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