Environment & Science

Debate over the proper role of public power drives Proposition 16

File photo: New electrical transformers are seen at a Pacific Gas & Electric storage facility May 29, 2003 in San Francisco, California.
File photo: New electrical transformers are seen at a Pacific Gas & Electric storage facility May 29, 2003 in San Francisco, California.
Justin Sullivan/Getty Images

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It's one of the most complicated issues on the ballot next Tuesday - but don't let that scare you away. Proposition 16 proposes new restrictions on the way local governments can expand the public utilities they provide. A heated discussion is driving the ballot measure about what kind of energy keeps the lights on, and how much municipalities pay for it.

When something's working right, it's easy to ignore. Steve Hance says that's the way it is with the power plant he manages for the city of Santa Clara. It maintains a low profile in this industrial neighborhood. Especially when it's off. "If it were running you'd hear a dull hum," he says, as he walks through the Donald Van Raesfield power plant, Santa Clara's 147-megawatt power plant that includes two combustion gas turbines with heat recovery steam generators and one steam turbine.

Even with this plant, inside city limits, Santa Clara doesn't always generate its own electricity. We're right in the middle of spring snowmelt, so all the hydro in California is flowing well," he says. "Prices for the wholesale power are really low and we don't need to have anything going – it ends up being cheaper for our customers."

A century ago, Santa Clara's public power was a string of streetlamps along the main drag. The energy shock of the seventies and eighties spurred the city's interest in renewable energy. Now sources like wind and geothermal are over a third of the energy mix for the city's utility, Silicon Valley Power.

Engineer Steve Hance is proud of the utility he works for, even though he no longer benefits from it at home. "I moved from Santa Clara to Sunnyvale where I pay PG&E bills, and now my rates are three times higher," he says ruefully. He needed more room for a growing family.

Santa Clara's a little island of public power. Cities around it are powered by the investor-owned utility Pacific Gas & Electric – PG&E. Now Marin County is sprouting a new island in that sea – and taking away more of PG&E's customers. "Before we've paid whatever shows up on our PG&E bill. Right now there's a choice and right now Marin Clean Energy has a locked in price for five years," Dawn Weisz says confidently.

Weisz is the interim director of Marin County's public power project. Marin Clean Energy is what's called a community choice aggregation – public power run by local government with the aid of the investor-owned utility. "We continue to use the poles and wires, the transmission and distribution. They continue to do the billing and the customer service. And all we do is decide where we want the power to come from, to flow into those wires," she says.

Weisz says Marin has long been interested in cutting its carbon emissions from energy use. Now the month-old Marin Clean Energy authority powers 6,300 customers. Marin offers twice as much renewable energy as PG&E did, and an all renewable supply for a premium cost.

Weisz argues that the price of the energy it provides is more predictable, too. "Fossil fuel costs really fluctuate a lot," Weisz points out. "And you can't know what your costs are going to be if you're tied to the fossil fuel market. So unhooking from that market was really important to us."

Weisz further argues Marin's community choice aggregation doesn't have to make money for shareholders. Private utilities do. Marin officials believe that will yield lower rates in the long run.

But UC Berkeley economist Severin Borenstein, who runs the Energy Institute at the Haas School of Business, casts doubt on that prediction. "Overall, the evidence is not very strong one way or another that investor-owned utilities are more or less efficient or cost effective than municipal utilities," Borenstein says. "And I think that whenever your utility is not performing well there is a tendency to want whatever the alternative is."

PG&E has taken a dim view of these alternatives. The investor-owned utility once supported public power projects like Marin's. But a spokesman for PG&E, Andrew Souvall, says officials at the utility have changed their minds. "The programs proposed to date are not economically viable and would create serious financial risks to customers, to local governments, and to local taxpayers," he says.

In other words, PG&E argues the public could end up paying more for expertise and energy it already provides. PG&E's also concerned about its own profits and investors.

Now the utility's taking its fight against breakaway public power projects to voters. PG&E's parent corporation is the major financial backer of the “Yes on Proposition 16” campaign. It’s poured tens of millions of dollars into that effort. We'll have more tomorrow on that campaign – and on what Proposition 16 would do if California voters approve it.