintain. Currently Berkeley’s system maintenance costs are averaged out with newer communities such as Hercules. 

There are substantial financial and legal issues that will have to be explored before the city could commit to either of these options. 

“A substantial investment of staff and financial resources will have to be committed to study these options,” the report says. 

The City Council will consider several other energy-related recommendations tonight including the city’s expected utility tax windfall.  

According to a staff report, the Budget and Fiscal Management Office estimates that Berkeley will receive $650,000 in increased taxes as a result of high utility costs.  

The council approved a Budget Review Commission recommendation that the city not profit from the energy crisis. It now collects a 7.5 percent tax on utilities. Councilmembers had hoped the city could ask the utility not to tax the rate hike, but PG&E, which collects the tax, has indicated that it would be too difficult to administer the tax break.  

Berkeley households would save approximately $5 per year, but city staff has determined that it would be too expensive for the city to mail out rebates.  

The staff report suggests the easiest thing to do would be route the money into an existing unspecified programs for low-income residents that “can be increased to provide this direct assistance quickly without much additional administrative burden.” 

Councilmember Polly Armstrong said there are a lot of creative minds in Berkeley and that she is looking forward to hearing the ideas of people who have been motivated by the current crisis. 

“I think people haven’t been challenged in a long time,” she said. “I’m really looking forward to hearing about possible solutions.”