All Charged Up in Sacramento
People thought S. David Freeman was crazy. When he arrived in Sacramento to look for housing, a prospective neighbor hissed at him. When he stopped 10 people on the street and asked their opinion, eight said they hated his employer. A ninth described the organization as “a bunch of crooks.”
Freeman has a lot more friends now. As general manager of the Sacramento Municipal Utilities District--its acronym, SMUD, seemed designed to suggest the morass its affairs had become--he has surmounted a series of plagues that Moses might not have wished on Pharoah.
SMUD’s aging and repair-prone Rancho Seco nuclear plant was abandoned at a stunning cost of $1.25 billion. SMUD’s other big source of electricity--water power--was crimped by a historic drought. SMUD’s electric rates soared, its bond ratings dropped, and the board of directors squabbled so much that it ran through six general managers in as many years.
Then came the recession. With SMUD on the brink of financial collapse, it looked as if Pacific Gas & Electric, the big San Francisco utility, might take over.
The man who changed all this--who gave Sacramento back its utility--is a visionary Tennessean (“Al Gore is a soul brother”) who is rumored around town to be in line for a high-ranking federal energy post.
Freeman pooh-poohs such talk, insisting that he is “having a ball” just reviving SMUD. He has cut costs, avoided raising rates and earned higher debt ratings from both Standard & Poor’s and Fitch Investors Service.
The utility is stronger financially, yet customer’s bills are lower, thanks to SMUD-induced conservation. Al Gianini, executive director of the Sacramento Area Commerce and Trade Organization, says “the situation has improved dramatically.”
“They owe it all to David Freeman,” says Dan Kirchner, senior economic analyst at the Environmental Defense Fund in Oakland. Adds John Castagliola, S&P;’s director of municipal utilities: “The strength there is the strength of the general manager and his team.”
With his trademark cowboy hat and Deep South drawl, the 66-year-old Freeman is about as far as anyone could be from the stereotypically colorless utility manager. But he is no country bumpkin. Freeman holds an engineering degree from Georgia Tech, finished first in his University of Tennessee law school class and previously helped tame the big Tennessee Valley Authority, where he was board chairman.
Freeman arrived at SMUD in June of 1990 and immediately went to work slashing operating costs to close a projected $50-million budget deficit. With a talent for public relations, he also set to work winning over the public.
Before Freeman, for instance, SMUD earned derision for buying blazers, neckties and slacks for each of its Rancho Seco operators. Freeman promptly auctioned the duds on local television.
To further dramatize his war on waste, he auctioned the brass wastepaper basket from his own office too.
More important than public relations, though, was Freeman’s program for rescuing the utility. Simply put, he set out to build the equivalent of another nuclear power plant “one house at a time.” His secret weapon: conservation.
Known as “demand-side management” in the industry, conservation is popular with California utilities nowadays, especially given the disfavor of nuclear power. But SMUD has turned energy-saving into a crusade. In doing so, it may be paving the way for the state’s utility industry to cope with the growing energy demand--and clean air requirements--that inevitably lie ahead.
“We’re being recognized as a utility of the future, rather than a utility of the past,” Freeman says.
SMUD now spends a higher proportion of its revenue--about 7%--on conservation than any other U.S. utility. Since October, 1990, it has planted 55,000 shade trees, situated so they’ll work hardest as “air conditioners with leaves.”
SMUD also pays Sacramentans up to $275 to buy a super-efficient new refrigerator--and give SMUD the old one. The utility has safely disposed of 37,000 of them so far.
“We don’t want the suckers sitting out in the garage drawing current,” Freeman says.
His larger aim is literally to electrify Sacramento, and not just with SMUD’s performance.
“We have as a goal the massive displacement of petroleum,” he says flatly. To that end, Freeman is pushing electric buses, electric trolleys and, yes, electric cars. SMUD wants to take control of the region’s publicly owned light-rail system (“back to the future,” he calls it, in reference to the historic role of power companies in transit).
Freeman himself tools around town in an electric-powered Chevy S-10 pickup.
Freeman has also been lucky. In replacing the power lost with Rancho Seco, he was fortunate enough to stumble into a soft market, enabling SMUD to buy replacement power cheaply.
But SMUD doesn’t intend to rely on fossil fuels or purchases for long. By 2000, it intends to get three-quarters of its electricity from renewable resources, including solar, wind, hydro- and geothermal power and enough conservation (including 500,000 new trees) to save the equivalent of a new nuclear plant.
SMUD is also building five small, gas-powered cogeneration plants around town to provide cheap power and use heat that would otherwise be wasted to provide steam for local industries. One plant may harvest methane from a nearby garbage dump to provide steam for Proctor & Gamble. Another will use its extra heat to power a plant that will make ethanol from rice straw--a byproduct of the region’s farms that is usually burned as waste.
But Freeman is hardly a tree-hugging sentimentalist. On the contrary, he knows all this has to pay.
“We buy waste at 3 to 4 cents a kilowatt hour,” he says, which makes it cheaper than new generating capacity. Thus, despite the Rancho Seco debacle, Sacramento still has lower electric rates than other major California cities.
“You do the right thing,” Freeman says, “and the Lord, she’ll reward you.”
