Municipal utilities get second look as energy woes grow

The Associated Press
Monday April 30, 2001

SACRAMENTO – More California cities are considering starting their own utilities as the state’s problems with its privately owned power companies drag on. 

Municipal utility drives already are underway in San Francisco, Corona, and San Diego County. 

Proponents say rate hikes, blackouts and bankruptcies are fueling the idea that public power offers cheaper, more reliable service. 

But only a few cities have set up their own electric departments in recent years, and most fall short of full-fledged utilities. 

Cities like Davis, Lincoln and Culver City considered the option during the 1990s and rejected it. State regulators blocked a proposed far Northern California multi-county public power agency when some local governments objected. 

“Is the investment worth the risk? Most of us would say we don’t know yet,” Santa Rosa City Manager Jeffrey Kolin said at a Sacramento gathering of city and county officials this week sponsored in part by the American Public Power Association. 

The flagship effort is in San Francisco, where voters will decide in November whether to create their own utility in the hometown of venerable giant Pacific Gas and Electric, which filed for bankruptcy protection this month. 

Since January, the cities of Hercules in the Bay Area and Corona in Riverside County avoided possible condemnation fights with existing utilities by forming their own utilities to deliver electric service to new neighborhoods. 

Blackouts and appeals from darkened businesses led Corona officials to quickly opt to build several small plants to power city operations and new neighborhoods. 

Glenn Prentice, who heads the new Corona electric utility, said a half-dozen other cities have since contacted him for more information. 

Despite their financial woes, the state’s investor-owned utilities disagree. 

“There’s been much more talk of it, but as soon as most folks sit down and take a look at the realities ... they realize that they would have to buy on the same market, at the same outrageous prices that we and the state have been paying,” said PG&E spokesman John Nelson said. “The talk quickly evaporates.” 

PG&E says public power companies no longer have access to low-cost electricity such as that provided by federal dams. In addition, cities that withdraw from investor-owned utilities still face 15 years of paying off pending state bonds that California officials plan to use to cover this year’s spiraling power costs. 

But advocates of public power say they can charge less because they don’t have to pay taxes or dividends to investors. 

And as electricity prices soar and the lights dim, they also like the idea of deciding locally which customers pay the lowest rates and how to handle rolling blackouts. 

“One of the things this crisis has proved is the value of local control,” said Jerry Jordan, head of the California Municipal Utilities Association.