Botched Roll-Out in Part to Blame for Second Failure on Public Power – If the reports are true, tonight at a special Wednesday evening city council meeting, the council will pull the plug on the energy service initiative and, for the time being, bow out of their opportunity to form a publicly owned utility.
Many will undoubtedly be pleased at this development, believing the timing is wrong for the city to pursue what they see as a risky and expensive endeavor. Indeed, there are many important and practical reasons for the city not to pursue a POU at the moment.
The city of Davis has a sales tax measure on the ballot for June and has already read public opinion in the form of letters to the editor and undoubtedly emails to council indicating frustration that the city would be spending $1 million on this risky project at a time of fiscal crisis.
The council undoubtedly and perhaps rightly wants to disentangle the sales tax from the issue of public power.
Unfortunately, what the council may not yet understand is that if they pull back on the POU, they have to kill it for the foreseeable future. The problem is that if they believe that the election and the sales tax are primary reasons not to go forward at this time, it would be dishonest for them to raise the issue in 2015 after passing the sales and parcel tax measures.
At the same time, all of this is unfortunate. The city believed it could save 20% on its electricity and a city-financed study showed that PG&E was among the more costly energy providers and was as a more unreliable one.
In December of 2013, the Davis City Council authorized the city manager and the city attorney to initiate actions necessary to provide municipal electrical utility service to Davis residents. Two weeks later, accordingly, representatives from the city of Davis met with representatives from PG&E to initiate discussions of the steps necessary for implementation of the city’s plan to create a Publicly Owned Utility (POU).
But the city was not ready for the roll-out of this issue and the rapid pushback they received.
The Chamber quickly commissioned a poll of its members indicating questions and potential opposition to the move, particularly the additional $600,000 price tag, even though the money would be financed and paid back at the rate of $66,000 per year over ten years.
The city was not prepared to counter the message of PG&E’s representative Alicia Okelo-Odongo who said, “While this is our preferred path to the next steps, we are committed to continuing to engage with the city, as conversations around the city’s evaluation of creating a publicly owned electric utility continuum,”
She then warned, “Our facilities are not for sale.”
“If the city does decide to pursue this effort to acquire facilities we urge the council to take into serious consideration the cost and risk associated with such an effort,” she added. She cited a 2006 study valuing PG&E facilities in all of Yolo County at $568 million. “While a current detailed study has yet to be done, we anticipate that the value specific to Davis is higher than it was years ago.”
She also cited a report from December 10 that indicates “a far higher price to be paid if the city does go forward with acquiring PG&E’s lines.” She added, “In addition, the report assumed that Davis while pursuing green power goals can buy power for less than the market price of power today.”
The city’s pull out here means that they have allowed PG&E to win by framing the message. The city never was able to counter the message that this was an expensive, risky, and ultimately unaffordable and unlikely endeavor.
The city was unprepared to fire back with the results of their own study that showed the potential cost savings. They never rolled out, for instance, that the electricity savings could save that same $600,000 in a single year on the city’s electricity bill for water alone.
They never rolled out their plan for acquiring assets from PG&E, for creating cheaper and greener energy, for the better use of the $4.3 million in funding generated by the community for the Public Purpose program that PG&E currently uses elsewhere.
In short, the city appeared to be caught flat-footed on the public roll-out of the issue. They did not have quick responses ready when the community and columnist Bob Dunning, later joined by the Davis Enterprise editorial, cried out that this was the wrong time.
The city had to know what they were facing. It was not long ago that PG&E spent more than $10 million on a disinformation campaign in opposition to Measures H and I in 2006. That initiative “would have allowed Yolo County to join Sacramento’s publicly owned SMUD, backers see opportunities for long-term savings, local accountability and greener production methods in public power.”
The Enterprise was right when it said, “If the past is anything to go by, a bruising fight lies ahead.”
They added, “The reasoning behind them is still sound. The investment is well worth it if it results in greater local control, lower prices and a reinvestment of the fees Davis ratepayers pay back into Davis.”
At the same time, the paper argued that “conditions have changed in seven years.” They reasoned, “Retiree pension and medical benefits costs are out of control. A recession has forced cuts to services and a drastically reduced city workforce. We have a massively expensive water project coming up, one whose rates are sure to be challenged at the ballot box, but will be hefty no matter what final form they take.”
They added, “Voters also will be asked to approve a sales tax in June to help close the budget deficit, as well as a parcel tax to fund roads and parks. If we ask taxpayers for too much, we may end up with nothing.”
The city had the opportunity to fire back here, to argue this was a way for the city to save costs on water and on the general fund.
And yet, the Enterprise editorial came out nearly two weeks ago and the city has made no showing to respond, to get their message out. And so now, the correct course of action is to sink their sunk costs, lick their wounds, and move forward on their most critical measure – passing the sales tax and securing the funding needed to balance the short term budget.
It is unfortunate, but the city now needs to kill this initiative and go back to the drawing boards. One has to wonder what might have been had the city manager not been preoccupied with leaving Davis and the council had fewer things on their plate.
The ones who will continue to suffer are the Davis ratepayers and the taxpayers who continue to have to pay the excessive costs to remain with PG&E.
—David M. Greenwald reporting
“In addition, the report assumed that Davis, while pursuing green power goals, can buy power for less than the market price of power today.”
Ms. Alicia Okelo-Odongo is right and that’s another reason why this endeavor didn’t pull in more backing.
IMO another big mistake was getting the NRC involved which, for me and I’ll guess many others, contributed to the perception, real or not, that much of any savings would be squandered on paying more for green power. I voted for the SMUD takeover, but that would’ve been SMUD buying their power as they now do and not with the more expensive green goal that I’m sure the city would’ve persued.
G.I. your paranoia about the NRC has overwhelmed your good sense. The November 18, 2013 item on the NRC agenda was informational only. The NRC did not “get involved.” No action was taken by the NRC on the item. Here are the minutes of that meeting:
that’s a complete mischaracterization of what the report assumed. the report looked at the discrepancy between pg&e costs and other power companies and used that figure to extrapolate
“I voted for the SMUD takeover, but that would’ve been SMUD buying their power as they now do and not with the more expensive green goal that I’m sure the city would’ve persued.”
you’re assuming that the city would have done things on its own rather than contracting with smud or a similar company – as they did with the operations portion of the water project.
No assumption at all:
Here’s some excerpts from the staff report to the NRC on 11/18/2013.
Driving factor:
“3. Achieve environment objectives through direct influence and management of the community’s energy portfolio.”
Primary energy options:
“3. POU: Purchase green energy sources and operate the distribution system within the city.”
but none of that has a bearing on the statement by the pg&e rep.
G.I., you have taken the staff report point out of context.
Now, let’s drill down into your first point 3. Currently, you as a Davis ratepayer pay your proportional share of the annual $4.3 million Public Purpose Program (PPP) fee added to our electric bills. How much of that $4.3 million is spent by PG&E in Davis? Virtually none of it. The major reason is that Davis long ago worked collaboratively to create PVUSA. However, to add insult to injury, PG&E doesn’t use the low cost PVUSA produced power directly in Davis in order to reduce our bills. Instead they take that power and dump it into their portfolio and use our local energy portfolio to benefit everybody else in the PG&E system. So right now you G.I. are getting ripped off not just once, but twice with respect to how your $4.3 million is being spent and how your PVUSA resource is being used. Right now today … Ripped off … You
That is the whole context of the informational item that was presented to the NRC on November 18, 2013.
Why does Davis’ participation in PVUSA preclude PG&E from spending PPP money on Davis?
Nothing precludes PG&E from spending PPP money on Davis, they just aren’t right now.
Realist, the PPP was established in part to promote the adoption of renewable energy sources within communities. Given the presence of PVUSA in Davis, the mathamatical calculation of renewable energy production in Davis soars. Therefore, spending PPP funds to increase renewable production in Davis looks “strange” on paper.
With the above said, David is right, nothing precludes PG&E from spending the whole $4.3 million in Davis each year.
PG&E has started having one of their employees attend all NRC meetings, and at Monday’s NRC meeting the NRC formally requested a presentation from PG&E at the next NRC meeting on how the $4.3 million annual amount has been spent over the past few years. The PG&E rep agreed that was a good idea.
Matt, maybe the city can get PG&E to agree to spend the $4.3 million in Davis only. A deal could be made. Now that PG&E knows the city is serious about someday persuing a POU we should have some bargaining power.
I do not disagree at all GI. I made that same point at a meeting on Monday morning.
Matt, …..GMTA…..
GI – Makes me wonder if we every asked. Probably not. My guess is that those that wanted a POU would have wanted to make sure that they had a PR story to say that PG&E was taking all of our money and using it elsewhere.
That would be more than a bit Machiavellian. Enough more that it strains the bounds of believability.
With that said, it does do a good job of making a point with a touch of hyperbole.
I’m curious to know how much of the PPP money is currently being spent in Davis.
PG&E wins again. The octopus keeps its suction cup on your wallet. Of course with Pinkerton leaving and the budget upside down they made the correct tactical move. Its doubtful that the new city manager would be up to the task of rolling PG&E while hitting the ground running.
Mr Toad wrote:
> PG&E wins again. The octopus keeps its suction cup on your wallet.
If you don’t like PG&E getting anything from your wallet you are free to go “off the grid” (like many friends with cabins in rural areas) with solar, batteries and propane any time you want…
I already did with my electricity right here in Davis. More difficult with gas especially with no burn ordinances.
Toad wrote:
> More difficult with gas especially with no burn ordinances.
It is easy to switch from low cost natural gas to expensive propane (if you want to)…
P.S. I don’t want to mention any names (since it is not to code) but when a friend in Davis got a huge bid to hook the fancy Wolf range his wife got for the kitchen to the PG&E gas pipe to the furnace (at the other side of the house) a few years back he connected the range to a propane tank (that he fills at the ACE rock yard) with a flexible gas line he got at Hibbert…
David wrote:
> The ones who will continue to suffer are the Davis ratepayers
> and the taxpayers who continue to have to pay the excessive
> costs to remain with PG&E.
I still have not seen anything that leads me to believe we will save any money with a POU (and looking at what people in the “Public” sector (our public “servants”) get paid on the link below I would be surprised if I did not pay more money to a POU):
http://transparentcalifornia.com/
We get our natural gas at home from PG&E and up in Tahoe we “own” our own propane tank and buy gas from Truckee-Tahoe Propane. Even after spending an entire weekend of “vacation” last year putting in a $2K Eternal instant hot water heater and a $250 Nest thermometer we are still spending more per year on propane at the cabin (that we rarely visit) then gas at the home where we live 90% of the time and still have old fashioned water heaters…
So I guess the City Council just wasted $400,000…
keith, do you think it is a “waste” to know how much the annual electricity charge savings could be for the City’s water and wastewater utilities? Do you think it is a “waste” to try and save some of the $6 million per year those utilities are projected to spend on electricity in 2018?
And this is exactly the point I was making (or trying to) in today’s piece – we never had this conversation in public.
If they decide no go, are we liable for any of the $600K that was approved (I think) a couple wks ago?
We are only liable for what has been spent.
This article makes it sound as though this was just a messaging problem. In fact there are risks. The statements by the PG&E representative are accurate: it would probably be expensive to buy the facilities. More to the point, many Davis residents would be perfectly willing to join SMUD and let a professional utility run the power grid locally. But many of those same residents probably don’t have confidence that the city could run its own grid efficiently or effectively. Some have concerns that ideology would trump efficiency and cost in choosing how to run it.
Perhaps in 2 – 3 years the economy will be better, the city’s revenue picture will look better, and it might seem that the city has money to spend on something like this. Maybe a citizens group could spend the time to lay the groundwork for that, at no cost to the taxpayers. Right now the focus of the city council needs to be near-term fiscal issues. Things that might speculatively save money years from now, with considerable risk along the way, should probably be put off. Which is what the council appears to be doing: they’re being prudent.
“Some have concerns that ideology would trump efficiency and cost in choosing how to run it.”
Exactly right. In fact I believe this has already happened in the questionable study that we spent $400K to run.
There is a potential scandal right in front of us about this 400K expenditure. What is the connection between the consultant and the city council. How was he selected? Was there a public bid opened for consultants to carry out the study? Was it appropriate to use wastewater funds to pay for this study?
I urge people to look at the background of the consultant who we paid this vast sum to and ask whether it is plausible that he would have produced a study that reached a different conclusion regarding a POU.
J.R. wrote:
> I urge people to look at the background of the consultant who we paid
> this vast sum to and ask whether it is plausible that he would have
> produced a study that reached a different conclusion regarding a POU.
Great question…
Let’s hope that public dialog on sites like the Vanguard will help pull back the curtain and maybe reduce the amount of $400K studies that could be done for a lot less…
As noted in prior comments, the City’s water and wastewater utilities are projected to spend $6 million per year on electricity in 2018. Do you think it is a “appropriate” for those utilities to try and save some of the $6 million per year? A 10% savings amounts to $600,000 per year. A 20% savings amounts to $1,200,000 per year. A 42% savings amounts to $2,520,000 per year.
NOTE: the 42% savings number is from the public documents that were part of the analysis of Measure H in 2006
SMUD vs. PG&E: SAMPLE ELECTRIC BILLS: September 2006
Utility Co. __ Residential (700 kWh) __ Business (2000 kWh) __ Supermarket (250,000 kWh)
PG&E _______________ $90 _____________________ $375 _____________________ $31,824
SMUD _______________ $65 ____________________ $217 _____________________ $27,055
Savings with SMUD _ $25/month ____________ $158/month______________ $ 4,768/month
Savings with SMUD _ 27.8% __________________ 42.1% ____________________ 15.0%
You are confusing the issue. This misappropriation of $400,000 came from the wastewater fund. If such a movement of funds occurred in the private sector people would go to jail. Why are you bringing in the irrelevant issue of what the water utility might save. The water utility is not the same entity as the wastewater fund. I get quite suspicious when people obfuscate like this.
Does anyone know who authorized the expenditure to this particular consultant, and how he was chosen? Because so far we have no answers on this, only evasions and misdirections and changes of topic.
“This misappropriation of $400,000 came from the wastewater fund. If such a movement of funds occurred in the private sector people would go to jail. Why are you bringing in the irrelevant issue of what the water utility might save. The water utility is not the same entity as the wastewater fund. I get quite suspicious when people obfuscate like this.”
How is the money misappropriated here? The public utility is an enterprise fund endeavor and the money that the city will save on water – waste water and surface water – will come directly out of that fund.
“This article makes it sound as though this was just a messaging problem.”
It was a messaging problem primarily. Were there risks? There are risks in every public policy move and change. We had an affordable way to mitigate or spread the costs and that would have given us time to properly studied the issue. The failure to roll this out properly, means we could not study it. We are going to spend several hundred million on a water project, we couldn’t spend $1 million over a decade to look into better ways to power it?
Why do we have to pay a consultant to study it? We develop citizens commissions for these things. I’m sure we have the brainpower in Davis to do the calculations. Put Alan Pryor in charge of it, get a couple of experts who live here to work with him. Then come back with a coherent plan.
Again: no matter how broke the city is, no matter how dire our finances, it seems there’s always money for consultants.
You raise an incredibly good point Don. The amount of electrical industry expertise that exists in Davis is massive. That expertise includes many people who have spent substantial portions (sometimes all) of their careers in regulation in Sacramento and Washington. It includes many current and former SMUD employees. It includes current and/or former Roseville Electric employees. It includes current and/or former PG&E employees.
Looking into this issue with local resources would not only be wise, it would be transparent.
I think this is more complicated than water or waste. I don’t trust that we have the citizens to do this… especially considering the demand that we include environmental activists on the committee.
And it is 100% optional unlike water that required us to make some changes due to our inability to comply with all the clean water regulations.
I wonder when the City Council and Staff will learn that their policy of ‘hiding the ball’ from the public is no longer a viable approach to public engagement. Early, thorough and transparent community dialog, plus a commitment up-front to contracting operations to SMUD (and not expanding City payroll), and the POU would likely have received support from a large majority of the community.
With staff overspending their original authorization by 60% for the first step in this process, how much confidence should anyone have that the next $600K would be sufficient? At a time when the City is facing large deficits and a backlog of unfunded liabilities, agreeing to spend $1MM + on what looks like a highly speculative deal without first gaining public support, was simply foolish.
This is such a huge mistake. A huge missed opportunity, if it is indeed true. We are soooooo stupid sometimes.
Davis Liberals take note of this. California Democrats take note of this.
Your continued head-in-the-sand approach to over-spending combined with your lack of interest for developing and protecting our economy is leading to your inability to pursue a progressive agenda.
If you want someone to blame for the pullback on this POU idea, look in the mirror. It is the manifestation of greed. Greed to dominate the political environment. Greed to fill the pockets of the public employee union members.
The narrative has shifted to one where people are tired of spending, and in no mood to agree to any policy changes that include any risks for higher costs.
And this shift is absolutely not good for those that desire a more progressive agenda.
So, if you want to get your progressive agenda back, start supporting policies that lead to more efficient and affordable government more real revenue production.
“Your continued head-in-the-sand approach to over-spending combined with your lack of interest for developing and protecting our economy is leading to your inability to pursue a progressive agenda.”
THat’s an interesting comment, but it doesn’t make a lot of sense to over-spend on electricity because we have overspent on employee compensation.
I think the problem is the assessment of risk. If we run our own utility, there is a risk that we might end up paying higher costs from unforeseen challenges, or from those in town demanding we pursue a green agenda.
What is that probability?
My sense is that more people would be willing to roll the dice on it if we were not in such a deep financial hole.
We can either make our government employees all well-off and able to retire young without a financial worry… or we can pay them market wages and benefits and have the ability to do some creative things that cost money or that risk costing us money.
I think what we are seeing is proof that we cannot do both.
How is it different than allowing the city to run other utilities like water? Or contract out to companies like DWR?
It is different in that those are different utilities and there are greater cost-risk exposures. I will show you the difference in my monthly bills for these three things, and you will understand this point.
And correct me if I am wrong, but there is no equivalent to PG&E for waste and water. You either outsource or run it as an internal municipal service.
I look at energy delivery as being similar to telecommunication delivery… why don’t we own and operate a municipal telco service?
We even tried to run our own cable service and how did that work?
Frankly
“If we run our own utility, there is a risk that we might end up paying higher costs from unforeseen challenges, or from those in town demanding we pursue a green agenda.”
For me that was the true problem. I think we pretty much knew the big risk was a green at all costs agenda once the leftists in town got their hands on the POU.
i think this is really the driver for you. so you’re willing for the city to pay an additional $600,000 a year for electricity just on water (which goes to YOUR water rates that you’ve been whining about) because you’re afraid that some lefities will make you go green – isn’t that about the sum of it? how much money are you will to pay not to go green, i want to know?
That’s not it at all, I want the cheapest source of energy we can buy, whether it is green or conventional. I want the most savings we can possibly attain. Now come up with a plan that does that and keeps the lefties from hijacking the POU and you’ve got me hook line and sinker.
Then maybe instead of saving $600,000 we can save $800,000, $1,000,000? Now DP, are the leftists in town willing to quit whining about going green and realise some real savings?
DP wrote:
> I think this is really the driver for you. so you’re willing
> for the city to pay an additional $600,000 a year for
> electricity just on water
It is important to remember that the “$600K savings” is just a made up number (since SMUD is not going to sell us power at that price and unless PG&E gives Davis a gift we will pay a lot more to produce and distribute power than SMUD after a POU buys PG&E’s assets in town)…
$600,000 is a projection at half the savings rate that the consultants included in their report and less than one quarter of the savings that was projected in the 2006 SMUD Annexation materials shared as part of Measure H and Measure I. It is far from a made up number. It is a number that needs considerably more refinement and validation. Everyone agrees with that. The question is whether it is worth spending the money that such refinement and validation might cost.
Matt wrote:
> $600,000 is a projection
Just like the $1 Billion “projection” to replace the Oakland side of the Bay Bridge that ended up costing $6 Billion + and the $30 Billion “projection” for the bullet train when we voted on Prop 1A that is now over $90 Billion (and that will probably triple in cost again if we ever build it since there will be a lot of bridges)…
Ahhhhh but there is a huge difference between those two projects and the POU … there is no infrastructure that has to be built in the case of the POU. No construction costs. All the infrastructure is already in place.
What unforseen challenges Frankly? More importantly, why would those unforssen challenges not affect all electrical suppliers in the market … Roseville Electric, SMUD, PG&E and any Davis POU that might be created?
Are you willing to articulate the “conservative agenda”, particularly City and State?
PG&E has access to cheap power from Sierra hydroelectric and from plants built long ago when costs were lower.
When power costs next spike, utilities that need to buy power on the open market may wish they had PG&E’s costs.
I wish the city had been better prepared, but I think that retrenching on this matter is appropriate under the circumstances. I don’t agree that bringing it back in 2015 or later would be dishonest; I think people will appreciate the full load of pressing issues the Council has before it.
I do not disagree with Jim, but am still a skeptic as to whether Davis should do this on its own.
I don’t think Krovoza got this memo.
Meeting cancelled?
I don’t think Krovoza had any intention of pulling the plug on exploring alternative utility options. Brett and Lucas expressed a wish to slow the process down but Krovoza pushed it forward.
I’m confused. I went to the city website, and it showed tonight’s meeting was cancelled. Did something actually happen?
The 5:30 closed session meeting was cancelled. The regular meeting happened.
There appeared to be at least three votes to kill it at the time I wrote this story. Obviously that changed.
I counted three votes as well.
Hey all,
With some of these comments, I feel like I’m listening to a Rush Limbaugh analysis of the high costs of alternative energy.
Based on some ten years experience as a solar contractor, I do have more than a novice’s familiarity with the costs of this form of energy production. Costs for solar power production have come down dramatically from where they were last decade. It is not at all unreasonable to think that a solar installation, built at scale, could result in significant cost savings – particularly when looking at the marginal cost of energy at peak demand.
What I have long wondered is why PG&E, itself, did not long ago opt to begin construction of large scale facilities – they could be delivering green energy and earning RECs at the same time. It has just never made sense to me why they wouldn’t pursue that option.
Obviously, somebody has some numbers that Dan and Joe find compelling or they would not be pressing the issue – particularly in this fiscal environment.
How about if somebody could come forward with a concise and compelling argument for the case?
From PG&E’s website: “The power mix* we provided to our customers in 2012 consisted of non-emitting nuclear generation (21 percent), large hydroelectric facilities (11 percent) and eligible renewable resources (19 percent), such as wind, geothermal, biomass, solar and small hydro. The remaining portion came from natural gas/other (27 percent) and unspecified power (21 percent). Unspecified power refers to electricity that is not traceable to specific generation sources by any auditable contract trail.
We have added more than 100 megawatts of new solar photovoltaic generation, owned and operated by PG&E, including three new solar plants dedicated last year in Fresno County.”
Don,
I guess I’ve missed the part of the story where PG&E offers to provide renewable power to Davis at its true new marginal costs of solar electric power.
PG&E will sell its power to Davis and all the other cities and rural customers at whatever rate they can persuade the PUC to approve. It seems PG&E has a reasonably balanced portfolio of energy sources, with a growing amount coming from renewables. Davis won’t be building any dams or nuclear power plants, and cannot provide all of its own power, so presumably a Davis utility would become a customer of PG&E. So the city would seek to augment that with solar and other renewable sources. How much solar would it take for Davis to reduce the cost of power to its citizens below PG&E rates? How much space would such a solar array take? Look at the current solar projects that are being constructed in California. They are big and sprawling sites. So I wish to see an unbiased assessment of the actual energy needs of the city, and what local sources would be needed, for this proposal to make sense.
Because of the reliable and accessible power grid provided by CA-ISO (the California Independent System Operator Corporation) any local distribution system can purchase power from any generating company that participates in the grid. CA-ISO facilitates over 28,000 market transactions each day in a truly open market.
Let’s not fool ourselves here. Building a good publicly owned utility is hard… very hard. Building a good regulated private owned utility is also hard. It comes down to the quality of governance. And in both cases that governance will be heavily influenced by politics.
The business of energy is a natural monopoly. And the infrastructure investment requirements are so large that there are not enough choices to leverage the invisible hand of free market capitalism.
But the current PG&E option works well enough. It is in fact a good regulated privately-owned utility. It is not perfect… none are… but it is good enough.
We are risking a change that would end up being less good… and maybe even terrible.
Ain’t broke, don’t fix it.
The pursuit of perfection is the enemy of the good.
and by your standard, anything that produces some power ain’t broke? no matter how unreliable or expensive it may be?
It’s not unreliable, that’s all just a hopped up red herring that the environmental enthusiasts are using to try and push the POU.
Have you actually read the studies on Pg&E?