The Publicly Owned Utility has become a source of community scrutiny on the operations of city government ever since the public discovered earlier this year that the city had spent $400,000 on a feasibility study and that council earlier this year had approved an additional $600,000 loan provided by the Wastewater Enterprise Fund to continue to study and conduct outreach on the feasibility of the city moving to a publicly owned utility. The $400,000 feasibility study estimates that the city and ratepayers could save as much as 20% on electrical bills.
For this coming Tuesday’s council meeting, staff recommends that the city council, “Approve a work program that specifically describes activities and tasks to be undertaken over the next six months that would enable staff to continue the due diligence process, educate the community about public owned utilities and develop partnerships with community groups that would collaborate with the City in its efforts to achieve its energy goals and objectives.”
The staff report specifically highlights hiring a consultant to manage the implementation of this work program at the cost of $30,000 plus a communications consultant to assist with public education, outreach to stakeholders and preparation/implementation of a communications plan at the cost of $25,000.
The city would also “prepare “studies of successfully implemented publicly-owned electrical utilities that were created within the service boundaries of an investor-owned utility. Prepare a business plan for the operation of a public electrical utility, collaborating with local resources, and continue to work with PG&E regarding energy goals and objectives.”
All told moving forward with the staff recommendations would authorize $85,000 in expenditures, which would cover expenses for about six months. This money would come out of the $600,000 loaned and allocated from the Wastewater Enterprise Fund.
The city continues to stress that none of these past or current actions authorizes the actual implementation of the POU.
Back in December, the council approved a resolution that authorized then City Manager Steve Pinkerton and City Attorney Harriet Steiner, “to initiate actions necessary to provide municipal electrical utility service to Davis residents.”
In late January, the council established a four-part work plan and authorized the city to execute consultant agreements necessary to complete the work not to exceed $600,000. That money was to be a loaned from the Wastewater Enterprise Fund to be paid back at the rate of $66,000 a year over a ten year period.
By late March, 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 efforts in other communities, specifically looking at how long they took and how much they cost.”
However, once the public and PG&E caught onto the city’s plans this became controversial.
Back in January, Chamber Executive Director Kemble Pope reported on a poll conducted by the Chamber that found that most of the respondents were unsure whether the city should continue with these plans. Their selection in the poll was “that they did not have enough information.” Mr. Pope told the Council, “The community is not educated, they may support this project, but we don’t know.”
Meanwhile Alicia Okelo-Odongo, PG&E’s government relations manager said a PG&E working group is prepared to work with the city’s leadership and sustainability experts “to explore innovative partnerships to help the city achieve its energy goals.”
“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,” Ms. Okelo-Odongo continued; however, she 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.”
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, also a candidate for council, has stated, “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.”
Daniel Parrella has pushed an alternative model noted recently, “From my experience walking precincts, I would estimate at least 9 out of 10 people disapprove of the $600,000 loan to study DMUD.” He would state, “For someone who has a lot of faith in the Public Power movement it is, at times, difficult for me to admit that the current detractors have a point when it comes to council priorities. It is also very important to remember that the public does not care one bit about whether the money comes from the general fund, the enterprise fund, or the POU wish fund. The public views this loan as a clear disconnect on behalf of the council, and with two taxes coming up to vote this year the last thing we need is a public that thinks the council will spend their money frivolously.”
He argues, “My aim is to direct the discussion away from DMUD and focus on what I believe is a far more realistic option, that of a Community Choice Aggregation.”
“Community Choice Aggregation (CCA) is a state policy that enables local governments to aggregate electricity demand within their jurisdictions in order to procure alternative energy supplies while maintaining the existing electricity provider for transmission and distribution services,” he writes. “The key difference between a CCA and DMUD is a CCA only controls the generation of electricity; we would still pay PG&E for transmission fees. DMUD would allow us full control over every aspect of our utility grid, and theoretically greater cost savings. Below is a link to the staff report.”
Right now, the city is essentially spending money on making an informed choice. As staff notes, “A key recommendation of this report is staff’s request that the City Council authorize the City Manager and City Attorney initiate specific activities and tasks necessary to provide City Council sufficient information to, at an appropriate point, allow for a decision to be made regarding the formation and operation of a publicly-owned utility to serve the City of Davis.”
Many question the timing of this initiative. As Brett Lee noted a few weeks ago, when the council originally made the decision, they did not know that the city manager would be leaving and perhaps failed to recognize the degree of disruption that the campaign would take.
At the same time, the city recognizes a potential for saving 20% on power, which in the water and wastewater enterprise funds alone could come to between $600,000 to $1.2 million annually in a $6 million a year expenditure on electricity just in water.
Put into that context a one-time expenditure of $600,000 is a reasonable risk from the council’s perspective.
—David M. Greenwald reporting