by Daniel Parrella
I was a sophomore in high school when the vote for SMUD to annex Yolo County happened. PG&E outspent and outmaneuvered the City of Davis and convinced the people of Sacramento to vote 61%-39% against annexation. 8 years later the city seems doomed to follow a similar path.
From my experience walking precincts, I would estimate at least 9 out of 10 people disapprove of the $600,000 loan to study DMUD. Last Saturday an older couple told me that this was the worst city council we have ever had. They mentioned the $600,000 being spent on Public Power as proof of this.I was taken aback, the idea that this council could even be in the same conversation as some of the previous ones seemed almost ridiculous. It is depressing that a council that continues to make progress undoing the damage caused by a decade of bad decisions would be put into the same sentence as some of previous councils. I think this speaks largely to a PR problem occasionally alluded to by the Vanguard.
For someone who has a lot of faith in the Public Power movement it is, at times, difficult for me to admit that the current detractors have a point when it comes to council priorities. It is also very important to remember that the public does not care one bit about whether the money comes from the general fund, the enterprise fund, or the POU wish fund. The public views this loan as a clear disconnect on behalf of the council, and with two taxes coming up to vote this year the last thing we need is a public that thinks the council will spend their money frivolously.
My aim is to direct the discussion away from DMUD and focus on what I believe is a far more realistic option, that of a Community Choice Aggregation.
Community Choice Aggregation (CCA) is a state policy that enables local governments to aggregate electricity demand within their jurisdictions in order to procure alternative energy supplies while maintaining the existing electricity provider for transmission and distribution services.
The key difference between a CCA and DMUD is a CCA only controls the generation of electricity; we would still pay PG&E for transmission fees. DMUD would allow us full control over every aspect of our utility grid, and theoretically greater cost savings. Below is a link to the staff report.
Both DMUD and a CCA were discussed, eventually DMUD was chosen. While I agree in the long run that DMUD could potentially save the city more, it has substantial risks which I think the city has overlooked.
For starters, we would have to declare eminent domain on a multi-BILLION dollar corporation that views public power as the single greatest threat to their business model. It would likely cost the city millions of dollars, and we also run into the risk of following in the footsteps of the Hercules Municipal Utility (HMU). The Hercules City Council promised much of the same to what we have been hearing from our own council, and it was nothing but an unmitigated disaster. PG&E recently bought HMU out, ending that chapter of the public power movement.
While the CCA option offers less control and less savings than DMUD, we have a clear path to follow as well as an opportunity to modestly cut energy costs in the city of Davis. Marin Clean Energy (MCE) was the first CCA created in California, followed very recently by Sonoma Clean Power (SCP). I have been very impressed with both groups. While selling solar panels in Marin County to both PG&E customers and MCE customers, I made some “pro & con” observations:
Pros:
1. There is now market competition in otherwise purely monopolistic utility market. Homeowners can switch between PG&E and MCE, and they do quite frequently.
2. Marin County & Sonoma County were able to avoid the mother of all legal battles by bypassing the Eminent Domain issue entirely.
3. Currently MCE residential customers pay 90 cents more per month, while commercial pays about 15 dollars less compared to PG&E. SCP customers are modestly less expensive for both residential and commercial rates. Here are my sources for these statistics:
https://marincleanenergy.org/rate-change-2013
https://mcecleanenergy.com/rates
(Note: this one has not been updated with the recent rate 7% increase)
http://sonomacleanpower.org/for-my-home/rates/
http://sonomacleanpower.org/for-my-business/commercial-rates/
4. Marin County & Sonoma County have both steadily increased their share of electricity coming from renewable energy sources.
Cons:
1. We could theoretically lose out on far greater savings with DMUD.
2. If we were to join MCE as Richmond recently did, we could be subjecting ourselves to a group that is willing to increase electric rates on a whim if it means increasing their share of renewable energy. I mention this because I know some of the frequent Vanguard commentators would not be thrilled with that idea.
3. We would still have to pay start-up costs, and how much is not yet clear. Those start-up costs will likely receive similar backlash from the community, as we have already seen with DMUD.
4. California CCA’s are still very new, and have yet to prove they can control costs better than PG&E in the long-run. While we have examples of much older and much larger CCA’s on the east coast, every utility market is different and it does not seem to be a useful comparison.
From a political perspective I think choosing the CCA path will allow the city to frame the debate in a positive light.
The bulk of PG&E’s campaign against SMUD annexation focused around a single study valuing its equipment in Yolo County at $568 million. It was in direct contrast to the $100 million estimate by SMUD and the $110 million estimate by Sacramento Local Agency Formation Committee (SLAFC). By going with a CCA we can avoid this argument entirely by allowing PG&E to keep its infrastructure.
Leaving PG&E with its own infrastructure also addresses people who point to the city’s current neglect of basic road maintenance as evidence of inability to handle increased utility management. If people are still concerned that our city is even tooinept to handle the generation part of the utility bill, we could go the route of Richmond and try to join MCE.
For the significant number of homeowners and businesses who believe PG&E is a good service provider, they could always opt out and remain with PG&E. Tens of thousands have done so in Marin County. Force-feeding public power down the throats of Davis residents with DMUD is likely to ruffle more than a few feathers.
With literally none of the non-incumbent city council candidates approving of the $600,000 loan, it seems clear that now is not the right time for a whole new DMUD entity. However, this does not mean that Davis should abandon the idea of Public Power altogether. Moving forward in this precarious budgetary position, I think we need to scale back our aspirations a bit.
Daniel Parrella Wrote: “The public views this loan as a clear disconnect on behalf of the council, and with two taxes coming up to vote this year the last thing we need is a public that thinks the council will spend their money frivolously.”
There is a general perception that our city council is completely out of touch with economic reality. The city continues to fund frivolous “vanity projects” and unnecessary functions while neglecting maintenance of our basic infrastructure.
I would like to see the political focus in the city change to a focus on taking care of basic functions and away from catering to special interests and frivolous “pie in the sky” type projects.
Perhaps the only way to get the politicians attention is to vote down the tax increases?
so your view is that the council should not explore ways for the city and ratepayers to save money on power?
Cheap shot. That’s not what Topcat was pointing to.
it most certainly is.
topcat wrote: “I would like to see the political focus in the city change to a focus on taking care of basic functions and away from catering to special interests and frivolous “pie in the sky” type projects.”
the city has identified a pou as a means to save 20% on power which would come to $600,000 to $1.2 million in savings on the water bill alone.
I don’t know a single person who believes that number without serious reservations as to its accuracy or likelihood of coming to fruition.
when you say you don’t know a single person, who are you referring to? experts, lay people on the street, who?
So, you’re saying that the electric bill, for water alone, is at least 3 million dollars. Please cite your source.
Believe I saw $6 million somewhere.
“Council” doesn’t explore anything. Staff does. Staff is overburdened, and the city is broke. So it’s a waste of time, a waste of resources, a distraction from the work the council and staff should be doing, to have them ‘explore ways’ to save money on power.
If a citizen’s advisory commission, using no staff time, wishes to cost out the options, great. I think Daniel Parrella has clearly pointed to a more reasonable direction for that effort at this time, with the resources available.
The Innovation Task Force has cancelled their last two meetings. There hasn’t been significant progress at the council level on economic development in quite some time. Michael Bisch has explained why projects keep getting delayed: lack of staff resources. It’s pretty clear there isn’t going to be any greater amount of staff resources available. The council needs to set priorities. Public power isn’t a priority.
Don… think you were making the same point I meant to, but more eloquantly…
that’s probably why they are hiring a project manager to move the project forward. the amount of money they think they can save makes the risk worth it.
I question your assumption that “they think”… I believe a more accurate characterization is “they react”.
the staff spend six months setting up this process last year and after studying it, the consultant report presented savings possibility.
They directed staff to ‘react’ with them. What %-age of effort by staff was diverted to that rather than making sure you have water when you turn on your faucets, that your excrement disappears when you flush the toilet, that the streets were properly maintained/striped/signed, that traffic signal were functioning well, that water drains away from your property, etc., etc., etc.
I don’t think Daniel spent six months coming to his recommendation, and I’m reasonably sure that the City has paid nothing for his good idea.
They haven’t voted to hire a project manager, at least not yet.
1000% percent agreement here. But I appreciate the great article by the new DP.
Daniel… well written and worthy of consideration… although I do not believe you will win a CC seat this cycle, I hope to hear more from you, and consider another run in 2 years.
“I hope to hear more from you”
I agree with hpierce. I think that the run for city council this time, even if unsuccessful, will serve you well in terms of getting your name and ideas out for the public to consider. I hope that regardless of current election outcome you will continue writing articles for the Vanguard, presenting during public comment, and in general keeping your self in public view. You might also want to use the intervening two years to broaden the scope of your knowledge beyond the realm of business ( even environmentally friendly business ).
I could not disagree more. PGE is a big bully. Let’s not provoke them, let’s tiptoe around and take a course that won’t threaten their business model. How about more leadership with innovation to provide for the conditions we will live with in this century rather than what worked last century. I call this leading from behind where its safe and nothing much will happen to the ‘leaders’ positioned safely in the rear.
DavisBurns
As someone who is thoroughly disgusted by the monopolistic business model of PG&E, I am tempted to agree with you. However, as someone rather pragmatic, I can view this as a potential step in the right direction.
It is not unusual to make small steps as a means to an end thereby either gradually co opting the old way of doing things and thereby either bringing those who cling to an old model around to a more modern way of thinking or ultimately rendering the old model obsolete and thereby making the change without them and letting their system fail.
One example we have seen of this is the demise of businesses such as Borders and Blockbuster. As new means of obtaining these products ( e books and companies such as Netflix ) became more popular, the old models failed. I am not sure that it is necessary to duke this out in court or exercise the “nuclear option ” of eminent domain in order to move the city towards a more desirable model of energy supply.
I think it is at least worth considering.
I am new to this discussion. First, I read where a 200-page report was written by an economist, and $400,000 has been spent.
How much did the 200-page report cost, and does this economist specialize in POUs?
The reasons to pursue a POU are good ones: cost savings, control over energy supply, increased reliability, control over 4.3 million dollars of PPP money.
The reasons for not pursuing a POU, while legitimate, are ones I hate to give in to, the biggest is that we don’t want to go to battle with PG&E because they are powerful and they have lots of money to spend fighting us.
I hate when we have to base decisions on bad reasons, and sadly that seems to be the situation we are in.
Liability, insufficient resources to manage a local utility, cost of purchasing infrastructure are all valid reasons. The battle that would ensue with PG&E is a realistic prediction as well.
All manageable. Instead we will continue to pay share holders, pay higher prices for less reliable service, and get with a utility company that seems to have no interest in helping us reach our renewable energy resource goals, and is in fact throwing up barriers to us doing so.
This city can’t even balance its budget. I’d say confidence in the city’s ability to ‘manage’ those things is about as low right now as confidence in the school board’s performance.
I suggest any discussion at the staff and council level of a POU be deferred for at least two years.
What’s important to understand is why some MUDs have a much lower cost of electricity than companies like PG&E: That reason is mostly access to cheap hydroelectric power. To wit, most old POUs buy a large share of their electricity from dams owned and operated by the U.S. Bureau of Reclamation:
“Excess hydropower is sold first to preferred customers, such as rural electric power co-ops, public utility districts, municipalities, and state and Federal agencies. Any remaining power may be sold to private electric utilities.”
Most of the larger POUs also own their own damns. For example, SMUD owns Brush Creek Dam, Buck Island Dam, Camino Dam, Gerle Dam, Ice House Dam, Junction Dam, Loon Lake Dam, Rancho Seco Dam, Robbs Peak Dam, Rubicon Dam, Slab Creek Dam, and Union Valley Dam.
The problem with the creation of a new publicly owned utility, like a DMUD, is that all of the power now produced by the dozens of USBR dams* in California is already fully subscribed. AFAIK, there is no chance for a DMUD to buy any of that cheap power. And as a result, there is no reason to think the rates of a DMUD would be anywhere near as cheap as SMUD.
It’s still possible that DMUD could sell electricity for less than PG&E. However, I am not aware of a full cost analysis, which includes an amount for the substantial start-up costs and the long-term costs of buying power. It seems to me the purchase of P&E from PG&E, forgetting the huge legal bills, would be very costly. But I remain open-minded until the case is made with facts one way or the other.
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* These are the USBR dams in California. I am not sure if all of them are hydroelectric producers. However, all that are sell their power to publicly owned utilities like SMUD:
B F Sisk Dam, Boca Dam, Bradbury Dam, Buckhorn Dam, Camp Creek Diversion Dam, Carpinteria Dam, Casitas Dam, Clear Lake Dam, Contra Loma Dam, East Park Dam, Folsom Dam, Friant Dam, Funks Dam, Glen Anne Dam, Imperial Diversion Dam, John Franchi Diversion Dam, Keswick Dam, Laguna Diversion Dam, Lake Tahoe Dam, Lauro Dam, Lewiston Dam, Little Panoche Detention Dam, Los Banos Creek Detention Dam, Martinez Dam, Monticello Dam, Mormon Island Auxilliary Dam, New Melones Dam, Nimbus Dam, Northside Diversion Dam, O`Neill Dam, Ortega Dam, Palo Verde Diversion Dam, Parker Dam, Prosser Creek Dam, Putah Dam, Rainbow Diversion Dam, Red Bluff Diversion Dam, Robles Dam, San Justo Dam, Senator Wash Dam, Shasta Dam, Sly Park Dam, Spring Creek Debris Dam, Stampede Dam, Stony Gorge Dam, Terminal Dam, Trinity Dam, Twitchell Dam, and Whiskeytown Dam
SMUD doesn’t pay shareholders.
“SMUD doesn’t pay shareholders.”
True. But neither does the L.A. Dept. of Water & Power, and PG&E’s electricity rates are quite a bit lower than the L.A. Dept. of Water & Power’s rates.
Monthly Average Residential Electric Bill @ 750 kWh per month:
L.A. Dept. of Water & Power — $176.44
Pacific Gas & Electric — $142.06
SMUD — $91.96
SMUD’s electric rates are 64.73% as much as PG&E’s. Its residential customers save 25% on average for their electricity compared with PG&E.
What’s crucial to understand is that SMUD buys its power for about 30% less than PG&E buys its power. PG&E has its own sources of hydroelectric. For example, it owns the Lake Almanor Dam. But PG&E gets none of the super cheap power from the USBR dams. SMUD gets a a lot of its power from them. That represents a huge subsidy to SMUD from the federal government, and as far as I know, a DMUD would have no access to any of that cheap USBR power.
If SMUD relied only on the few dams it owns and had to buy natural gas (and far more expensive solar and wind and biofuels) for the rest of its power, SMUD would cost just as much as PG&E. You can see that with the situation in L.A., where only a small share of that publicly owned utility gets its power from USBR dams.