San Francisco Bay Guardian - January 28, 1998
By Savannah Blackwell
There’s plenty of bad news about the deregulation of electricity in California. The private utilities have taken control of the process. Big business is poised to get most of the benefits, at the expense of small consumers. And residential and small-business consumers are stuck paying off a $28.5 billion tab for the utilities’ bad investments in nuclear power plants.
But there’s a small ray of hope in this dismal swamp. Although almost nobody has noticed, deregulation could offer a historic opportunity for communities to take back control of electric power from the private monopolies – and promote the use of renewable energy in the process.
For the first time in almost a century, cities, counties, and community groups in northern California have a real chance to form publicly owned cooperatives that could break the stranglehold of Pacific Gas and Electric Co., work to reduce the astronomical rates we pay for electricity, and bring vast amounts of money into public coffers.
Those co-ops could make purchasing decisions that encourage the production of renewable energy and help move the nation away from reliance on fossil fuels.
From Palm Springs to San Jose, California cities are exploring establishing municipal co-ops to buy electricity. San Francisco officials are well aware of this opportunity, and city workers familiar with the situation say they are ready and willing to take advantage of it.
But the mayor, the city attorney, the supervisors, and the San Francisco Public Utilities Commission have not pursued any action that would challenge PG&E’s hegemony.
The details are complex, but the bottom line is simple: San Francisco has everything it needs to create a public-power co-op that could bargain on behalf of thousands of consumers and thus compete with big business in the energy market and get better rates for residents and small merchants. The alternative is higher electric rates for all and a continued reliance on coal, oil, and nuclear power. But City Hall is doing nothing.
Aggregation, not aggravation
Deregulation, which takes effect March 31, turns the electricity business into something resembling long-distance phone service. PG&E will still own the poles and wires that deliver power to San Francisco consumers, the same way Pacific Bell owns the local telephone wires. But consumers will be able to choose one of numerous competing companies to provide electricity through those wires, the same way you can choose one of numerous long-distance carriers to handle your phone calls.
Unlike the breakup of the telephone monopoly, though, energy deregulation is heavily stacked in favor of the existing big private utilities in the state. Energy companies that want to compete with PG&E, Southern California Edison, and San Diego Gas and Electric are facing major barriers, especially when it comes to providing residential service. Many would-be competitors have decided not to offer residential service at all (see “Plugging in: A Consumer’s Guide,” page 22).
It’s a different story for big businesses and institutions that buy huge amounts of electricity. They can bargain with plenty of competing companies that want to sell them power – and get very favorable rates.
But there’s an alternative for small consumers too. It’s called aggregation. The concept is simple: Thousands of consumers get together and bargain as a group, buying power in bulk at low rates and distributing it among the members. Those aggregators can also set standards for the power they buy – for example, they can require that some or all of it be generated from wind, the sun, or other renewable energy sources.
Anyone can become an aggregator – private companies, nonprofits, and public agencies. But because of legal issues, particularly the liability problems associated with providing electric service, experts say the best and most effective way to aggregate is to do it through a city or county.
“By combining the electricity loads of their citizens into one large buying group, municipal governments can purchase reasonably priced power generated from clean renewable resources, thus capturing a share of restructuring’s economic efficiencies while delivering the environmentally sustainable energy that American wants,” Sacramento-based energy expert Peter Asmus wrote in a recent report.
Asmus, coauthor of Reinventing Electric Utilities: Competition, Citizen Action, and Clean Power, prepared a report for the Renewable Energy Policy Project in December 1997 called “Power to the People: How Local Governments Can Build Green Electricity Markets.”
In the report, he wrote: “Among the reasons local governments might explore alternatives to incumbent electricity providers are the following: municipalities can reduce rates for residential customers and small businesses, offer new services, meet citizen demand for clean air and water, and comply with the state and federal environmental standards.”
The city of Palm Springs has taken that advice. The city has been working for several years to begin aggregating consumers – both residential and commercial – to get better rates and cleaner power than the community has received from Southern California Edison. SoCal Ed is pulling every trick it can dream up to derail the process (such as initially requiring applicants to fill out forms with 49 categories of information before allowing them to switch to the municipal power co-op). But former mayor Art Lyons, who is spearheading the city’s effort, says 9,000 residents and businesses out of 32,000 queried have signed up to get their electricity from the city’s new energy-services company.
“We’re slugging it out here,” Lyons told the publication American Local Power News this month. He told the Bay Guardian the effort is worthwhile: “The political leadership [of the city] has to be willing to do something for its constituents. And our [city] council has been.”
If public-power and consumer activists are successful, Palm Springs won’t be the only city moving to become an aggregator. The Sacramento-based Local Government Commission, an independent nonprofit, is working to educate municipalities on their options under deregulation, including aggregating their consumers and entering the market. The group is sponsoring a conference on the issue in Sacramento June 5.
“Local governments are awake to this issue,” consumer advocate Paul Fenn of the Oakland-based American Local Power Project told the Bay Guardian. “Probably over the next year you’re going to have an explosion of muni aggregation around the country.”
Where’s San Francisco?
San Francisco, the only city in the nation that has a federal mandate to offer public power, ought to be in the forefront of the movement.
“Willie Brown could say we’re going to make San Francisco a high-tech green community,” Fenn said. “[He could say] we’re going to aggressively sign people up and go out for competitive bidding, and say we’ll give extra points to the company that builds new renewable facilities.”
But don’t count on it. San Francisco’s government, which has long been influenced by the locally headquartered PG&E, is not budging.
The Hetch Hetchy Department of Water and Power has been examining since at least last summer whether it could get cheaper energy deals for San Franciscans under deregulation. But a report or proposal has yet to make its way out of staff offices and onto the desks of the Public Utilities Commission’s decision makers (see “Ducking Deregulation,” 9/3/97).
“The city and county of San Francisco is way behind on this,” Fenn told the Bay Guardian. “They’re kind of showing their colors in terms of PG&E’s influence.”
There are some major hurdles to municipal aggregation, thanks to the private utilities’ influence on state legislators involved in writing the deregulation bill (see ‘You Lose,’ 8/13/97, and ‘The Energy Elite,’ 10/08/97)). The state’s requirement that all residential and small-business consumers pay off the private utilities’ $28.5 billion in “stranded assets” (money lost in what turned out to be bad investments, such as nuclear power plants) has ensured that no one can provide power much cheaper than the incumbent private utilities, according to industry analysts and insiders.
And under the deregulation law, any customer who makes no move to change his or her electricity supplier (and some 80 percent are expected to fall into that category) will remain with the existing, “default” provider – in this case, PG&E.
That means that any aggregator that wants to compete with PG&E has to bear the cost of marketing itself and signing up each individual customer.
In Massachusetts the situation is very different. That state’s deregulation bill includes a provision called “community choice,” written in part by Fenn, that essentially designates the municipality as the default provider. As such, local governments in Barnstable County have voted to pool some 180,000 consumers in an effort to get a better energy deal, including some renewable power.
“In Massachusetts, we were able to write a bill that made sense, rather than simply kowtowing to the industry,” Fenn told the Bay Guardian.
Still, cities have plenty of options at their disposal. In Davis, Dan Berman, a green energy and consumer advocate, is leading a citizens’ initiative to create a municipal utility district. That would give the community the ability to use eminent domain to take over PG&E’s system – and would make the municipal utility to default provider.
“Otherwise, your consumer base may be subject to cherry-picking from eager, deep-pocketed marketers,” Berman told the Bay Guardian.
San Francisco deputy city attorney Tom Berliner, who advises the city’s PUC, says that in all likelihood a municipal buying co-op wouldn’t be able to offer cheaper power than PG&E until at least 2002 – when the utilities are supposed to have collected enough money from consumers to pay off their stranded costs. He acknowledged, however, that there is an argument that municipal aggregation would make for good public policy anyway.
“I’m going to guess that the PUC will at least have an opportunity to consider the question,” Berliner told the Bay Guardian.
Many environmentalists and consumer advocates, fearing that San Francisco may continue to bow to PG&E’s will and stay out of the power business, are already starting to push for citizens and small businesses interested in green power to aggregate themselves.
“The thing for residents to do is try to get Hetch Hetchy to aggregate,” independent utility analyst Eugene Coyle told the Bay Guardian. “ But failing that, somebody will have to pick up the ball and do it.”
And somebody is already moving to do that. San Franciscans for Public Power, led by Joel Ventresca, and the Alliance for Municipal Power, a project of the San Francisco Green Party, are taking the lead.
“Aggregation is a perfect way to get citizens together and educate people on the advantages of alternative energy,” AMP’s Don Eichelberger told the Bay Guardian.
“What we really need to be doing is joining the community together to demand green power,” Robert Lehman of San Franciscans for Tax Justice and a member of AMP told the Bay Guardian.“We can do it without the city, so as to create real consumer market power influence.” ■
To view the text of documents referred to in this article and in the accompanying sidebar, go to www.sfbg.com/news/32/17/features/docs.html.
P.S. Efforts are afoot to overturn the state’s deregulation bill, A.B. 1890. A consumers’ initiative, led by The Utility Reform Network (TURN), the Consumers Union, and Harvey Rosenfield’s Californians Against Utility Taxes, called the Utility Rate Reduction and Reform Act would cut consumers’ bills by 20 percent and overturn the requirement that they pay off the utilities’ stranded costs. It is expected to be released from Attorney General Dan Lungren’s office within the next several weeks. In a related matter, TURN’s effort to sue over the bonds to cover the stranded costs (consumers must pay for those too) was stymied. In early December the California supreme court refused to hear TURN’s challenge.
Earlier this month TURN tried with the assistance of Assemblymember Diane Martinez, who heads the Utilities and Commerce Committee and has become a critic of A.B. 1890, to introduce legislation that would accomplish the same thing as the initiative. The legislation was sent to “an interim study” by a legislative committee; don’t expect to see it rear its head anytime soon. For more information on the initiative, call TURN at (415) 929-8876.
Consumers who want solar power can start working toward that goal now. The $540 million available for renewable energy projects under A.B. 1890 includes rebates for solar panels. Call Vince Schurent at the California Energy Commission at (916) 653-1063.
If you’re interested in the Local Government Commission’s June 5 workshop on aggregation, call Pat Stoner at (916) 448-1198. Got questions about deregulation? E-mail them to Savannah Blackwell, our resident authority on the topic at email@example.com and then check Talk Back for your answers. sfbg.com/TalkBack/
Is green really clean?
Consumer and environmental advocates say aggregation is a way to quickly create a large demand for green power – and, potentially, to shift the nation toward more renewable energy.
Experts say that individuals alone buying green power packages will do little to raise the minuscule percentage of energy that comes from truly renewable sources. Energy economist Eugene Coyle explains that only about a third of the total electricity consumption in the United States comes from residential use. Assuming that only 10 percent of residential consumers sign up for a “green power” package, and that it offers only 50 percent renewable energy (as is typical of most such packages), only 1 percent of available energy would come from green sources.
“Through aggregation, people could put money into buying or building a green power plant,” Coyle said. “Or they can contract with existing green power facilities to get as much green power as they can, or do both.”
“What we’re talking about is democratic control of our resources,” Julia Peters of the Oakland-based American Local Power Project told the Bay Guardian. “We’re talking about being green citizens rather than merely green consumers.”
A 1995 poll conducted by Salem Electric in Oregon suggested that people are more willing to pay extra for green power if the cost is spread among a large group of consumers.
“Aggregation is a way to make green power more affordable to more people,” Coyle said.
Without aggregation, consumer advocates fear that green power will become a luxury item: a few well-off consumers will opt to pay more to feel good, but the overall energy mix in the nation won’t change.
“If you’re buying a green product right now, you’re buying already existing green power that has already been created because of state regulations and is now being sold to you as premium power,” said consumer advocate Paul Fenn of the American Local Power Project. “But by getting together a large group of consumers, you could establish a large enough demand to quickly force new green power into the system.”
According to Rich Ferguson of the Center for Energy Efficiency and Renewable Technology (CEERT) in Sacramento, no new green facilities have been built in California since the early 1990s.
E.J. Simpson, an independent consultant to communities attempting to get control of their energy service, told the Bay Guardian that aggregating citizens to get green power is doable.
“You could put together the greener deal pretty quickly,” Simpson said.
The problem with green power marketing right now is that, for the most part, only the largest corporations with the deepest pickets have entered the market (see “Plugging In: A Consumer’s Guide,” page 22). Most of the “green” products offered right now are from affiliates of corporations that are, for the most part, big polluters.
“A choice between the monopoly and the monopoly’s corporate sibling is not much of a choice,” Theresa Mueller, an analyst with the San Francisco consumer group The Utility Reform Network (TURN), said in the organization’s latest newsletter.
Vermont-based Green Mountain Energy, whose parent company has a relationship with Hydro-Quebec, is offering a deal in which the company promises that if enough people sign up it will build a wind-powered facility. Enron has pledged to build a wind plant as well. (For more on Enron, see “Global Gospel of Gas,” page 27.)
But at the same time, the money these companies make can also go into less environmentally sound ventures. Mission Energy, owned by Edison International, is part of a venture to build coal-burning plants in Australia, India, and Indonesia.
For consumers, this presents a dilemma: If consumers refuse to buy green power packages from companies that also pollute, will those companies have any incentive to shift to renewable resources?
“I hate to send my money to the dirty companies, so I sympathize,” CEERT’s Ferguson told the Bay Guardian. “But the flip side of that argument is that the bad guys are going to continue to do bad things if they don’t see a demand for green power.”
The San Francisco-based Center for Resource Solutions is trying to encourage accountability on the part of marketers. In exchange for paying CRS to get a Green-E label, which requires the product to be at least 50 percent renewable, utilities are subject to a CRS review of the company’s contracting record within six months to make sure it is buying the green power the company has promised consumers.
But there are other problems with the current green marketing beyond accountability.
For example, Green Mountain energy has contracted to get its green power from Oregon-based PacifiCorp which has some renewable sources of energy but has mostly coal plants and some hydropower. Nancy Rader, an independent power consultant and wind power advocate, pointed out that ratepayers in other states likely have paid for PacifiCorp’s generating facilities already. Doesn’t that suggest PacifiCorp will be subsidized more than once by ratepayers?
And, Coyle points out, if PacifiCorp sends what renewables it has to Green Mountain, won’t the company just send its dirty power elsewhere?
San Francisco Bay Guardian - January 28, 1998
By Savannah Blackwell
Sophie Maxwell, 48, has lived within walking distance of Pacific Gas and Electric Co.’s aging fossil fuel-powered electricity plant in Bayview-Hunters Point for 20 years. A former runner and a longtime vegetarian, she now has asthma; a simple task such as talking on the phone can make her chest tighten. Her young nieces and nephews suffer from the same respiratory ailment. Her son contracted cancer of the lymphatic system about a year ago. And though she can’t prove it, Maxwell identifies the plant as the culprit.
“We started thinking, wait a minute, something is radically wrong here,” Maxwell told the Bay Guardian. “We have the city’s largest population of sick folks – young and old. When you look into a classroom of 40 kids and 15 of them are as attached to their inhalers as their lunch boxes, you know something is up.”
Maxwell is far from alone in suspecting the plant to be a major contributor to high rates of respiratory and other illnesses in which environmental factors can play a role. Bayview-Hunters Point residents complain that windowsills facing the plant are chronically covered in sooty residue. They hear loud booms at the plant late at night. They notice the darkish smoke billowing periodically from the plant’s stack, and as Maxwell puts it, “The air is different here. It feels heavy, and well, there’s this smell.”
The Hunters Point Power Plant, which, like its sister the Potrero Power Plant, uses both oil and natural gas to generate electricity, has stood since 1929 in a community now identified by the San Francisco Department of Public Health as suffering from unusually high rates of asthma, breast cancer, and other ailments influenced by environmental factors.
In the new era of electricity deregulation, the future of the Hunters Point and Potrero plants is in question. Under the rules of California’s deregulation, generators of power, including PG&E, must well off at least 50 percent of their capacity. PG&E is going for almost 90 percent.
“Clearly, they’re planning to make their money in retail and transmission and distribution services, rather than producing electricity,” Truman Burns, a regulatory analyst with the California Public Utilities Commission, told the Bay Guardian. PG&E tried to sell the Hunters Point and Potrero plants last summer, but objections raised by community activists and the city, both of which declared that the CPUC’s environmental review process was inadequate to ensure the safety and health of the community, fouled that up for a while (see “Shafted Again,” 6/4/97, and “Take a Deep Breath,” 6/11/97). On Jan. 14 the company announced it would sell the Hunters Point and Potrero plants, along with its Pittsburg and Contra Costa fossil fuel-burning plants and the Geysers geothermal plant in Sonoma County.
Last November, Duke Energy Power Services Inc., a subsidiary of the charlotte, N.C.-based Duke Energy Corporation, bought the Morro Bay (in San Luis Obispo County), Moss Landing (in Monterey County), and Oakland fossil fuel plants, which together account for roughly 45 percent of PG&E’s generating capacity, for $501 million. The buyer of the Hunters Point and Potrero plants, insiders say, would likely be a large out-of-town corporation such as Duke or AES Pacific Inc., the company that tried to build a third power plant at Hunters Point in the mid-‘90s.
But the Bayview-Hunters Point community, in this case represented by the Southeast Alliance for Environmental Justice (SAEJ) – the group that successfully fended off the third power plant – has other ideas. It wants San Francisco to buy them.
SAEJ says it wants the city to buy the Hunters Point and Potrero plants because it is the only way for the public to influence the plants’ future. And because the plants are already major polluters and selling them would likely lead to more environmental problems, the group says the plants must be bought and eventually shut down.
“The reason why we want the city to buy the plants is that it will take them out of the hands of a private owner that would have the incentive to run them at full capacity, thereby increasing the pollution,” SAEJ executive director Claude Wilson, who penned a Dec. 9 letter to Mayor Willie Brown urging him to get the city to purchase both plants, told the Bay Guardian. “This is a golden opportunity for the city to step in and take control of this, a primary source of pollution that has been connected to respiratory [illnesses], cancer, and other ailments….Ultimately, we want the plants shut down.”
And, SAEJ says, the deal wouldn’t necessarily cost the city any money. The plants could generate $200 million a year in revenue. Their combined net book value is roughly $90 million. “With these revenue projections, private companies are expressing interest in partnering with the city to cover the up-front cost,” Alan Ramo of Golden Gate University’s Environmental Law and Justice Clinic and legal advisor to SAEJ, told the Bay Guardian.
The operation of the Hunters Point plant presents particular environmental challenges because it is so old. It is a regular emitter of harmful particulate matter, ozone, and its precursors (as is the Potrero plant); periodic spills of oil, asbestos, and other hazardous materials take place. The site it sits on contains the largest amount of hazardous materials of any facility monitored by the city’s health department. PG&E’s Hunters Point and Potrero power plants are recognized as the largest stationary sources of air pollution in San Francisco, and each year they generate more than 2,000 tons of air pollution, which drifts in all directions and contributes significantly to total air pollution. According to the CPUC, selling the Hunters Point plant to a new owner will likely translate into two to six times more air pollution, because the agency predicts it will be run at maximum capacity.
In the past several years at the Hunters Point plant, fuel oil, asbestos, and mercury have spilled, a circuit breaker (which contains highly toxic PCBs) has caught fire, and oily sheens have been released into the bay, according to a review of documents at the city’s health department.
According to documents at the Regional Water Quality Control Board, at certain times the plant has discharged bay water used for cooling its boilers back into the bay while it was too hot for fish safety; it has also released oil and grease into the bay water.
Likewise, at the Bay Area Air Quality Management District, documents show that the agency has identified periodic problems, though Avtar Virdee, the Hunters Point plant manager, initially told the Bay Guardian that he was not aware of any violations at the plant. A review of documents showed that BAAQMD issued 15 violations between 1989 and 1994, and one since then. For example, the Hunters Point plant was issued a notice of violation in late November 1993 after its emission monitoring system was down for more than 24 hours, and no one notified the district.
For its part, PG&E has identified in public documents obtained by the Bay Guardian through the health department that elevated levels of toxic petroleum-related chemicals are present in the groundwater at Hunters Point as well as at the Potrero plant. PG&E’s consultant identified “black tar-like deposits and carbon rich material located in and near … the Potrero Power Plant” and told regulators that “PCBs were detected in the soil near Tanks 1 and 2” at the Hunters Point plant.
“Continued operation of these plants is a glaring example of environmental racism and injustice,” Bradley Angel of Greenaction told the Bay Guardian. “The important thing to remember is that there are clean, sustainable energy sources out there.”
“For half of PG&E’s existence, they’ve been contaminating this community and poisoning the residents,” Joel Ventresca, chair of San Franciscans for Public Power and a former environmental commissioner, told the Bay Guardian.
PG&E failed to return a Bay Guardian request for comment.
The breakup of PG&E’s monopoly poses a tricky regulatory problem. Most agencies regulate PG&E’s plants as a block and don’t necessarily have individual environmental standards for each one. The Regional Water Quality Control Board, which monitors the temperature of PG&E’s discharges into the bay and keeps track of which fish are spawning where, is concerned.
“Let’s say the striped bass is spawning in the water near the Pittsburg plant. Before deregulation, we could tell PG&E to crank up that plant last [that is, after its other generating plants],” Judy Huang, an associate water resources control engineer, told the Bay Guardian. “But I cannot do that under deregulation.”
The likelihood of decreased regulatory scrutiny of the plants under restructuring of the electricity industry provides another argument for the city to purchase the plants.
“If the city doesn’t buy them, somebody else will and they’ll expand them, increasing the environmental and health impacts,” Ramo told the Bay Guardian. “For San Francisco to secure the sources of electricity and pollution in the city, the city has got to buy both the Hunters Point plant and the Potrero plant. After alternative sources are found, the plants can be phased out.”
Support for purchasing the plants is growing. On Jan. 13 the city’s Environmental Commission voted unanimously to urge the city to look into it. And the San Francisco Green Party has pledged its support. “We’re saying we stand with the community, and it does make sense that if PG&E’s going to sell it anyway it’s better for us to have control over it,” Don Eichelberger of the Green Party told the Bay Guardian.
Leading independent utility analyst Eugene Coyle says the proposal makes sense. “For multiple reasons, the city should use its eminent domain powers to buy the plants so it can control them based on the needs of the community,” he said. “I predict that if a private corporation buys [the Hunters Point plant], it will build another one [there].”
For their part, the city’s elected officials have not broached the issue. The City Attorney’s Office has filed legal documents stating that San Francisco has a stake in the future of the plants.
However old and hated by San Franciscans, the plants are considered by PG&E, regulators, and industry analysts as much-needed providers of local back-up power to the city. Together, the two plants have historically generated roughly half of San
Francisco’s energy demand, according to Golden Gate University’s environmental law clinic.
“We’re really concerned because those plants are essential to San Francisco,” Deputy City Attorney Tom Berliner, who advises the city’s Public Utilities Commission, told the Bay Guardian.“Without them, we do not have reliable electricity.”
Brown has yet to take a position on the matter, and Berliner said that buying the plants through eminent domain is only one option the city is considering. Other options include doing nothing, buying the plants at auction (PG&E has estimated Hunters Point’s net book value at $53 million, and the land it sits on is accessed by the state Board of Equalization at $9 million; Potrero’s net book is $37 million and the land is assessed at $23 million), partnering with another company to purchase the plants, or trying to force stronger cleanup requirements on the buyer through the city’s permitting processes.
PG&E, which says it needs to spend $5 million cleaning up the Hunters Point plant site – a figure nowhere near what community advocates suspect is needed to protect neighboring residents – is expecting to complete the sale by early July. The bidding process begins in mid-March.
“This is a decision that will be made by the Board of Supervisors and the mayor,” Berliner said.
Maxwell hopes they do the right thing.
“This plant has been a financial burden on many city agencies, including San Francisco General Hospital,” Maxwell said. “The city has the opportunity now to make a difference. And you know, I think it owes us this one.”