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SMUD: What's not to like?

By    Dan Berman Special to The Enterprise
Published: January 23, 2005

On Tuesday, the Davis City Council voted 5-0 to support the long-awaited $500,000 SMUD annexation study, which found that annexation of the three major cities in Yolo County to the Sacramento Municipal Utility District will provide inexpensive, reliable electric service to new customers in Yolo County.

Annexation, according to the R.W. Beck study, almost certainly will save money for existing SMUD customers as well.

The council appointed Mayor Ruth Asmundson and Mayor Pro Tem Sue Greenwald to a subcommittee that will represent the council and handle relations with SMUD. After seven years of studies by commissions and consultants and task forces, Davis — together with the rest of Yolo County — looks to be on the verge of major changes in its energy future, just as it was a generation ago when it took the lead in developing a new energy efficiency code.

To many, SMUD's stability and efficiency represent the antidote to the chaos and criminal thievery of electricity deregulation.

The R.W. Beck study discovered that cooperation is the way to go: If West Sacramento and Woodland move forward together with Davis and join SMUD, the per capita cost of annexation would total $108 million, which comes out to only $1,448 per customer when spread over the 72,300 customers in the three-city service area.

Think about it: What would be the mortgage on a $1,448 house? Perhaps $9 to $10 a month! This is the amount that would be added to a normal SMUD bill.

In September 2004, a typical residential load of 700 kilowatt-hours cost a SMUD customer $61. That was $45 less than the $106 paid by a PG&E customer in Yolo County who used the same amount of electricity.

Apparently annexation will pay, even in the short term. Annexation to SMUD would be like buying the house you rent and lowering your monthly payments. Who would want to rent under those circumstances?

In 1981-84, when Folsom was annexed to SMUD, PG&E first declared that its property wasn't for sale, then demanded $23 million for its poles and wires. SMUD countered with an offer of $5.5 million, then took PG&E to court under eminent domain, after the Folsom electorate had voted by a 72 percent margin to support annexation. PG&E ended up settling out of court for $13 million.

The annexation process requires: 

 Why is SMUD better for Yolo County ?

Compared to PG&E, SMUD is better for six simple reasons.

1.      SMUD charges less. SMUD pays no dividends to stockholders; instead, it reinvests its surplus back into the system.

2.      SMUD has more reliable service, so much so that it believes it will have to carry out an extensive rebuild of the Yolo annexation area to bring it up to SMUD standards. Those $27 million in rebuilding costs have been worked into the estimated $108 million purchase price.

3.      SMUD is greener. More than five times as much solar electric (photovoltaic or PV) capacity per customer has been installed in SMUD territory, and more than twice as much wind generation capacity per customer as PG&E.

4.      SMUD has happier customers. According to the J.D. Power "2004 Electric Utility Residential Customer Satisfaction Study," SMUD ranked third in "customer satisfaction" and PG&E ranked 10th of the 13 largest electric utilities in the West.

5.      SMUD's top executives are in it for the service, not the money. Gordon Smith helped lead PG&E into restructuring and then into bankruptcy. Until late 2004 he was the president and CEO of the Pacific Gas and Electric Co., and senior vice president of PG&E Corp., the holding company that owns PG&E Co., the bankrupt utility. Smith "earned" $11.84 million in total compensation in 2003. SMUD's general manager, Jan Schori, earned $283,327 that same year.

6.      SMUD is democratic. Its ratepayers elect its seven-person board of directors, who live in their respective districts and meet in public. SMUD's democratic accountability and lack of a profit motive make all the difference.

PG&E, by contrast, is a wholly owned subsidiary of the PG&E Corp., which is accountable only to its stockholders. Self-selected boards of directors that meet in secret govern both the holding company and the utility.

The challenge for ordinary citizens, and for political and business leaders in Yolo County , is to learn to work together with SMUD and the Sacramento community for our mutual advantage. The Sacramento community had to fight PG&E to create its own SMUD. With community support, Folsom fought its way into the SMUD service area 20 years ago.

It's time for us to follow suit. We can do it, too.

  Dan Berman is a Davis resident. He has been active with the Citizens Task Force on Energy issues and the Coalition for Local Power (www.publicppowernow.org), which has advocated public power solutions for Yolo County since 1997.

  SOURCES

1. Comparisons of rates and of typical bills are available from several sources: for example “Utility-Wide Average Retail Electricity Prices, Major California Utilities, by the California Energy Commission, 1980-2002,  http://www.energy.ca.gov/electricity, updated Nov. 14, 2003; also “Comparison of Typical Electric Bills,” Monthly Report, Energy Rates & Contracts, Los Angeles Dept. of Water and Power, available by calling 213-367-0330; at SMUD call Alan Wilcox at 916-732-5633, whose calculations show that for 2005 PG&E Co.’s overall rate (beginning Jan 1, 2005) is 13.2 cents per kilowatt-hour.  When the most likely new SMUD rates are approved in March, SMUD’s overall rate will be 9.89 cents per kilowatt-hour, which means that overall PG&E’s will charge 33% more than SMUD in 2005. 

  2. For service reliability, see the Citizens Task Force on Energy Issues Final Report, City of Davis, Feb. 2003,  p. 27, available at   www.ci.davis.ca.us/story?story=CTFEI, which shows that Average Sustained Outages per Year from 1992-2000 ranged from 40 to 70 outages for SMUD and 130-160 outages for PG&E.

  3. For installed PV capacity, see a report by the California Energy Commission at www.energy.ca.gov/renewables/emerging_renewables/2004-07-20_GRID_PV.PDF, August 2004 (exact web address may have changed since summer 2004).   (PG&E Co. has about 3.5 million electricity customers; SMUD has about 540,000).  For installed wind capacity by state and utility, go to American Wind Energy Association website at www.awea.org.

  4. For a copy of the J. .D. Power survey go to www.jdpa.com/awards/industry/pressrelease.asp?StudyID=869.

  5. Information on SMUD compensation supplied by General Manager Jan Schori’s office, summer 2004; information on total compensation of former President and CEO Gordon Smith of PG&E Co. comes from General Order No. 77-K Report for 2003, furnished to the California Public Utilities Commission (CPUC) by PG&E Co.  The information on Mr. Smith’s regular salary and bonuses of $1,869,656 is from p. 51 of the 77-K Report.  In addition Mr. Smith collected $9,968,736 in “Final Retention Payments” in 2003, (p. 141 of the 77-K Report) for total compensation that year of $11,838,392. .  Robert D. Glynn, CEO and President of PG&E Corp, the holding company which owns the PG&E Co., collected $17,089,241 in “Final Retention Payments” in 2003.   Peter A. Darbee, the new President and CEO of PG&E Co., the utility to which we pay our electric and gas bills, received $6,408,483 in “Final Retention Payments” in 2003.  The 77-K form lists employee compensation, and amounts spent on attorneys and law firms, and all donations to community organizations and political campaigns.  In FERC Form 2, Page 357, supplied annually to the CPUC, PG&E Co. provides a list of all of its contractors.  For more information on the 77-K Report and FERC Form 2, Page 357, call 415-703-1329.           (1/20/2005).

 6.  http://www.smud.org/annexation/

--Dan Berman is a Davis resident.  He has been active with the Citizens Task Force on Energy Issues and the Coalition for Local Power—www.publicowernow.org which has advocated public power solutions for Yolo County since 1997.

 


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Last updated 9-12-2005