Council Votes 4-1 to Rescind $600,000 Authorization for POU

public-powerby Michelle Millet

Councilmember Brett Lee made a motion to rescind the previous authorization to spend up to $600,000 on the study of a POU. Councilmember Lucas Frerichs seconded the motion. It passed 4-1 with Councilmember Rochelle Swanson and Mayor Pro Tem Dan Wolk supporting the motion and Mayor Joe Krovoza opposing it.

The Vanguard will update this story.

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Tonight council  is scheduled to vote on resolution that authorizes staff to continue taking the necessary actions needed to form a publicly owned electric utility.

Specifically, the resolution identifies the steps and activities that need be taken to determine whether to move forward with actions necessary to create a publicly-owned electrical utility, as well as the tasks necessary to make the utility operational.

The resolution states the staff will provide sufficient information to allow council to make this determination within the next 12 months.

These steps include utilizing community resources such as the Valley Climate Action Center, Davis Coalition for Local Power, UC Davis Energy Institute, and the City of Davis Energy Services Options Technical Advisory Group, completing  various due diligence tasks, initiating an environmental review pursuant to CEQA, investigating and reporting the steps necessary for acquisition of electrical infrastructure, and continuing discussions with PG&E regarding the implementation  of this resolution and any alternative proposals that PG&E might propose.

A vote to move forward with this plan was set to take place on March 25, but was delayed at the request of Councilmember Brett Lee.

Lee stated concerns over adopting the resolution before some key question regarding the process of moving from an investor owned utility (IOU) to a private owned utility (POU) had been addressed.

He requested that staff attempt to contact communities that have recently made this transition and ask them questions like: When did you start?  When did you finish?  How long did the legal issue drag on, and  how much did it cost?

Lee stated, “We will likely end up in court and there will be legal costs involved. I don’t know whether this will be millions of dollars in legal fees or whether it will be tens of millions in legal fees. I don’t know whether the journey is a 1 year journey or a 10 year journey.  Fiduciary responsibility requires us to have at least half a sense of what we are trying to do in terms of the cost involved and the time involved.” He clarified that his goal was not to derail the process, but he felt this was a necessary first step to take.

The May 13 staff report, though, does not specially address  the questions raised by Councilmember Lee.

In response to the question of how long the process would take, staff directed council to an excerpt from a PowerPoint presentation given in December, during which a consultant estimated the acquisition could be achieved in 18-36 months. Staff estimates that a condemnation proceeding could add another 2 years to the timeline.

The report does not include any specific information regarding other municipalities’ efforts to move from an IOU to POU.

According to the Enterprise article,  “Davis’ Path to Public Power is not like others,” published on April 1, there is no city in California that has made the transition from a IOU to a POU.

The article states, “The municipal utilities in California are usually much like Palo Alto, Alameda, Burbank and Glendale. They are long-serving utilities incorporated in the late 1800s or the early 20th century without the controversy of having a high-profile court fight or regulatory battle with an investor-owned utility.”

Staff does include a table containing a list of Publicly Owned Electric Utilities that were established between 2003-2013.  Of the 17 new public power utilities formed during this time, 7 are located in California.  Of those 7 only 2 – McAllister Ranch Irrigation District and  Port of Stockton Electric, which provides power to an industrial wharf in Stockton – have PG&E listed as their previous supplier. Neither of these utility companies appear to provide residential electric service.

If Davis continues to pursue a POU it is expected to face strong opposition from PG&E, who has made it clear that they will oppose such efforts.

It is reported that in 2006 PG&E spent $11 million dollars opposing a plan that would have allowed SMUD (Sacramento Municipal Utility District) to take over electric services for Davis and other parts of Yolo County that were served by PG&E.  The investor-owned utility ran attack ads, conducted push surveys and sent mailers advocating against the annexation.

If tonight’s resolution is approved, staff is requesting that the city hire a temporary employee or a consultant to manage the implementation of the work program and engage a communication consultant to prepare and implement a communication plan that addresses public education and stakeholder outreach.

About The Author

Michelle Millet is a 25-year resident of Davis. She currently serves as the Chair of the Natural Resource Commission.

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71 Comments

  1. Davis Progressive

    surprised no one wants to weigh in on this. i understand it’s been argued to death. however, my question is what do people think of the cca alternative that parrella has been championing?

    1. Tia Will

      DP

      What I would actually like to see the council do is to direct the staff to come up with a comprehensive look at these two alternatives, a POU and the CCA alternative and report back on the pros and cons of each.

      Frankly and Michelle

      I do not see this as a peas and carrots vs dessert issue. I see it as an exclusive focus on the present which is what Frankly seems to be advocating vs a broader of view of what is best for us now, and what will be best for us in the future. When we force our kids to “eat their peas and carrots first” we may be inadvertently engaging them in a war in which all the parent can see is the short term nutritional gain and all the kid can see is the goodies.
      Good parenting requires weighing the benefits of the present with those of the future, namely a family that is able to view their short and long term options in a realistic pragmatic fashion without pretending that the future will not be someday as important as the present is to us now.

        1. South of Davis

          It is a waste of time to do ANYTHING and spend ANY money until we get PG&E to agree to a price where they will sell their assets.

          If I wanted to start a Public Owned Nursery (PON) It would be easy to say that I could save everyone 20% on plants when I was using a $10,000 purchase price for the location of the PON on 5th street.

          Buying plants for 20% off sounds great but won’t happen if we have to pay more for the real estate (way more if we need to add the legal fees to take the property via eminent domain).

          1. Davis Progressive

            you’re not politically savvy if you argue that line.

            “It is a waste of time to do ANYTHING and spend ANY money until we get PG&E to agree to a price where they will sell their assets.”

            you have to put pressure on pg&e and second there is a process through the cpuc to do that. pg&e isn’t quite as far in the driver’s seat there.

          2. South of Davis

            DP wrote:

            > you’re not politically savvy if you argue that line.

            PG&E has revenue of close to $15 BILLION. If cities could really “save 20%” that it $3 BILLION a year in potential revenue for politicians (that anyone “politically savvy” knows they would have gone after if the savings were real). As far as I know we have not had any recent POUs start up that save anyone money…

          3. Mark West

            You are exactly right DP. PG&E will fight tooth and nail to prevent it from happening, which makes the claims of proponents so obviously false since they do not include the cost of the fight that everyone knows is coming, in their projections.

            I think the POU is a great idea, just as is the idea of moving the rail line. When we have excess staff time and financial resources to invest in these projects, we should do so. Neither however will have a positive impact on our fiscal situation in the foreseeable future so they should only be pursued if we can find someone else to do the heavy lifting, at little or no cost to the City (in terms of staff time or money).

          4. Davis Progressive

            the rail relocation effort is a regional one and not one taking up a ton of staff time.

          5. Matt Williams

            DP, other than Herb Niederberger, and now the new Interim City Manager, Gene Rogers, is there any existing City of Davis staff member whou has any of the requisite expertise?

            The reason I ask that question is because Don Shor said earlier that “Staff doesn’t have time.” If none of the staff have the appropriate expertise, why will any of them be devoting time to it?

          6. Davis Progressive

            the pou had experts in the field lined up to do a lot of the work and advice plus a very small expenditure for a project manager.

          7. South of Davis

            Mark wrote:

            > I think the POU is a great idea,
            > just as is the idea of moving the
            > rail line.

            So do I… It is important to be realistic and realize that just like unions have a HUGE amount of political power in this state PG&E also has a HUGE amount of political power in this state. For anyone that thinks it will be easy to get PG&E to let Davis save money by taking over their assets without a fight I’m betting that we will have an easier time saving money by kicking out the fire union and hiring a private company to run the fire stations (basically both are impossible and paying a consultant to “study” private power is as big a waste of money as paying a consultant to “study” private fire)…

  2. Napoleon Pig IV

    Valuable steps in the flow of greater power to the porcine pinnacle, unless of course the sheep get restless and stir the pot on election day. But why fear the unlikely when history so clearly favors Power to the Pigs!

  3. Michelle Millet

    Forming a POU appears to be the best way for the city to reach its renewable energy goal and from what I understand customers of POU pay less then investor owned ones.

    While I think there are some legitimate reasons to not pursue this option at the present moment these aren’t the reasons I’m hearing from the endeavor’s loudest critics.

    IF spending 1 million upfront results in long term cost savings, IMO its fiscally irresponsible not to move forward. It is my understanding that this is the assumption we are working under, but that point seems to be getting lost. I would recommend those supporting the move to a POU do a better job explaining to the public how this transition will result in cheaper electricity bills, because I don’t think people have either heard this or if they have they don’t seem to believe it.

    1. Davis Progressive

      the million dollar issue is bs, it’s spread across ten years and the savings will more than pay it back. the other issues are real. in the cca, if pg&e really holds onto the lines and infrastructure, that might be a way to get them to be more reasonable.

        1. South of Davis

          DP wrote:

          > the million dollar issue is bs, it’s spread across ten years

          Have you ever got mad about someone complaining about a “top 1%” person living in a “million dollar home” and say “that’s bs since it is spread across 30 years”?

  4. Michelle Millet

    It sobering to think about the smear campaign PG&E will launch if we pursue public power. Given the lack of information the public currently has on the advantages of forming a POU, IMO, PG&E is going to have a very easy time convincing people it’s not a good idea, and the collateral damage that could result from such a battle quite frankly is something that deeply concerns me.

    1. Frankly

      PG&E Campaign..

      POU = PEW

      “Forming a POU appears to be the best way for the city to reach its renewable energy goal”

      And here we see what the REAL driver is.

      How about the city focus first on financial solvency and maintaining all of our existing infrastructure before taking on more.

      What kind of problems would we have today if the City had treated our POU infrastructure like they have our roads and city buildings?

      Green energy is dessert. You need to eat your peas and carrots first young lady.

      1. Michelle Millet

        And here we see what the REAL driver is.

        It is one of the main drivers yes, I don’t see anyone denying that.

        How about the city focus first on financial solvency and maintaining all of our existing infrastructure before taking on more.

        I’m not going disagree with you that this should be our primary focus right now.

        What kind of problems would we have today if the City had treated our POU infrastructure like they have our roads and city buildings?

        Probably big ones.

        Green energy is dessert.

        Sorry, this I’m going to disagree with you on.

        1. Michelle Millet

          What kind of problems would we have today if the City had treated our POU infrastructure like they have our roads and city buildings?

          I wonder, I do not know, if there are stricter regulations regarding the maintenance and upkeep of utility infrastructure then those that regulate roads/building.

      2. South of Davis

        Michelle wrote:

        > Forming a POU appears to be the best way for the
        > city to reach its renewable energy goal

        Then Frankly wrote:

        > And here we see what the REAL driver is.

        The “REAL” driver is getting money to friends (that happen to be in the renewable energy business) and create more union jobs (where each member is forced by law to give a portion of each check to the union that supports the politicians that grow union employment, pay and benefits)…

  5. Michelle Millet

    Lee made a motion to rescind the previous authorization to spend up to $600,000 on the study of a POU. Frerichs 2nd the motion. It passed 4-1 with Swanson and Wolk supporting the motion and Krovoza opposing.

  6. Don Shor

    Along with the other headline this morning — Council Clears Way For Innovation Center RFEI To Move Forward — I’d say the council should quiet some of the persistent criticism from the last few weeks.

    1. Davis Progressive

      no just shift it. the council basically caved to what is probably a vocal minority at this point. that doesn’t give me any confidence that they have the mettle to make the tough decisions.

      1. South of Davis

        DP wrote:

        > the council basically caved to what is probably a vocal minority

        I’m betting that if DP walked around town today asking people “should the Davis city council borrow $1 million it does not have to “study” creating a utility run by the city” the “majority” will say no (politicians never do anything the “majority” does not like unless they are getting a ton of money from the people with the “minority” opinion)…

        1. Davis Progressive

          do we want council that makes the right decisions or bows to the will of the people? what i see is that pinkerton is gone, three councilmembers are running for reelection and there is no political will left. given what we have to do in the next nine months – that doesn’t bode well.

          i heard lucas once again questioning whether we would do a parcel tax. not good. not good.

        2. Matt Williams

          SoD said … “creating a utility run by the city.”

          The fact that you can say that with a straight face SoD shows you haven’t been paying attention and/or listening. The City has no intention of “running” the utility. That set of tasks will be outsourced to SMUD, or Roseville Electric, or PG&E themselves.

          RIF

  7. Tia Will

    I am deeply disappointed in the action of the CC on the issue of information gathering for a POU last night.
    We have heard the council criticized for not exhibiting leadership, and then with the exception of Joe Krovoza, all four of the members backed away from a position of true leadership in being willing to investigate a huge potential, albeit, future benefit for the city.

    I am also disappointed in the lack of transparency in the reasons given. We went from” staff didn’t provide desired information”, to “the timing isn’t right due to finances, due to we have to much on our plates, due to we are hearing too much push back from the community. Too much “push back” for what ? For consensus building, maybe?Too much to get elected or re elected, maybe ? For other issues more important to various individuals such as measure O and measure P and a potential parcel tax, maybe ? We don’t know because we weren’t told.

    Finally, I simply am disappointed that the action taken did not in any way reflect the words spoken. All four of the CC members who voted to rescind sayed they actually favored the concept of the POU and that this was not an
    attempt to “derail” the project. However, the action they took did exactly that. There were other options available.
    The could have done what both Joe and Rochelle spoke about, namely breaking it down into smaller pieces.
    They could have directed the staff to answer a very specific list of questions to be drawn up by Brett Lee and bring the answers back at a specified date.
    They could have set a definite timeline to re address the issue.
    The action they took did none of these things. They simply took it off the table with vague comments about how it could be taken up again once the new CC members are seated. And what will have changed when that occurs ?
    Now we will have at least one new comer who will have to be brought up to speed, and oh ,yes there is the issue of the parcel tax , and a new city manager, and the innovation park project and ……

    What I see here is leadership and prioritization that was started, and then abandoned. Very short sighted.
    Very sad.

    1. Mark West

      I completely disagree. What we saw last night was a Council majority that finally realized that you have to prioritize the way you spend money and time during a fiscal crisis. What I saw was leadership that recognized that you have to pay for basic services before you spend money on candy. The POU will not solve our fiscal crisis, neither now or long term. We have many more important items to focus on for the next couple of years without being distracted by good ideas that are not part of the comprehensive solution of our current fiscal reality.

      “They could have directed the staff to answer a very specific list of questions to be drawn up by Brett Lee and bring the answers back at a specified date.”

      Brett asked very specific questions at the last meeting. Staff did not answer them.

      1. Davis Progressive

        “I completely disagree. What we saw last night was a Council majority that finally realized that you have to prioritize the way you spend money and time during a fiscal crisis.”

        no. they understood that the public wasn’t with them, and they pulled back in the face of a tax election in hopes of it passing and then they’ll take another shot at it.

    2. Michelle Millet

      We have heard the council criticized for not exhibiting leadership, and then with the exception of Joe Krovoza, all four of the members backed away from a position of true leadership in being willing to investigate a huge potential, albeit, future benefit for the city.

      This is not true. Brett clearly stated he wished to continue looking into the POU, what he stated was that he did not want to continue spending money until some key question were addressed. Staff has yet to address the questions.

      1. Tia Will

        Michelle

        I agree that is what Brett said. I will stand by my statement that he equally well have provided staff with the full set of questions that he wanted answered and set a new date to bring this up. Instead, he left the timing open.

    3. Michelle Millet

      I am also disappointed in the lack of transparency in the reasons given. We went from” staff didn’t provide desired information”, to “the timing isn’t right due to finances, due to we have to much on our plates, due to we are hearing too much push back from the community.

      Again Tia, this is not an accurate or fair portrayal of what has happened. The last time council discussed this Brett and Rochelle both expressed concerns that there was little information regarding what the journey from a IOU to POU would look like. Concerns have been expressed over and over again that council has too much on its plate. (When the first voted to approve the POU they did not know they would be needing a new city manager).

        1. Michelle Millet

          Brett’s point is that the city should not be spending money for a project manager to answer some very fundamental basic questions. We have a lot of strong supporters of public power in the this community that could probably answer some of these question off the top of their head.

          (I just finished the follow up piece-which will be posted tomorrow.)

    1. Mark West

      To what end? So the Staff can ignore them again. The process should stop until the questions are answered to the satisfaction of Council.

      One of the big issues in this City is the prevalence of Staff members who operate with their own personal agendas, ignoring Council directives and pushing forward with their own intentions in mind. You don’t combat that by asking again with a big ‘pretty please’ added. You combat it by stopping the process immediately and requiring compliance.

      1. Michelle Millet

        To what end? So the Staff can ignore them again. The process should stop until the questions are answered to the satisfaction of Council.

        I’m going to agree with Mark on this. Very specific question were asked multiply times and they have yet to be addressed. Rochelle commented that if these questions had been answered then she may have voted differently last night.

      2. Tia Will

        I disagree. Staff are in no way held accountable by this strategy. If they can block any project just by failing to provide answers, we might as well not have a city council and just let the staff decide everything.

          1. Tia Will

            No, but then I would not tolerate a lab tech refusing to run my tests.
            And I fail to see how it is not being blocked if someone is refusing to provide answers.

          2. Matt Williams

            I’m with Tia 100%. Brett called out Herb Niederberger from the dais, but then later during a break sought Herb out and told him, “I wasn’t trying to picki on you.” I couldn’t help but wonder at the time why Brett was backpedaling after being so clear from the dais. I’d forgotten about that exchange until reading this comment. Brett’s actions seem to be just as contradictory now as they were at the time.

  8. Tia Will

    “What we saw last night was a Council majority that finally realized that you have to prioritize the way you spend money and time during a fiscal crisis.’

    What I saw last night is a Council majority that moved closer to your view of appropriate prioritization. I do not agree that the POU represents “candy”. I see a move away from an outmoded business model that helps only
    PG&E and its investors as a very worthy project.

      1. Michelle Millet

        I’m going to disagree with you here Mark. According to Krovoza last night customers could see up to 130 million dollars in savings over the next 30 years by switching to a POU.

        1. Mark West

          At this point, the savings are entirely imaginary. Given that Joe is one of the strongest proponents of project, I don’t think it is reasonable to use his numbers as a justification for moving forward. The POU may save customers money in the long run, but so far there are no real world examples that the proponents can point to to demonstrate the validity of that claim.

          1. Tia Will

            Mark

            “At this point, the savings are entirely imaginary.”

            At this point the Innovation Park is entirely imaginary. That does not mean that we should not be pursuing it.

          2. Mark West

            There are thousands of business parks to look at, learn from and compare to. No one will be exactly like Davis, but there is a long history of data that may be used to make reasonable and conservative revenue projections.

            There are no recently formed IOU to POU transitions that can be used to justify the current projected rate savings, nor to determine the upfront costs of fighting PG&E and purchasing the infrastructure. The projections are entirely imaginary.

          3. Matt Williams

            Mark, you are defining proof very narrowly. SMUD very clearly laid out what the savings would be in the official election documents regarding the annexation vote. Are you labeling SMUD as a bunch of bold-faced liars?

          4. Mark West

            We are not dealing with SMUD Matt, though I wish we were. SMUD has access to low cost power that Davis POU will not be able to acquire. SMUD has demonstrated over a long period of time that they can manage their compensation in a sustainable way, The City of Davis has not. SMUD knows what they are doing, Davis POU does not. I believe SMUD’s projections because they are based on facts. Everything associated with the Davis POU is based on the speculation of a well paid consultant.

          5. Matt Williams

            Mark, we have had this conversation before, but let’s have it again. The Davis POU will not be managing its compensation. That will be the responsibility of the company that wins the operations outsourcing contract. SMUD is the most likely successful bidder when and if such a solicitation happens. So in that scenario SMUD will be managing the compensation. If it isn’t SMUD it will probably be either Roseville Electric or PG&E themselves. You are applying worst case scenario “contamination” to any discussions of a POU based on your assessment of other City-operated services.

            Further, because of the very early stages that this process is in, we truly don’t know the specifics associated with “access to power.” If SMUD gets the operations contract, they may well desire some of the power sourcing business as well. They clearly were willing to commit to being the power source in 2006. It was a good business decision for them then. I can’t see any reason why it wouldn’t be a good decision for them now.

            Bottom-line, you are giving the innovation park every benefit of the doubt, while at the same time giving the effort to save money on our electrical power no benefit of the doubt. All I ask for, and all Tia is asking for is balance as we look at these ways to make our community more fiscally and economically sustainable.

          6. South of Davis

            Matt wrote:

            > SMUD is the most
            > likely successful
            > bidder

            If the goal of the POU was to really start a utility (vs. funnel $1 million of tax dollars to friends to “study” things) it seems like getting an actual bid from SMUD (with an actual annual cost) would be a good place to start.

          7. Frankly

            Comparing business park economic development to a POU is like comparing Target to a lemonade stand. Give me a break.

            Tax revenue derives primarily from economic activity. It is universal. Every community in the world knows it and pursues it.

            Except in Davis… where we chase POU rainbows instead.

          8. Michelle Millet

            The POU may save customers money in the long run, but so far there are no real world examples that the proponents can point to to demonstrate the validity of that claim.

            I think that is the point that was being made be the decision last night. That we need study this issue more to help determine if what the cost savings can. My assumption is that Joe’s point is that from what we have learned so far it is worth investigating.

        2. South of Davis

          Michelle wrote:

          > According to Krovoza last night customers could see up
          > to 130 million dollars in savings over the next 30 years
          > by switching to a POU.

          Not to give Joe a hard time, but anytime anyone tells you what your savings will be over 30 YEARS alarm bells should go off.

          If you stick a modest 3% inflation factor on the “savings” you get close to a quarter BILLION savings over 50 years…

          Looking at small business cash flow projections over the past 30 years ALL show positive cash flow in the second year growing over 10 years.

          In reality only about 10% of the deals exceed the projections and about 30% are in the red for a while.

          1. Matt Williams

            Damn SoD, I have no idea why we are building that surface water plant!!! all its projections are over a 30 year period.

          2. South of Davis

            Matt wrote:

            > Damn SoD, I have no idea why we are building
            > that surface water plant!!! all its projections are
            > over a 30 year period.

            Nothing wrong with making “projections” over 30 years, but anytime someone gives you an exact number or exact percentage of savings over 30 years you know that they are lying or just don’t have a clue what they are talking about…

          1. Davis Progressive

            ah on the contrary, if you look at the projected budget you will see that without intervention the structural deficit goes up by another $2 or $3 million by 2018. why? water rates. what does the pou fix? the electric bills for water.

          2. Mark West

            Only if the reduced rates materialize, and there is no example out there that anyone can point to that supports the notion that a newy forumed POU will be able to offer lower rates. If the POU is run by City employees with our current unsustainable compensation system, you can be certain the low rates will never materialize.

          3. Matt Williams

            “only if increased revenues materialize”

            What is good for the goose is good for the gander.

            For the record I believe both will be very good for the City and contribute mightilly to our economy and fiscal sustainability.

          4. Mark West

            Agreed that both must prove out, but there is much greater history of successful economic development then there is for successful POU creation that involves taking infrastructure and customers away from PG&E.

  9. Tia Will

    Mark

    “Agreed that both must prove out, but there is much greater history of successful economic development…”

    Here is where I am encountering a philosophic difficulty. Both you and Frankly have on a number of occasions extolled the virtues of acting in an entrepreneurial fashion. Frankly has also extolled the benefits of accepting risk in order to “get ahead”. He has also criticized public endeavors as not having this driving spirit.
    Now here we have an effort by the city to explore an area in which there is the possibility ( felt to be a good one by Mayor Krovoza ) that investing in further research could lead to significant benefits for the citizens and yet you seem to feel that even a modest investment ( $85,000 in the scaled down proposal) should not be spent in this manner.

    It would seem to me that you are assessing risk or investment quite differently when considering the pubic vs the private sector. If I am wrong, please clarify.

  10. South of Davis

    Tia wrote:

    > It would seem to me that you are assessing risk or
    > investment quite differently when considering the
    > pubic vs the private sector. If I am wrong, please clarify.

    Most investments don’t yield the desired return and a huge number of investments wipe out some (or all) of the initial investment.

    Not to answer for Mark and Frankly, but if the city does not need to risk money to get more tax revenue why should it?

    It costs nothing to give a developer the OK to build on land around town (if we make the developer pay for the election and infrastructure).

    If the developer makes a killing great, if a developer can’t lease the place up and loses millions giving it back to the lender a new owner will buy it and lease it up at lower rents either way the city gets more tax revenue.

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