Analysis: Editorial Suggests Wrong Time to Consider POU

Share:

public-powerAt the last council meeting, the Davis City Council approved a consent item that would finance an additional $600,000 to study the feasibility of the city moving away from PG&E and towards a Publicly Owned Utility (POU) that the city believes would both save the city and community 20% of its electricity bills, as well allow the city enhanced flexibility in the $4.3 million in funding generated by the community for the Public Purpose program that PG&E currently uses elsewhere.

However, there has been a major pushback against that movement by the Chamber, PG&E itself, members of the public and now the Davis Enterprise, which on Sunday argued, “Public power would be good for Davis, but we have too much on our plate.”

The editorial writes, “Revisiting a long-held community goal, the Davis City Council is looking at the feasibility of a public utility to provide electricity to residents. Last attempted with 2006′s Measures H and I, which 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.”

However, they write that PG&E is the main obstacle to such a vision.  Our current provider, they write, “is in no mood to give up customers, and not inclined to sell the infrastructure a public provider would have to buy. In 2006, the utility spent heavily to prevent an exodus and, while the measures passed in Davis, it was able to convince Sacramento voters to reject the union. Davis was back at Square One.”

“At this point, the council has spent $400,000 analyzing the possibilities, with $600,000 more earmarked from a wastewater fund,” the paper notes.

They add, “A report by economist Charles Cicchetti unsurprisingly found that a public utility could save $5 million to $9 million a year after paying $20 million for the physical infrastructure. Just as unsurprising, PG&E disputes the first figure and promises the second will be higher. Ultimately, state regulators or the courts would have to decide what all those power lines and transformers are worth.”

The paper notes that city leaders are reluctant “to discuss details” while they are in early stages of analysis.

”All we’re doing now is methodically exploring the issue,” Mayor Joe Krovoza said.

“But if the past is anything to go by, a bruising fight lies ahead,” the paper correctly observes.  They noted that they, along with all other public officials, backed the 2006 measures and the paper argues, “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 argues that “conditions have changed in seven years.”  They reason, “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 add, “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.”

But the paper, like many others, fail to see this as a way to control costs and save money down the line.  Much has been made of a $1 million investment, but at this point, that investment comes to $66,000 a year in payments.  If the further analysis seems unwieldy, the city has the ability to cut their losses.

But, like others, the Enterprise takes a different approach, arguing, “Now is not the time to take on another huge project. We have too much on our plate as it is.”

They write, “Perhaps if the long-hoped ‘innovation park’ ever gets going and we start attracting high-tech businesses to town, the tax base will improve to the point where this is feasible. Or perhaps our economy will rebound enough to allow us the fiscal luxury of moving forward.”

There will always be reasons not to take chances and to play it safe.  As people in Davis found out yesterday, PG&E has poor system reliability compared to other utility operators, PG&E has a worse outage duration and more sustained outages per customer than comparable groups.

The study found that their per KWH price was high but Davis pays more per KWH than the average PG&E customer.    Each 1 cent per KWH costs Davis about $2.64 million per year.

Given community pushback and council concerns about getting the revenue measure passed, the Enterprise might ultimately be right, that “for now, public power seems like a step too far.”

But the numbers are mindboggling in terms of the potential here and $1 million, $660,000 spread out over a decade, seems like a small amount to risk on something that could produce $5 million in savings community-wide per year.

—David M. Greenwald reporting

Share:

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

Related posts

52 thoughts on “Analysis: Editorial Suggests Wrong Time to Consider POU”

  1. Tia Will

    Just an observation and a question.

    1. I find it somewhat ironic that the council comes under fire for exploring the possibility of a POU, and at the same time comes under fire for dropping projects on the public at the last minute, as has frequently been charged in many venues. Either we are willing to let the council explore options in a gradual, thoughtful manner over time, or we will inevitably be faced with situations where it looks to those not on staff or the council as though a decision is being forced through without investigation and deliberation. Groundwork for any large initiative requires time, reflection, debate, and yes, money. I would strongly urge letting the council explore this option.

    2. I am wondering how those in the business community (and any others with an opinion) feel about the ability of PG&E to continue to hold what amounts to a monopoly on the provision of services, and then provides demonstrably inferior services? How does this fit in with the idea that if an individual or company has enough drive, it will be able to compete and succeed? Should it not follow that if there is a less expensive, or more efficient or just overall more beneficial means to provide the service, then that is the model that should be chosen?

    1. growth issue

      That’s just it Tia, many think that spending $1 million for research on a POU at the same time that the city is also crying for more taxes feel that yes, this was just dropped on us. For the most part, I don’t think the public knew of the $400,000 survey until recently when the news came out that the city needed $600,000 more.

      1. David Greenwald Post author

        “spending $1 million for research on a POU – as a way to save 20% – at the same time that the city is also crying for more taxes”

        fify

        1. Mark West

          You keep talking about the potential savings as if they are guaranteed, when nothing could be further from the truth. We might save money, we might not. What we know is we are spending $1 Million that we don’t have on a project that is speculative at best.

          1. growth issue

            If I felt this were truly about saving money I might buy in. But imo this is all about going green to satisfy all the environmentalists in town and trying to acheive that pie-in-the-sky zero carbon goal of 2050. Going green isn’t a money saver, just ask Germany and Britain. Are we the only city that has such an unacheivable goal of 2050 zero carbon and how much money are we going to pour into it trying?

          2. Matt Williams

            G.I. are you willing to sit down over a cup of coffee to talk about your concerns and the details of the study?

          3. SouthofDavis

            Mark wrote:

            > You keep talking about the potential savings as if they are
            > guaranteed, when nothing could be further from the truth.

            If every city could fire PG&E and save 20% they would have already done it (we are talking about a lot of money)…

          4. Mr. Toad

            PG&E has a long history of beating attempts by communities to switch to public power. They have vast resources and will spend large amounts to defeat attempts to change the system. This does not mean that they are a better provider just better defeating their opponents.

          5. Matt Williams

            SoD, every other city in California has to (by law and regulation) pay PG&E a recurring “Exit Fee” over and above the purchase price of the assets. It is my understanding that Davis was specifically excluded from having to pay PG&E any recurring “Exit Fee.” I believe that provision was written into the State legislation as a reward to Davis for its proactive work on PVUSA. Not having to pay that “Exit Fee,” changes the economic calculations substantially.

          6. Tia Will

            “You keep talking about the potential savings as if they are guaranteed, when nothing could be further from the truth. We might save money, we might not. What we know is we are spending $1 Million that we don’t have on a project that is speculative at best.You keep talking about the potential savings as if they are guaranteed, when nothing could be further from the truth. We might save money, we might not. What we know is we are spending $1 Million that we don’t have on a project that is speculative at best.

            And Mark, this is exactly how I felt when you assured me that I should not demand projected numbers of income generation vs costs, but just trust that plans for economic/business expansion would benefit the city rather than just accepting your word that the pros of growth would exceed the cons.
            I don’t see how you can criticize lack of guarantee on the part of the city,
            but defend it on the part or business.

      2. Matt Williams

        G.I., I met with one of the Council members last night, and he agreed that any analysis going forward should only authorize smaller amounts rather than a big $600,000 one-time authorization. Those smaller amounts will be closely tied to specific milestones that will be check pointed by Council prior to authorizing any funding of the exploration of the next milestone. The results of each milestone would in effect be a go/no-go decision on any further effort.

        The $400,000 expenditure by the City Enterprise Funds on the initial analysis amount is A) not a General Fund expenditure, and B) since those Enterprise Funds consume massive amounts of electricity as part of their operations pumping and treating water and wastewater, saving 20% of those expenditures is a wise decision targeted toward operational economy. The 2018 electric bill for those Enterprise Funds is expected to be in the vicinity of $6 million. Saving 10% of that amounts to $600,000 saved for the Davis ratepayers served by the Enterprise Funds.

        1. Mark West

          ” he agreed that any analysis going forward should only authorize smaller amounts rather than a big $600,000 one-time authorization.”

          1. The CC already authorized spending the $600,000.
          2. Item 5D on tonights agenda is to authorized amending the contracts for the first round of the evaluation because the City ended up spending $150,000 more than the CC authorized.

          Doesn’t give one a lot of confidence that anyone is watching the store here.

          1. Matt Williams

            Mark, when you dealt with your Rominger-West vendors did you budget one payment at a time, or did you proactively plan for the total expenditures you could possibly make with that vendor over the budgeting period?

            I don’t disagree that what you perceived Council’s authorization appeared to be was not confidence-building, and I not only wholeheartedly agre with your perception, I have carried a clear message to individual Council members that they need to 1) clarify why and how there is someone minding the store, and 2) publicly acknowledge that the Council has heard the public outcry about the perceived lack of controls and milestones.

            With that said, what I am hearing from you is that you believe the City should abandon all efforts to reduce its electrical rates. That sounds a whole lot like a “When rape is inevitable …” argument.

  2. Mr. Toad

    The number that really counts for the Enterprise. How much PG&E spends on advertising in their paper that they stand to lose. I bet its a nice bit of revenue.

      1. growth issue

        Didn’t the Enterprise back the Cannery? I didn’t hear any of you screaming they were only backing it because they wanted the revenue from the new homeowners buying their paper. Oh, could that be because you agreed?

        1. Mr. Toad

          I’m not screaming and yes the Enterprise is a small town booster paper trying to increase its subscription base and maybe you are also correct that I support public power. So if there was criticism of them for supporting cannery it should have been raised by the opponents and in fact I think it was. Still in this case there is a direct risk to revenue from PG&E to the paper so its fair to point it out.

  3. iPad Guy

    Until we can demonstrate the ability to manage a small-town fire department, I think we’d better avoid taking on something like this.

    Citizens might have been successful protesting the original $400,000 if it hadn’t been kept secret until the deed was done. Now, we’re supposed to lock in a decade of loan repayments to make the next step “affordable.” Assuming this kind of accounting is legal, why not use the method for street repairs, etc?

    This study expense is being offered with little speculation about the cost of and the odds for a fight to take over the utility. But, one would guess that the first $1-million could be dwarfed by the subsequent costs.

    More important, we’re on the verge of losing our newly found elected leadership and city manager with the stomach for acting on our unsustainable fiscal problems. Why add to our expenditures and workload when we’re facing a return to our old ways?

    1. SouthofDavis

      iPad Guy wrote:

      > Why add to our expenditures and workload when we’re facing a return to our old ways?

      The people that are getting “paid” the million for the “study” are happy and a lot of other people (like the firefighters) can’t wait until we return to “our old ways”…

      1. Mark West

        Considering the current physical condition of the municipal water system (not to mention the roads, buildings, parks, pools, etc) I think you might want to use a different example, unless of course you are just trying to prove iPad Guy’s point.

          1. Mark West

            DP: Are you asking me? Absolutely not. The only way I will support a POU is if we are able to contract out operations to SMUD.

            Finding out if SMUD is willing to do that job should be question #1, before we spend another penny on consultants.

          2. Matt Williams

            I agree with your final sentence Mark. What makes you think that such discussions haven’t already been initiated?

        1. Matt Williams

          Actually Mark, in a blue ribbon assessment of the City of Davis water system recently completed by Kennedy Jenks and Brown and Caldwell, the condition of the system was deemed to be significantly above average. The assessment team went out of their way to complement the City on its proactivity … and then made a long list of capital maintenance suggestions that totaled approximately $40 million over 6 years. The most common reason for the capital maintenance suggestions was because of the normal aging of the system.

          1. Mark West

            $40 million in needed repairs doesn’t sound like much to you huh? $6.7 Million a year is just chicken feed to some I guess.

          2. Matt Williams

            Mark, you need to read the Kennedy Jenks / Brown & Cadwell report entitled “Water Distribution System Optimization Plan.” The link to it is http://water.cityofdavis.org/media/publicworks/documents/pdf/pw/water/documents/davis-water-distribution-system-optimization-plan-report.pdf It is a quick read, only 473 pages long. Here are some excerpts:

            5.2.1 Wells Condition Assessment Evaluation
            The wells were evaluated using data provided by the City, windshield-based tours of many of the well sites, and an evaluation review workshop with the City. The City operates wells ranging from new to over sixty years old. In general, it appears the City uses good, proactive practices for operating and maintain- ing its water distribution system, including the wells. The City has been pulling the pump and motor, conducting cleaning/bailing, and completing a video inspection of the downhole well condition every seven years, which is most likely more than is needed for some wells, just right for others and possibly not frequently enough for problem wells. For this reason, the City is currently adjusting its well rehabilitation and inspection practices on a case by case basis commensurate with known well issues and other indicators such as decreasing production capacity.

            As shown in Table 5-9, over 60% of the City’s distribution system is 50 years or older. According to Design of Water Supply Pipe Networks, Swamee, the projected useful life for cast iron/ductile iron, and asbestos-cement pipe is 120 and 60 years, respectively.

            Portions of the original City distribution system was constructed with unlined CI pipe in the late 1910’s to early 1920’s and is approaching 100 years old. Although these pipes are within the expected useful life range, unanticipated conditions can and have been observed to cause premature failures of much newer pipelines within the City. The City should anticipate increasing failure rates in the future as the bulk of the distribution system installed prior to 1970 continues to age.

            There have been a total of 367 documented water distribution pipeline repair work orders since 1978, according to City-provided records, with the locations shown on Figure 5-3. Pipeline repairs by year are shown graphically on Figure 5-4. Work orders associated with pipe repairs trended upward since 1978, reaching a peak with 25 in 2002; however, since 2002 it appears that pipe repair occurrences have been trending downward. The reason for this shift is most likely attributed to the City’s initial pipeline replacement program. The City has replaced sections of the water distribution system beginning in 2001 through 2005, again in 2010 and plan to replace more in 2011.

            Pipe repairs have averaged between 0.04 to 0.13 breaks per mile of pipe per year since 2003, which is a relatively low occurrence rate for a water utility. This indicates the distribution system is currently in good condition.

            The City has a robust main flushing and valve exercise program, according to the last five years of Annual Reports submitted by the City to the California Department of Public Health (CDPH). The City completes flushing of dead end blowoffs once every 1 to 2 years. Additionally, the City operations staff exercise all distribution system valves approximately every 1.5 to 2 years. Both flushing and valve exercising are excellent preventative maintenance practices and the City should continue to strive to maintain these proactive efforts.

            The City has historically supported a robust and comprehensive maintenance program, which has included regular cycles of inspection and rehabilitation of water distribution facilities throughout the City. The improvements identified for the existing system build on the good work completed by the City by harnessing the strength of the City’s existing high quality deep groundwater supply and healthy looped distribution system to support implementation of the conjunctive use program.

            When you read all of the above, you will clearly see that no one in the Water Department is looking at the Water System from a chicken feed perspective. The costs of maintenance is a simple bi-product of the age of the system. No matter how good the City of Davis Water Engineers are, they simply can not turn back the hands of time and make the age of the system components magically become younger.

  4. Frankly

    I learned a long time ago that perceptions are reality.

    The perception is that the city and Council is spending $1 million on a POU study at a time they are also asking us to open our wallets again to keep the city’s financial head from sinking below the water-line. The perception is that a city and Council that just gave away a $100 million dollar land asset to the Yolo Land Trust and that spent so much time and money banning plastic bags as an environmental feel-good move… does not really care so much about the fiscal arguments, and instead is attracted to a POU because it gives Davis control over a green agenda… an agenda that would ultimately be MORE costly to Davis residents.

    And finally, the perception is that a city unable to effectively manage employee costs and accurately budget and report is incapable of taking on one more complicated service delivery business.

    The concept of a POU in Davis is PEW and should be DOA.

    1. Matt Williams

      Frankly, when you say “that a city unable to effectively manage employee costs and accurately budget and report is incapable of taking on one more complicated service delivery business,” my reply to you is “Outsourcing.” I think you are familiar with that term.

  5. SouthofDavis

    Frankly wrote:

    > The perception is that the city and Council is spending $1 million on a POU
    > study at a time they are also asking us to open our wallets again to keep
    > the city’s financial head from sinking below the water-line.

    It is not a “perception” that the city is spending $1 million they are spending it (even is David says none of the spending should “count” if it comes from different accounts or will be paid back).

    P.S. Thanks to David I got the idea to buy a new Ferrari F430 by telling my wife I’m not “spending” $275K on a toy car since the down payment came from the kids college fund and I will be paying the $200 loan back over time…

    1. growth issue

      LOL SOD, why don’t we just fix the streets with the same type of financing and borrowing from other departments if it no big deal? Using their math then the problem is solved.

    2. Matt Williams

      What I hear you saying here SoD is that the City should stop trying to save money on the millions and millions and millions of dollars it spends each year for electrical power for its General Fund and Enterprise Funds. My back of the envelope estimation of the annual savings for the City Funds is in excess of $600,000 a year at a savings percentage of only 10%. Am I hearing you right? Are you saying we should simply roll over and pay that $600,000 a year, and make no effort to reduce the electrical rates that drive that expenditure?

  6. Michelle Millet

    I prefer thinking long range on these issues. Thinking short term may save us money in the short term, but cost us more further down the road.

    Big picture, the fact of the matter is fossil fuels are a limited resource, use of them may be cheap upfront, but they have environmental costs as well as fiscal costs that are not calculated in to the upfront cost. It does not seem fiscally responsible to continue to rely on them as a fuel source.

    If moving to a POU allows the city to invest in renewable energy then that seems to me the best use of our money, even if the upfront cost where predicted to be higher. The fact that our costs could go down, and we would have control over our PPP money, make further investigating this option the obvious choice.

    1. Frankly

      With fracking the estimate is 100 years of fossil fuel just in the US.

      There is over 500 years of coal in Canada and the US.

      I think you are getting way ahead of yourself.

      In the coming decades we will have more scientific advances to help us shift from fossil fuels to sustainable and green energy sources.

      As the supply dwindles the price will increase. Also, new science will reduce the cost of alternative energy.

      The free market will take care of the problem without the level of economic disruptions that liberal-progressives and technocrats are attempting.

      I am thinking long-term also.

        1. Frankly

          Not really. Much less so than I am concerned about environmental nuts getting a hold of enough levers and pulls of the government to severely cripple the economy and put more people into poverty.

          1. Michelle Millet

            I would fear any type of “nut” getting a hold of enough levers and pulls of the government. Including those so fixated on profits that they are not really concerned with the environmental impacts of their decisions.

        1. Frankly

          Matt – From an idealistic viewpoint, we have zero free-market industries. Everything is so highly regulated that the government ends up skewing the game of winners and losers. However, the energy industry is skewed even more than others. And I am okay with that up to a point. I am okay when the regs and policies are to ensure safety. I am okay when the regs and policies promote fair competition. I am okay when the regs and policies to assist with expensive infrastructure… and for that I am okay if the government takes a piece of the action for their assist. However, I am not in favor of regs and policies to promote a political or environmental agenda (that, BTW, are one in the same today) unless that agenda has zero or minimal material impacts.

          It is basically that story of the wind and the sun competing to see which can get the man to disrobe. The wind blows and blows and the man only pulls more tightly on his ropes. Then the sun shines down and the man gladly peels off his robes and everything else.

          The lesson of this fable is transferable to how we transform an industry. We can invest in R&D for new discoveries that make renewable energy more viable and less expensive, and for discoveries that make fossil fuels cleaner. This will be analogous to the sun shining down on new and better choices. But direct involvement in the markets to try and force-change behavior is like the wind… it will do nothing but disrupt the economy.

          1. Michelle Millet

            However, I am not in favor of regs and policies to promote a political or environmental agenda (that, BTW, are one in the same today) unless that agenda has zero or minimal material impacts.

            Soyou would not be okay with the government fossil fuel subsidies.

  7. Don Shor

    The paper notes that city leaders are reluctant “to discuss details” while they are in early stages of analysis.
    ”All we’re doing now is methodically exploring the issue,” Mayor Joe Krovoza said.

    It seems to me that a commission or an advisory group of interested citizens could be discussing this. In public, and with press coverage. Whether the NRC, or a specially appointed commission, I think there’s a long way to go in publicly vetting this idea. Delay any funding and open this process up.

    1. Michelle Millet

      I believe a Utility Rate Advisory Committee was appointed at the last council meeting (it was on the agenda). Seem like this should fall under their domain.

      As far as costs/rates go I’m not sure this would fall under the domain of the NRC. I could be off base on this but I think the NRC jobs should be to evaluate this move from, as their name implies, a Natural Resource perspective.

      Although it would probably be best if they coordinated with the Utility Rate Advisory Committee (I wonder if a PG&E rep. will be attending their meetings as well as NRC meetings)

    2. iPad Guy

      Agree, Don. It’s difficult to see the urgency in resolving this matter now. Too much other stuff that seems almost unsolvable facing us for years to come.

    3. Matt Williams

      I agree with you wholeheartedly Don. PG&E is going to be just as formidable an obstacle with a short ramp as with a longer ramp to gin up their public relations, dirty-tricks machine. Hiding the ball doesn’t produce any “PG&E advantage” and simultaneously feeds the voracious “mistrust of government machine.”

    4. J.R.

      I completely agree. It is still not clear to me who was trying to ram through the expenditure of one million dollars at this time. That decision is so foolish that one has to consider corruption as a possible cause.

  8. Tia Will

    Frankly

    ” I am not in favor of regs and policies to promote a political or environmental agenda ”

    The problem with this statement is that the “environmental agenda” cannot truly be separated from a “safety” issue for which you say you support regulation. As demonstrated the the recent Charleston chemical spill, more government regulation and or inspection might have prevented this major threat to people’s health and disruption of their lives. On a more limited level, more frequent inspection might have prevented the abandonment of a skilled nursing facility by its owners with residents still on site. Again, I do not see the root problem as government. If individuals ,whether in the private or the public sector ,always acted in an honorable and honest fashion, no regulation would be necessary. Unfortunately, as these cases illustrate, that is not the case. For
    “acting in one’s own true interest” to be effective as a market or societal strategy, it is first necessary to realize that one is not just an individual but also a part of a society, and to realize that one’s own best interest will only be achieved when that interest is aligned with the best interest of the society as well as one’s immediate short term desires.

  9. growth issue

    LOL, Dunning’s take on the POU…..also know as DUD

    “THE NAME GAME … it’s official … our million-dollar plan to wrest the means of power from PG&E will henceforth be known as the Davis Utility District … “DUD” for short …”

Leave a Reply

X Close

Newsletter Sign-Up

X Close

Monthly Subscriber Sign-Up

Enter the maximum amount you want to pay each month
$ USD
Sign up for