Coalition for Local Power News

COALITION FOR LOCAL POWER

Ratepayers’ Revolt: Why SMUD Is Winning in Yolo County

By Dan Berman for The Flatlander, Summer 2005, Davis, California

On May 19 the Board of Directors of the Sacramento Municipal Utility District voted 5-2 to move forward with the annexation of over 70,000 Yolo electric customers into the its service territory. SMUD will now submit an application to the Local Agency Formation Commission (LAFCO) of Sacramento County for expansion into Yolo County…in time for elections in Davis, West Sacramento, and Woodland in November 2006. The SMUD hearings-- available at SMUD.org — reexamined the debates about public versus private monopoly ownership, utility governance, and related issues. But now, for once, the advocates of democratic public ownership are on the offensive. A few facts and figures, which which have come up in the last few months of hearings—culminating in the May 19 annexation decision by SMUD--, help us understand why.

Everybody in Yolo County seems to know that PG&E, for decades, has charged substantially more than SMUD …and charges 31 percent more today. A typical residential customer who uses 700kWh pays $98 to PG&E in Yolo County but only $56 to SMUD in Sacramento—a savings of $42/month. Warehouses and medium-sized supermarket chains like Raley’s and Nugget are well aware of the fact that 250,000kWh of electricity costs $25,000/month from PG&E, but only $16,000/month across the river at SMUD.

These expensive bills must be especially galling since those supermarkets compete directly with Albertson’s and Safeway, giant firms that bypass PG&E through direct access discounts. It is likely that Raley and Nugget and other heavy electricity-users are behind the decision of the West Sacramento Chamber of Commerce to take the lead in the local business community in encouraging annexation.

PG&E SERVICE: “I am not here to bemoan the fact that it took PG&E seven months to install a transformer at one of our school and that students couldn’t use their new science lab for the first semester of the year. I am also not here to berate PG&E for waiting for nearly five months and then asking us to pay for the transformer before they would even schedule an installation date. I am also not going to demean the fine people who work for PG&E who didn’t show up on three different occasions that were scheduled to install the transformer. Instead, I am here to support the request that SMUD annex this area and include our schools based on the R. W. Beck recommendation….”

Rob Ball, Deputy Superintendent, Woodland Joint Unified School

District, Testimony before the Woodland City Council, February 15, 2005.

After years of painstaking analysis, SMUD and Yolo County governing bodies have concluded that PG&E's assets for the 72,300-meter system in the annexation area are worth a maximum of $145 million. PG&E--without furnishing documentation-- asserts those Yolo assets are worth $500 million, a claim which SMUD Director Genevieve Shiroma asserts “doesn’t pass the reasonableness test,” since SMUD calculates that its own 560,000-meter system is worth only $750 million). SMUD director Susan Patterson rejected PG&E attempts to promote further “joint” studies the annexation and pointed out that “all published results show that current SMUD customers, as well as Yolo customers, would benefit from annexation.”

Art Pimentel, of the Woodland City Council, reminded listeners that PG&E has already begun its “campaign of misinformation and fear,” a thought echoed by Yolo County Supervisors Mariko Yamada and Mike McGowan and by Don Saylor and Sue Greenwald of the Davis City Council. Greenwald pointed out that “PG&E would not be fighting this annexation so hard if we [in Yolo County] were not profitable customers to do business with.”

“TAKE THE MONEY AND RUN:” PG&E’S PHANTOM STOCK UNITS

“Nimm da gelt!” Brooklynese for “take the money and run,” seems to be the dominant attitude of top management of Pacific Gas and Electric, the Northern California energy giant which is both a holding company and regulated utility. On the last day of 2003, according to PG&E filings with the California Public Utilities Commission, the top 17 executives of PG&E Corp. paid themselves $84,548,521 in “restricted phantom stock units.”

That year Mr. Robert D. Glynn Jr., President and CEO of PG&E Corp., earned $17,089,241 in “phantom stock units,” to boost his total “earnings” to $34,009,060. His No. 2 guy, Mr. Gordon R. Smith, Sr., Vice President, PG&E Corp. and CEO and President, Pacific Gas and Electric Company (the operating utility to which we in Yolo County pay our electric and gas bills) “earned” a grand total of $20,345,448, including $9,968,736 “phantom stock units”(1), two years after they led PG&E into bankruptcy. (In five years the earnings of Mr. Glynn and Mr. Smith had skyrocketed from $2.1 million and $1.0 respectively, in 1998). One guy at the May 19 hearings pointed out that Mr. Glynn made 1133 times what the janitors earned, while Ms. Jan Schori, General Manager of SMUD (at $283,327) made only 11 times as much.

Board President Bill Slaton charged that PG&E had “lost sight of the cardinal rule of business: ‘Take care of your customers,’” and stated that in 35 years in the computer business he had never seen “such a campaign of deception,” in reference to PG&E’s testimony and full-page newspaper ads, and exhaustive PG&E document requests directed at SMUD and public officials in Yolo County.

TRUE COMPETITION: “I haven’t heard anyone in Sacramento advocate we return to PG&E. The movement toward annexation is a mess of PG&E’s own making. We are responding to a unanimous request of 19 elected officials in Yolo County. The reason SMUD is more efficient is that we do not serve two masters. We do not have to decide between our customers and our investors, because our customers are our owners, and our dividends go to our owners in the form of lower rates. Competition should exist between business models, and that’s what PG&E fears the most. I was elected to make decisions like this, and I’m not going to allow annexation to be decided by 30-second spots paid for by PG&E ”

Peter Keat, SMUD Director, May 19, 2005

The press has amply covered the entire debate, which has taken place in the public eye. For once democracy seemed to be happening before our eyes, and it looks as if PG&E disinformation campaigns and scare tactics will not overturn the sober deliberations of elected officials.

THE MUNI-KILLING PLAYBOOK

PG&E is a past master at fighting municipalization---except in the case of SMUD. The Sacramento Municipal Utility District was carved out of PG&E territory in a bitter 24-year struggle which ended in 1947. In the early 1980s, in response to a local campaign, SMUD annexed Folsom, despite PG&E’s familiar assertion that “our system is not for sale.” Folsom electors, by a 71 percent margin, voted in favor of SMUD, and PG&E, which had demanded $23 million for its system, was forced to settle out of court for $13 million.

PG&E prefers to strangle public power in the cradle. If that fails, it will try to block it at the local legislative level. In 1997 and 1998 PG&E consultants attended meetings of the Coalition for Local Power, and managed to get themselves appointed to leadership positions on the first Citizens Task Force on Electricity Restructuring of the City of Davis (2), where they were successful in stalemating the public ownership advocates in the final report.

PG&E has already lost these first two battles in the Yolo/SMUD annexation fight. The next round will be at the Sacramento County LAFCO, which will decide by July 2006 whether there will be annexation elections in Yolo County on November 6, 2006. PG&E will keep its stable of high-priced flacks and lawyers running around

the clock…nothing new for a company which spent over $2.6 million to defeat public power in San Francisco in 2002, and over $86 million on legal services in 2003.

Coverage of annexation has been sparse on TV and radio, which continue to drown in “if it bleeds it leads” triviality. Beth Curda of the Davis Enterprise has done a solid job on a difficult issue, and the Sacramento Bee, the Sacramento Business Journal, the Sacramento News & Review, and the Woodland Democrat have all editorialized in favor of annexation.

To get the message out, annexation activists will have to keep the issue before the public, with letters to the editor and calls to local radio and TV stations. Local newspapers and web sites such as smud.org and publicpowernow.org are the best sources of information. We must continue to shine a searchlight on PG&E’s “good corporate citizen” PR ploys and explain them to the public. Viral marketing will be the key: don’t leave home without a half-dozen flyers in your pocket or purse, in case you bump into some friends, and be sure to share what you know over the net.

It is no longer a secret that SMUD charges low rates, and supports nationally recognized programs in solar and wind generation and urban forestry. And while you’re thinking of those issues, don’t forget about that old American word “democracy.” The idea that any old ratepayer could attend a PG&E board meeting is laughable, yet that sort of thing happens all the time at SMUD. Try it yourself. Public ownership of essential services is as apple-pie American as town hall meetings and Old Glory.

June 1, 2005 (about 1520 words)

1. “Summary Compensation Table,” from SCHEDULE 14(A) INFORMATION, PG&E CORPORATION and Pacific Gas and Electric Company, received March 17, 2004, pp. 75-92; also /Report of Pacific Gas and Electric Company Pursuant to General Order No. 77-K for the Year Ended December 31, 2003, Attachment 1, SENIOR EXECUTIVE RETENTION ELIGIBILITY LIST, p. 141, available from the California PublicUtilities Commission in San Francisco by calling 415-703-1329.

2. For more on this see Jim Leonard, “PG&E’s Mole in Davis,” and Dan Berman, “PG&E Spent Big

$Money$ to Stop Davis MUD,” in The Flatlander, summer 2001.

Timeline of Public Power Issue in Yolo County: 1997-2006

March 1997	First meeting of Coalition for Local Power, an ad hoc group of Davis citizens dedicated to bringing public power to Davis
July 6, 1997	“It’s Time for Davis to Declare Our Energy Independence,” Op-Ed in Davis Enterprise by Dan Berman and Bob Milbrodt, advocating formation of a Davis Municipal Utility District (DMUD)
August 1997	Natural Resources Commission of the City of Davis holds public hearing to discuss city’s response to upcoming electricity deregulation. Public power experts from the Northern California Power Agency among the speakers.
December 1997	First meeting of Citizens Task Force on Electricity Restructuring, appointed by the City Council after recommendation by the Natural Resources Commission.
May 1998	Citizens Task Force on Electricity Restructuring issues its report, which is moot on issue of public power.
Nov. 14, 1999	“Municipal Utility District: Bold Idea for New Century,” Op-Ed in Davis Enterprise by Dennis Dingemans, Dave Rosenberg, and David J. Thompson.
February 2000	Campaign launched to collect 1692 signatures to put DMUD issue on November 2000 ballot.
April 2000	DMUD campaign turns in 4024 signatures (of 1692 required by Law) to Yolo County Clear. Review initiated by Yolo County Local Agency Formation Commission (LAFCO).
July 14, 2000	Yolo LAFCO rejects attempt to put DMUD issue on Nov. 2000 ballot. Mayor Ken Wagstaff of Davis is only “Yes” vote.
November 2001	Citizens Task Force on Energy Issues appointed by Davis City Council; Task Force recommends that City of Davis hire a consultant to study public power issue
February 2002	Davis City Council hires Navigant Consulting to study energy alternatives, including annexation to SMUD
October 2002	· Navigant Consulting, Inc., study* recommends that Davis pursue annexation by SMUD as an “excellent alternative to PG&E service and the most plausible outcome to establish local representation” and recommends including Woodland and West Sacramento in any annexation area. · Davis City Council votes to approach SMUD about annexation
January 2003	Final Report* of Davis Citizens Task Force on Energy Issues recommends further study of annexation to SMUD.
February 2003	West Sacramento, Davis, and Woodland approach SMUD about annexing portions of Yolo County into SMUD service area.
April 2003	SMUD Board adopts an annexation policy that sets criteria that must be met for SMUD to consider annexing an area.
July 2003	SMUD Board authorizes joint study of annexation feasibility and requires the Yolo communities requesting annexation to split the cost with SMUD. SMUD Board authorizes joint study of annexation feasibility and requires the Yolo communities requesting annexation to split the cost: half by SMUD and half by Yolo County jurisdictions.
March 2004	$500,000 Annexation feasibility study contract awarded to R.W. Beck, Inc.
January 2005	Annexation feasibility study completed by R.W. Beck.
Feb/Mar 2005	City Councils of Woodland, Davis, and West Sacramento, and Yolo Supervisors vote unanimously to request annexation.
April/May 2005	· Yolo County Board of Supervisors votes to seek annexation. · SMUD staff releases its annexation analysis to the SMUD · SMUD holds three public workshops on annexation issues.
May 5, 2005	Dr. Sanjay Varshney, the dean of the College of Business Administration at California State University, Sacramento, provides the SMUD Board of Directors with his report validating both the R.W. Beck report and the SMUD staff analysis.
May 19, 2005	SMUD Board of Directors votes to send the annexation request to the Sacramento County Local Agency Formation Commission (LAFCo).
July 2005	LAFCO to determine whether the annexation question can be placed on the ballot in Yolo County in November 2006
Nov. 6, 2005	Possible annexation election in Davis, West Sacramento, and Woodland as well as Yolo County, contingent on approval by Sacramento LAFCO

* Go to cityofdavis.org and search “energy issues” for copies of these reports.

Last updated 9-12-2005