Office of the City Attorney
Bailout Makes the Case for Public Power
By Dennis Herrera
[Originally published in the San Francisco Chronicle, December 19, 2003]
Far from the wild-eyed, socialistic power-grab routinely portrayed by well-funded political campaigns over the years, public power in San Francisco is a civic principle firmly enshrined by City Charter. As section 16. 101 states: "It is the declared purpose and intention of the people of the city and county, when public interest and necessity demand, that public utilities shall be gradually acquired and ultimately owned by the city and county."
If ever an event in our history made a convincing demand for the necessity of public power, it's the PG&E bailout approved by the California Public Utilities Commission Thursday.
While San Francisco may claim a small victory in the deal for working successfully with other consumers to save state ratepayers a billion dollars over the next nine years, the regrettable truth is that PG&E's customers -- residents and businesses alike -- are now saddled with an $8 billion tab for the company's bailout, putting a drag on our regional economy and serving no public interest. It's particularly hard to swallow because the savings could have been much greater.
We shouldn't be surprised. As a private-sector business, PG&E fought a long, hard and ultimately successful battle to ensure that its own corporate interest prevailed over that of the public it purports to serve. Frankly, no one should fault the company for it: Self-interest is a wholly legitimate aim of private enterprise. Unfortunately, therein lies the institutional problem San Francisco has faced throughout its involvement as a participant in bankruptcy negotiations. Therein lies the same problem San Francisco will always face whenever the demands of "public interest and necessity" come into conflict with PG&E's bottom line.
Despite what you will doubtless read among the spate of PG&E-sponsored letters to the editor, public power is no unattainable pipe dream. Of the more than 30 public entities in California providing electricity service to its citizens, nearly two-thirds do so under their own municipal authority -- including Los Angeles, Palo Alto, Alameda, Burbank, Pasadena and Santa Clara. It's important to remember, too, that San Francisco has already been in the public-power business for most of the last century: Municipal provision of hydroelectric power from Hetch Hetchy to city facilities, including the Municipal Railway, has saved taxpayers millions that would otherwise have gone to PG&E.
If San Francisco is to ever fulfill the "declared purpose and intention" of its people as stipulated by the City Charter, numerous alternatives are available that may begin to achieve the myriad benefits of a public-power system sooner rather than later. There is no reason not to pursue these benefits now in a fiscally responsible manner, and the city may do so in a variety of ways:
-- Community aggregation legislation passed last year now allows California cities and counties to "aggregate" the demand of electricity customers, enabling San Francisco to provide electricity and related services within its jurisdiction. It would also provide something heretofore unavailable: consumer choice, allowing customers to opt out of any municipal plan and remain customers of PG&E.
-- Diversification of municipal generation could improve reliability and facilitate the long overdue shutdown of older, dirtier and less efficient plants operating in San Francisco. Municipal involvement would also allow the development of more efficient, environmentally friendly electricity generation.
-- Expansion of the municipal electricity distribution system is another step toward public power, enlarging the city's customer base to retail customers in areas such as Mission Bay, Hunters Point Naval Shipyard and Treasure Island. The system could also be expanded by serving select categories of customers, such as residents and businesses on city property and in redevelopment areas.
-- Acquisition of PG&E's electricity distribution system would require the purchase of the company's system in San Francisco or legal condemnation of PG&E's facilities. Though previous acquisition proposals have been narrowly defeated in past elections, the $8 billion bailout for PG&E's mismanagement and bankruptcy may now raise a legitimate basis for a fresh analysis by city voters.
Whatever options San Francisco citizens and policymakers may choose in pursuit of affordable, reliable and safe public power as envisioned in our City Charter, city officials must carefully determine feasibility and fiscal prudence every step of the way. We owe nothing less to our citizens and the San Francisco businesses that fuel our region's economic growth.
But make no mistake: San Francisco needs an electric utility that puts ratepayers -- rather than PG&E's corporate profits -- first.
Dennis Herrera is city attorney of San Francisco.
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