SF&B MUD: A LOCAL ANSWER TO THE ENERGY CRISIS

By Robin David

Co-authored by Robin David, for the Labor Task Force for Public Power

When we flip the switch, we require certain things - at a minimum. Reliability: the lights should go on. We require affordable prices and abundant supply. Increasingly, we are also demanding that the impact of energy services on the environment be minimized and that the toxic impact on our communities be reduced drastically. Instead, deregulation has given us rolling blackouts and soaring rates. Moreover, the artificial shortages created by deregulation have provided a fig leaf for corporate and political demands for relaxed environmental standards in order to rapidly develop dirtier, non-sustainable energy sources.

In every respect, deregulation has failed to meet our needs.

The generation of electricity has been separated from its delivery - what is called transmission and distribution. It has been broken up among many competitors. None of these entities is required by law or regulation - or even economic interest - to maintain the smooth functioning of the entire system or to serve the utility consumers' needs for lower prices, greater reliability and cleaner power. They are only concerned with their own profits and the demands of their shareholders.

Only a MUD will be concerned with lowering rates, providing reliable service, developing cleaner renewable sources of generation and programming for energy conservation and efficiency. Only a MUD will be concerned with developing a balanced long-range plan involving these various elements of an electric service that meets consumers' needs.

A similar picture applies in the supply of natural gas. Due in large part to the manipulation of supplies by the biggest natural gas operators, consumers' gas bills have doubled and tripled. As with electricity, the SF&B MUD will seek to be a point of local control and protection.

THE SF&B MUD SOLUTION

When SF&B MUD is created on election day - November 6, 2001 - the program it follows will be determined by its board of five directors, who will be elected that same day. The Board will be totally independent of the S.F. Board of Supervisors, the Brisbane City Council and either city's mayor. It is accountable only to the voters within the utility district, and its only responsibility is their utility needs. For the MUD to help us face this crisis and meet the need for affordable, reliable, environmentally sound energy, directors must be elected who are committed to the following vision.

SF&B MUD's first task will be to acquire PG&E's distribution system - the wires, poles and substations that deliver electricity to customers. That will make us customers of SF&B MUD - not PG&E. In negotiating a fair price, it is important to remember that PG&E has charged us depreciation for their system as part of the rates for many years. This means that we have already largely paid for the system one time. We don't want to pay twice. To aid the process of negotiations, state law gives MUDs the power of eminent domain and condemnation.

SF&B MUD will have to arrange long-term contracts to supply electric power, which in turn will also provide the collateral for loans to buy the contracts and the distribution system. This spring, a long-time public power consultant negotiated reasonably priced long-term contracts for a Northern California public power authority. He calculates that these long-term contracts would allow SF&B MUD to supply power at rates that are cheaper than those of PG&E. He also calculates that SF&B MUD power purchases, debt service for acquiring PG&E's system, and maintenance and operation would cost $357 million a year. The Public Utilities Commission allows PG&E to collect $460 million for electricity from its customers in San Francisco and Brisbane. That's $103 million saved.

The new SF&B MUD Board will have several other tasks high on its agenda. An aggressive and serious study will be made into the possibilities of affordable solar power on all new construction and rebates for retrofitting older buildings, as well as the possibilities for wind generation, fuel cells, micro generation and other renewable and alternative generation.

The Board will also insist that the city of San Francisco and PG&E live up to their agreement to shut down Hunters Point Power Plant as soon as possible, and it will provide for this to occur by, for example, directing the re-powering of Potrero with expanded cleaner generation. This would remove the single greatest source of air pollution in an area that suffers one of the highest rates of respiratory disease in the state. In addition, the Board will insist that the agreement be amended to ensure that the workers at the plant are guaranteed jobs either with PG&E or San Francisco and that the compensation packages offered to all other PG&E power plant workers are reinstated for them.

GENERATING OUR OWN ELECTRICITY: LOWER RATES, GREATER RELIABILITY

Next on the SF&B MUD agenda is the development of generating capacity. With deregulated market rates out of public control, the more power we generate ourselves the less dependent we will be on outside sources. This area is unique in that San Francisco has a tremendous source of hydroelectric generation in California: Hetch Hetchy. The Raker Act of 1913 allowed San Francisco to dam Hetch Hetchy Valley expressly to supply cheap water and electricity to the people of San Francisco as a direct alternative to PG&E. Today, almost half that power is diverted at very low rates to the Central Valley through contracts with PG&E and irrigation districts in Turlock and Modesto. Power thus diverted must then be replaced at higher costs to San Francisco consumers. However, the language in those contracts clearly provides for the agreements with the Central Valley to be voided should a MUD be created in San Francisco.

The MUD would also have two natural gas-fired power plants within its borders. Mirant, a Georgia-based generating company, owns the one at the foot of Potrero Hill. It is planning to triple capacity there. Any expansion by Mirant should be opposed because a private operator would run the plant at maximum output for maximum profit with no consideration for the needs of the community. SF&B MUD should acquire that plant operating it to compliment other sources of generation which would reduce emissions. That would reduce its impact on the communities surrounding the plant. SF&B MUD would then scrap plans for a big new unit. SF&B MUD would scrap Mirant's current expansion plans. Instead, utilizing the latest technology, the Potrero Plant could be modernized to double capacity while greatly reducing pollution. Adding this capacity at Potrero would then allow the oldest and dirtiest plant at Hunters Point to be shut down.

The power from this plant, combined with the additional power from Hetch Hetchy, would provide 50 percent to 70 percent of the average daily electric demand, called load. This means that for most of any given day, San Francisco could generate its own power. This might not be practical if power could be bought more cheaply on the open market, but for the foreseeable future that is not the case.

San Francisco and Brisbane's location on the tip of a peninsula is another important reason for this area to have its own electric generation. Our connection to the grid and outside sources of power comes only up the peninsula from the south. Every couple of years we have been cut off by earthquake activity and disruptions in the transmission grid itself. As in the past, having generating capabilities within the District will allow us to keep the lights on and essential services functioning in emergency situations.

While fossil generation is being secured, the transition to renewable and alternative generation will begin to be implemented. This will have an impact in two very important, interrelated areas. Not only will it reduce the need to run the gas-fired plant at high load, but it has the potential of reducing peak demand. Solar and wind would be maximized during the late summer afternoons and early evenings, increasing supply just when demand is peaking. This would reduce the demand for fossil generated peak power, which is the most expensive and dirtiest.

BRISBANE

San Francisco has a history of using Brisbane as a dumping ground. To ensure equity and make SF&B MUD work, San Franciscans cannot make decisions about what SF&B MUD does in Brisbane. Brisbane residents must have veto power over any major SF&B MUD installations or activities within Brisbane borders.

SF&B MUD AND THE FUTURE

Reliable electric service will require access to a variety of generation sources. Only a MUD can answer questions of planning for future demand, balancing new generation against energy efficiency, balancing fossil generation against alternative sources, and low price versus environmental protection - all in our interest. When faced with these questions, the market will always answer, "Show me the money." And only a MUD will be able to deal with these complex issues in a democratic forum - the elected SF&B MUD Board of Directors.

SF&B MUD AND THE WORK FORCE

The utilities and the power generators, looking only at the bottom line, are pushing to undermine union pay scales and working conditions. More than 6000 utility jobs have been lost in the PG&E service area in preparation for deregulation and competition. SF&B MUD, on the other hand, must understand that its success depends on the skill, experience and dedication of the men and women who now make and deliver our electricity. Any facilities taken over from PG&E by SF&B MUD will have to guarantee the work force first crack at the jobs under existing union contracts. Staffing levels will be maintained and increased, if required, to guarantee safety and reliability. Anyone displaced, especially by the reshuffling of power plants, will have the option of staying with PG&E or Mirant according to the existing contracts, given rights within the Civil Service system (including seniority and benefits), or being handed a buyout package. Anyone displaced by the closing of Hunters Point Power Plant will have their rights restored to be on a par with other PG&E power plant workers. In the same way, any workers transferred to the new SF&B MUD from the San Francisco Public Utilities Commission or any other San Francisco agency would have to maintain pay scales, work classifications, benefits and seniority. Any jurisdictional concerns would be settled by the unions involved.

ADDING TO THE COMMUNITY, NOT TAKING FROM IT

Many municipal services such as education, health care and transportation, by their very nature, do not make money but require tax dollars. Public power departments and Municipal Utility Districts, however, make money. As a result, all utilities - public or private - are required by law to pay 2.7 percent into the city treasury for "the public good." All current public power authorities in fact contribute considerably more. In addition, though MUDs are exempt from taxes and franchise fees, the SF&B MUD will pay amounts at least equivalent to taxes to Brisbane and San Francisco.

There are other financial benefits from a MUD, as well. A MUD can charge lower rates for residents, small businesses and city facilities. Lower rates for city facilities means they can preserve more of their budgets for the delivery of their services. The SF&B MUD will funnel revenue into infrastructure and therefore back into the community.

Beyond the issue of money and budgets, a SF&B MUD will give the people of Brisbane and San Francisco democratic control over their basic utility needs, provide long-term stability, and take back the portion of their bills that are profits now sent to private investors. It will allow the people of San Francisco and Brisbane to keep and share those dollars with their communities.