Staff Looks for Direction to Continue Pursuit of POU

public-powerLast month, the Davis City Council directed staff to return with a revised resolution, adding steps to the work plan calling for hiring of a project manager to oversee the effort, and adding review of the due diligence work by the Technical Advisory Group and the newly-formed Utility Rate Advisory Committee. Also, staff was directed to conduct research into recent municipalization, how long they took, and how much they cost.

City staff once again clarifies that the approval of this resolution “does not in and of itself, authorize municipalization of electrical assets within the City limits. There is a process prior to taking the necessary steps towards acquisition of the PG&E assets.”

Among the other steps would be that this resolution would “Retain the services of an individual or firm to act as the Project Manager for the work contemplated by this resolution.”  Thus the project manager does not mean someone to manage the POU, but rather to complete the steps.

Among these steps would be “due diligence tasks” which include “case study analysis, asset inventory, utility appraisal, fair market value determination, business plan development, business model development, power portfolio and renewable energy determination, possible decentralized energy service evaluate enterprise investment return potential, risks and opportunities, assess appropriate institutional and legal structures, and cost of service evaluation.”

They would also look into an EIR process pursuant to CEQA (California Environmental Quality Act), an investigation on the steps “necessary for acquisition of electrical infrastructure used within the City Limits.”

All of this would lead up to a work plan, and would provide council “with sufficient information to allow the City Council to make a decision regarding a City-owned electric system within 12 months of the date of the resolution.”

Despite efforts by Joe Krovoza and Dan Wolk to save the POU back in February, the initiative remains controversial.  Part of the concern is whether the city staff, with Steve Pinkerton leaving at the end of the week, has the bandwidth to take the necessary steps.

It was Councilmember Brett Lee who led the way arguing against this initiative in late February.  “When we approved this not too long ago, we had a city manager, we had some other items that were not on our plate,” he said.  “Our city manager has quit.  He’s serving out the rest of his time here.  We’re now in the process of trying to find an interim.”

“Several of you are running for office this June, your bandwidth is fairly full,” he continued.  “We’ve also since the time we voted on this, decided to put a revenue measure for June.  So I’m curious which of my colleagues have the time, energy and bandwidth to lead the effort on the ballot measures and which ones have the time, energy and bandwidth to lead the effort to lead on this public power pursuit?”

The project manager is an acknowledgement from council and staff that there is a lack of ability for city employees to pursue this.

“We’re in a period in my mind of due diligence,” said Mayor Joe Krovoza, noting that the city has two outside reports who have noted that there is promise here from a sustainability perspective and from a monetary savings perspective.  He said, “As council, I think we have a fiduciary duty to investigate that promise.  I see us as embarked upon a one year or so, very methodical consideration of this question in as careful and deliberate a way as possible.”

“The decision on going forward as a POU has, in my mind, not been made,” he said.  “I think that is where this council, and I will take responsibility, certainly didn’t do a good job of its messaging.  I think it became communicated to the public that a decision had been made.”

There has been pushback from PG&E, polling that shows public opposition and concern, and pushback from both the Chamber of Commerce and the Davis Enterprise.

“Now is not the time to take on another huge project. We have too much on our plate as it is,” the Enterprise wrote in February. “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.”

The Enterprise noted 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.

Chamber Executive Director Kemble Pope noted a chamber survey that asked, “The City of Davis is moving forward with plans to separate from Pacific Gas & Electric Company (PG&E) and has spent $400,000 over the past two years on this project. Tonight, they will vote to spend an additional $600,000 on consultants to create a workplan to create a municipally owned electricity enterprise. Total cost of purchasing PG&E’s assets is unknown. SHOULD THE CITY CONTINUE WITH THESE PLANS?”

Kemble Pope reported that 41% said they were unsure, “that they did not have enough information.”  Another 28% said no and there were only 32% that said yes.  “The community is not educated, they may support this project, but we don’t know,” he added.

Sheila Allen, one of the candidates for council also summed up her opposition, noting at the Chamber debate, “This weekend people only wanted to talk about public utility.  I could not find anybody who was interested in us spending money right now to do this.  I absolutely agree that we need to move towards more renewables.  I really appreciated any time the city wants to do something that will save me 20 percent on my electrical bill or any other bill, but I think hiring a manager a moving forward with this right now is not the right time.”

John Munn would add, “I’m not going to sugar-coat this.  I don’t support pursuing a city-run utility at this time or spending money studying it.  We need to fix our problems first and then my requirements for seriously considering a publicly owned utility at any time are that it be clear from the outset that a city owned utility must be as reliable as what it replaces and must provide electricity at rates that are competitive with PG&E.”

The question is whether in the face of this opposition, the council will continue their plans to pursue this project.  No decision will be made on going forward with the project – the only question is whether planning will continue.

—David M. Greenwald reporting

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.

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55 Comments

  1. Frankly

    My parents taught me to eat my peas and carrots before I get to touch any dessert.

    Our city’s fiscal house is a mess. Eating our peas and carrots means fixing our budget deficit and addressing our long-term unfunded liabilities (deferred maintenance and employee retirement costs). These things require us to cut spending and implement the changes for increasing our revenue. Every discretionary penny we have available should be spent on this and nothing else. Then once we have implemented a plan that ensures the city is not heading toward financial insolvency and that allows us to cover all our needs and obligations for city operations, we should start pursuing things like a POU… those “dessert” projects that allow us to fluff our Davis feathers and prance around in liberal progressive pride. But this tendency to chase dessert before we cover our nutrition needs is the genesis of why we are so unhealthy today.

    Where is the economic development plan?

    1. Barack Palin

      LOL Frankly, good metaphor. I think our local liberals feel getting their hands on the POU in order to go green is eating their peas and carrots. Dessert might be funding a bike and electric car zero waste utopia.

      1. Frankly

        I think our local liberals feel getting their hands on the POU in order to go green is eating their peas and carrots.

        Mr. Palin – I think you are on to something here.

        These Davis liberals tend to be the most highly educated from a system that has increasingly shed any mission of teaching life-skills, when one obsessed with creating “good citizens” as defined by the collective.

        Said another way, the average Davis liberal needs to take some business and accounting classes to understand how revenue, expenses, net-excess (“profit” in the non-profit world), investment and returns all work. This is all stuff that the average liberal might find boring and tedious. But once they understand how earning money allows us to spend money… the light bulb should come on.

        Certainly it is more fun to spend other people’s money to acquire those goodies (like a Davis POU), but eventually it runs out and then we can’t even afford peas and carrots.

    2. David Greenwald

      I still don’t understand why you shrug at the amount of potential savings this could bring. This isn’t desert, it’s a more efficient way to buy dinner.

      1. Matt Williams

        David, picking up on your use of their metaphor, what I hear BP and Frankly saying is that if you don’t have any money in your pocket then the thought of buying dinner is unrealistic. They want you to make your dinner at home from the ingredients that currently exist in your refrigerator.

        Their metaphor does have some traction with me, but I believe it paints the issue in very simplistic on-off terms. My engagement with their metaphor would be to commit to eating at home from the refrigerator and while you are sitting around the dinner table eating this week’s meals, take the time to plan the meals for next week.

        1. Frankly

          Geeze… now I am hungry!

          But I will take your metaphor and raise it by another.

          When you need heat surgery, it is probably NOT a reasonable use of time to be planning your next Boston Marathon vacation. It would probably be better to wait until you have at least started your recovery.

          1. Matt Williams

            I will see your metaphor raise and bump the pot one more time. When you nead heart surgery it indeed is not a reasonable use of time to be planning your next Boston Marathon vacation; however it is a very good idea to take a look at the provisions of your health insurance to be sure your coverage isn’t goint to cause you avoidable copay, coinsurance and deductible obligations.

            As they say … if you can’t stand the heat, stay out of the kitchen.

      2. Frankly

        Let me test that premise.

        Would you agree to a statute in this measure that forbids any non-traditional (i.e. green) energy production above and beyond what is mandated/required by the state or federal government unless we maintain a 20% savings in ratepayer AND city energy costs?

        1. Tia Will

          Why in the world would you want to lock yourself into an option that does not include forms of energy production that might be more efficient, safe and more affordable in the future. To me this is the height of closing your eyes to the future while pretending that you are protecting it.

          For me this would have been the equivalent of a farmer who preferred using his horse and buggy saying ” I will support improvement of the roads into town, but only if you pass an ordinance that says that no one can bring in those new fangled automobiles.” After all, the automobile was very “non traditional” when first introduced.

      3. Mark West

        “Potential savings” is the part that needs to be emphasized in this discussion, with “potential losses” receiving equal billing. I see the 20% claim as being a best case result and by no means a certainty. Unfortunately, no one from the City is presenting the information we need to determine what the worst case scenario would look like, saying instead that we need to spend the $600,000 in order to find out. With that being the case, going forward with the POU analysis should wait until we have an extra $600,000 burning a whole in our pockets.

        1. Barack Palin

          Something else being left out of this equation is how much will Davis lose in PG&E taxation and loss of PG&E paying fees for access to our roads and infrastructure?

          1. Matt Williams

            What PG&E taxation do you anticipate the City losing?

            What PG&E roads and infrastructure access fees does PG&E currently pay?

          2. Matt Williams

            Those are the fees. What are the taxes?

            What is the proportion of the fees that are for Natural Gas, and Electric respectively? PG&E will continue to be the Natural Gas provider.

          1. Michelle Millet

            And I would add that the $600,000 should be burning a whole hole in our pockets!

            Are you saying you are against spending $600,000 upfront even if it resulted in long term savings? I don’t understand how this would be considered fiscally responsible?

          1. Mark West

            The real question is how many years at the new potential savings rate will it take to pay for all the legal fees associated with this process? We may well eventually save money, but how many years from now before those savings kick in? 10, 20, 50? Will we see any savings at all if City employees are running the show, or will we just see a continuation of our existing runaway compensation problem, with a larger number of employees. I don’t think anyone really has a handle on those issues.

            The 20% potential savings, or even Matt’s 10% savings, are still ‘pie in the sky’ numbers with no good estimate of the potential downside.

          2. Michelle Millet

            The real question is how many years at the new potential savings rate will it take to pay for all the legal fees associated with this process? We may well eventually save money, but how many years from now before those savings kick in? 10, 20, 50?

            Mark I think these are important question that IMO need to be evaluated before we move forward. They were brought up at the last council meeting which is why the vote to move forward was delayed. Staff was asked to come back with examples of other cities who have moved from a IOU to a POU. Hopefully after tomorrows meeting we will have a better sense of what this path will look like.

        2. Tia Will

          Mark West

          “The 20% potential savings, or even Matt’s 10% savings, are still ‘pie in the sky’ numbers with no good estimate of the potential downside.”

          I find this a curious comment coming from you since, when I asked you about the
          “potential revenues” from businesses in a business park, the answer that you gave me was essentially, I am not worried about that. Does this mean that you only worry about fiscal reality in the form of accurate projections when it involves actions taken by the city, but are willing to give a free pass to anything that is a private sector endeavor ?

          1. Mark West

            I am not worried about the revenues from a business park because as long as there is demand for space for growing businesses in town that business park will create new revenues for the City. Why? Because those business have to control their costs in order to make a profit.

            Not so for a City run enterprise such as the POU. A City run venture will have all the hallmarks of the current enterprise, with unsustainable compensation costs rising faster than the increase in revenues. There is no incentive to do otherwise since the City can always raise taxes on the citizens if things don’t work out. Businesses have a strong incentive to control costs since they don’t have the option of raising taxes. Until the City can demonstrate the ability to stop compensation growth, there is no reason to believe that there will be any long-term savings from the POU.

  2. Barack Palin

    Buying the POU with the intent on going green sounds nice but just look at Europe and it’s not all it’s cracked up to be. Right now fracking is the way to go, fracking has done much more to cut back on CO2 than any green technology.

    “Estimates suggest that using carbon taxes to achieve a further 330-megaton CO2 reduction in the EU would cost $250 billion per year. Meanwhile, the fracking bonanza in the U.S. not only delivers a much greater reduction for free, but also creates long-term social benefits through lower energy costs.

    The amazing truth is that fracking has succeeded where Kyoto and carbon taxes have failed. As shown in a study by the Breakthrough Institute, fracking was built on substantial government investment in technological innovation for three decades.

    Climate economists repeatedly have pointed out that such energy innovation is the most effective climate solution, because it is the surest way to drive the price of future green energy sources below that of fossil fuels. By contrast, subsidizing current, ineffective solar power or ethanol mostly wastes money while benefiting special interests.

    Fracking is not a panacea, but it really is by far this decade’s best green-energy option.”

    http://www.slate.com/articles/health_and_science/project_syndicate/2012/09/thanks_to_fracking_u_s_carbon_emissions_are_at_the_lowest_levels_in_20_years_.html

      1. Tia Will

        Frankly

        As a self proclaimed liberal, no hatred here. Just a willingness to look at the pros and cons of any initiative and recognize that all strategies, and individuals,have their strengths and weaknesses. I think that you may have a little role or identity confusion here. I have never claimed to “hate” either fracking or George Bush. Nor has any other poster who claims the role of liberal to the best of my knowledge. You, however, have openly posted your, yes, “hatred” for Barack Obama. I am no psychologist, but this resembles projection from my point of view.

        1. Frankly

          I don’t really hate Barak Obama the man. I hate his performance and lack of performance. Barak is exactly my age. We both play basketball and golf. I would bet we would probably get along well enough socially. It would just be his “friends” that would cause me to skip his dinner parties.

          But liberals hated and still hate George Bush.

          And many of them hate fracking.

          And most of them that hate both of these things can’t succinctly explain why. The best way to see this is to check out the camera interviews and anti-fracking activities of people in New York, San Francisco and our college campuses.

          1. Michelle Millet

            The best way to see this is to check out the camera interviews and anti-fracking activities of people in New York, San Francisco and our college campuses

            Why do judge an entire group by the actions of a few on the extreme? Would you like to be judged by the actions of extremist who share some of your political views?

          2. Michelle Millet

            But liberals hated and still hate George Bush.

            Does me saying I don’t really hate George Bush, that we probably have a lot in common, disprove your theory about how all liberals feel. Or does this only work one way?

          3. Tia Will

            But, respectfully Frankly, I just told you that I am a liberal and I don’t hate George Bush. Using your same rationale, I might enjoy spending time with him and bonding over a mutual interest in painting. However, I deplored his decision to involve the United States in Iraq at the cost of, how many lives ? So, who exactly, are these liberals that you are claiming “hate “George Bush ?

    1. Tia Will

      Barack Palin

      “Right now fracking is the way to go, fracking has done much more to cut back on CO2 than any green technology.”

      Even if you are correct in this assertion, which of course ignores any other environmental degradation that might be caused by fracking, one would need to consider why this is the case. Could it perhaps in part be due to fracking being supported by some companies and individuals with some very deep pockets, or could there possibly be a component of the ideological resistance that we see here from our more conservative posters anytime a
      “green initiative ” is mentioned. I can’t help but wonder how much further along “green strategies” might be had they had they received the same consistent support as have the “frackers’.

      1. Frankly

        Tia – You are just ignoring the point of math. Conservatives would support any and all green energy movements if any of them made financial sense. Currently they do not. But technology is advancing and some eventually will. For example, more people are putting solar panels on their roof because the economics pencil out. Same with hybrid and battery-powered cars… some are starting to be affordable when comparing the cost/savings change of gas use.

        When things make economic sense, then conservatives approve them.

        Compare that to liberals… much of what they demand makes no economic sense. Like blocking frack drilling. How many more people would have died in this country had we not leveraged frack drilling technology to lower the cost of natural gas? How much more coal pollution would have been spewed into the air had we not replaced so many coal burning plants with cheaper and cleaner natural gas?

        Like I said, the liberal opposition to fracking is largely irrational and certainly void of math.

        1. Don Shor

          Conservatives would support any and all green energy movements if any of them made financial sense.

          Yes, but, unfortunately we now have some conservatives seeking to impose obstacles to solar power. They’re trying to block net metering, trying to repeal the green energy mandates that helped to jumpstart the use of these sources, and more. And if you wonder why people despise the Koch brothers, it’s because they’re the ones who are bankrolling stuff like this. http://www.latimes.com/nation/la-na-solar-kochs-20140420,0,7412286.story#axzz2zXQTkVde

      2. Don Shor

        Could it perhaps in part be due to fracking being supported by some companies and individuals with some very deep pockets…

        No, it’s because natural gas is now so inexpensive, due to the new technology, that it is displacing coal as an energy source.
        http://www.bloomberg.com/news/2012-03-27/fracking-boom-has-u-s-cutting-climate-warming-emissions.html

        That shift, combined with state programs to encourage renewable energy and new rules from the Environmental Protection Agency that could come as early as today, has put the country on course to cut domestic greenhouse-gas emissions 12 percent by 2020, on par with what the failed cap-and-trade legislation aimed to achieve, said Dallas Burtraw, a fellow at Resources for the Future in Washington.

        Interesting to realize I was in high school with that guy. He also attended UCD.

      3. Barack Palin

        Tia Will:
        “I can’t help but wonder how much further along “green strategies” might be had they had they received the same consistent support as have the “frackers’.”

        You’re kidding right. Are you actually saying that green technology hasn’t received consistent support? How many billions have governments all over the world already poured into green strategies? Ever heard of Solyndra? How many companies have invested in renewable energy? I would bet you that green has had many times over the ammount of funds that fracking ever had invested in it. I know liberals don’t like it but it’s just a fact that fracking is has done more to cut CO2 than green technology.

        1. Tia Will

          Barack Palin

          “Ever heard of Solyndra?” Yes, BP I have heard of this and I wondered which of you was going to bring it up. I have also heard of the Edsel, but it’s failure did not mean that the private automobile has not become our preferred mode of transportation.

          1. Barack Palin

            Support your assertion that green strategies haven’t received the same consistent support as the “frackers”.

    1. Mark West

      It is potentially a “huge opportunity” for long-term savings if we contract with an outside entity to operate it. If we try to operate it with City employees, it will be a boondoggle and a huge waste of taxpayer funds.

          1. Michelle Millet

            Is there anything out there that says who will run it? If so I haven’t seen it. (I won’t rule out the chance that I have seen it and forgotten it).

          2. South of Davis

            Michelle wrote:

            > Is there anything out there that says who will run it?
            > If so I haven’t seen it.

            It looks like:

            We don’t know who will run it
            We don’t know what it will cost to hire people to run it
            We don’t know if PG&E will agree to a sale
            We don’t know what the sale price will be

            Am I the only one that finds it strange that anyone can tell me with a straight face that:

            We will all see our bills drop by 20%?

          3. Barack Palin

            SOD, it seems the only thing we do know for sure is if they do buy it they’ll take it green.

          4. Michelle Millet

            We will all see our bills drop by 20%?

            From what I understand that savings is based on the difference between what customers of POU’s pay for power versus what customers of IOU pay due to the fact that POU do not have shareholder expenses.

          5. Michelle Millet

            There is also the 4.3 millions PPP dollars generated annually that we would have control over.

          6. South of Davis

            Michelle wrote:

            > From what I understand that savings
            > is based on the difference between what
            > customers of POU’s pay for power versus
            > what customers of IOU pay due to the fact
            > that POU do not have shareholder expenses.

            We can’t forget that the Palo Alto utility is over 100 years old and bought their land and other assets for next to nothing. The home my wife’s grandfather paid $20K for in Palo Alto in the 50’s sold a while back for over $2 MILLION (More than 100x more). Guess who could charge less rent for a house in Palo Alto, a guy that bought the house for $20K in 1950 or a guy that paid $2 Million today? (only an idiot would think he could cover his costs charging that same amount as someone that has been in business for 50-100 years and not paying off loans)…

  3. Tia Will

    Mark West

    I cannot show you where anyone from the City has said that it would not be run by City employees. However it was my impression from the presentation of the representative from Palo Alto who spoke on their city’s experience and gave some limited answers to questions that it would be advisable for the city to hire outside expertise in regard to running the operation due to the complexities involved which she clearly stated had taken Palo Alto many years to master.

    1. Mark West

      Wishful thinking Tia. Until the City unequivocally states that they will outsource operations there is absolutely no reason to spend another dime on the process.

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