No easy choices on whether county should take over for PG&E
| Saturday, Jun 12 2010 06:00 PM
Last Updated Saturday, Jun 12 2010 06:00 PM
A CLOSER LOOK
This report is part of a series of stories looking at why Bakersfield residents pay so much for electricity.
Anyone who thinks Kern County can do a better job than Pacific Gas and Electric Co. may take some comfort in Tuesday's defeat of Proposition 16. Not much, though.
True, the ballot measure would have made it harder for local governments to start buying energy on behalf of their constituents. This remains an option under consideration by the county Board of Supervisors.
But voters' rejection of Proposition 16 does nothing to reduce the substantial cost and risk inherent in trying to take over PG&E's business here.
It's also unclear whether the county could beat PG&E's electric rates, as other, long-established municipal utility districts have succeeded in doing.
County supervisors have a tough choice to make: Do they act on local anti-PG&E sentiment and spend hundreds of millions of taxpayer dollars setting up a locally controlled utility? Or, do they back down and leave Kern's electric service in the company's hands?
Board members have asked county staff to prepare a non-binding, advisory measure for the Nov. 2 ballot. That would provide some guidance on how voters want to proceed.
Put it to a vote?
But the board appears divided over whether to try and meet an Aug. 5 deadline to get the question on the ballot.
After reviewing a May 25 staff report on the county's options, Supervisor Ray Watson said that trying to break away from PG&E probably wouldn't be worth the time and effort.
Besides, he said, the utility recently addressed one of the main criticisms against it in Kern by moving to reduce the disparity in rates paid by heavy and light users of electricity.
He also pointed to financial risks if the county did take over service here.
"Even if you were able to get it done, there's no guarantee that you could buy electricity and distribute it to the customers for a lower rate than what PG&E is providing," Watson said.
Supervisor Mike Maggard takes a different view, saying local PG&E customers continue to pay rates that are too high. He proposed leaving Kern's options open.
"I think a question on the ballot is still very worthy of our consideration," he said.
Liz Keogh, an organizer with the local consumer advocacy group Kern Powered-up Utility Customers, said she wants the county to take over for PG&E. Despite the expense -- which she said could be reasonably spread over many years -- local customers would gain more control.
PG&E spokesman Andrew Souvall listed four reasons the company should stay in charge: Its operations are overseen by state regulators, it has made good progress in meeting renewable energy goals, starting up a locally run utility would be expensive, and local government lacks the necessary experience.
"PG&E has been in the business of generating and delivering power to customers throughout Northern and Central California for more than 100 years," he said.
The county's May 25 staff report lays out several options that could make the ballot if the board chooses to go that route.
Municipal utility district
As requested by the board, the report examines the idea of starting a municipal utility district in Kern, which it says could be difficult and expensive -- possibly costing more than $1 billion just to take over PG&E's existing electricity distribution infrastructure. If such a utility covered the whole county (and there's no guarantee geographically diverse voters would all go along) it would immediately become the third-largest municipal utility district in the state.
Running the utility probably would require a work force of several hundred, and it would deny the county $8.2 million a year in property taxes now paid by PG&E, the report states.
Certain costs would not be eliminated by forming a new utility district, including a surcharge left over from the 2000-01 California energy crisis. It accounts for nearly 17 percent of PG&E's rates.
Community Choice Aggregation
An alternative that became available in 2002 would be to form what's called a community choice aggregation. CCAs provide a large degree of local control without requiring the takeover of PG&E's infrastructure in Kern. They pay utilities for the use of transmission lines but allow local authorities to make power-purchasing decisions.
How much money a CCA would save ratepayers here would depend on how well county government could compete against other buyers of electricity. As the staff report notes, the fact that a lot of energy is produced in Kern provides no advantage because a CCA would have to bid on power like any other utility.
A big downside cited in the report is the uncertainty associated with customers' ability to opt out of CCAs. That makes it harder to plan for future energy demand.
If the county decides to pursue this option, the report states, it could gain a financing advantage by using tax-exempt bonds to build or buy a power plant or other generator of electricity.
This all presents considerable risk, the report says: "Building and operating power plants would be a huge gamble for a CCA because its customer base would not be assured."
Seceding from PG&E
Another option might be for Kern to switch from PG&E service to that of Southern California Edison.
The county report says any such arrangement would be "a voluntary business agreement between the two regulated utilities" and would require the approval of the state Public Utilities Commission.
PG&E may be unwilling to go along with this option, given the company's position that it wants to continue to serve Kern County.
"Our policy is pretty clear," local PG&E spokesman Denny Boyles said, "that we're not for sale."
