Utility Turns Up the Heat, but City Takeover Study Approved

Shrugging off a public relations blitz by Southern California Edison, the City Council in Culver City moved a step closer to launching a possible takeover of the utility’s local franchise.

In a 3-2 vote, the council gave the go-ahead Monday night for a Sacramento consulting firm, R. W. Beck & Associates, to conduct an initial study of whether Culver City itself can make money buying and selling electricity.

Councilman Albert Vera is spearheading the nascent municipalization drive on the assumption that the city stands to win financially by ousting Edison as the local purveyor of power.

Independent experts have warned that a takeover, while potentially lucrative in the long run, would cost the city hundreds of thousands of dollars in studies and legal fees and millions more in actual acquisition expenses.

Edison, meanwhile, is vowing to fight the city at every turn.

“If they’re going to go forward, we’re not going to stand here and watch this,” Tom Bryson, Edison’s general manager for the area, said in an interview. “Our system is not for sale.”

Culver City customers pay about $37 million a year for power from the company.

Edison officials say it would be bad business for them to surrender the franchise. They also insist they can do a better job of providing power at lower rates than the city could.

At Monday night’s hearing, a series of speakers that included an Edison foreman and an Edison retiree praised the company’s service record, its dedication to the community, its vast resources and its considerable experience in handling a wide range of technical concerns.

Several Edison backers complained that the city is contemplating municipalization at a time when local governments elsewhere are rushing to privatize services as a money-saving measure.

“If we like high fees, we’ll love municipalization,” said Linda Mylan, a condominium manager.

Three Edison officials at the meeting handed out booklets and photocopied newspaper articles that cast municipalization in a dark and dangerous light.

One article expounded on the misfortune of Sheldon, Iowa, a town of 5,000 residents that apparently wasted $450,000 studying a potential takeover that never materialized.

Another article, the source of which was not readily clear, noted that R. W. Beck & Associates--the same company the council ultimately selected for its study--was a consultant to the Washington Public Power Supply System, which produced the largest municipal bond default in U.S. history.

Bryson added to the attack in prepared remarks to the council, contending that so-called pre-feasibility studies such as the one planned by Beck are used often to lure cities into purchasing costlier studies.

“In case after case, rosy projections from initial . . . studies like the one Culver City is contemplating are replaced by less desirable results from the more detailed and more costly studies that always follow,” Bryson said.

Reached this week in Sacramento, Beck consultant Ken Mellor said the company would be foolish to risk its credibility on what he called “teaser” studies. “We are going to provide a study that is the best study we can do,” he said.

As for the Washington power system debacle, Mellor acknowledged that Beck served as an independent bond financing consultant to the project, but he insisted that the firm did not produce the inaccurate energy forecasts that led to the massive bond defaults.

“We did not have any responsibility for projection of power requirements of that region,” he said.

Nevertheless, Culver City Mayor Mike Balkman was clearly jittery about the association with Beck as he joined Councilwoman Jozelle Smith in opposing the study.

“I have no confidence in Beck,” Balkman said. “Once we buy into (the study), we may feel we have to go further,” he added.

That left Vera, Steven Gourley and James D. Boulgarides to award the $24,000 contract to Beck, which did not have a representative at the meeting.

“Let’s have a little initiative, a little incentive . . . to start something,” Vera implored. “To postpone it is just a waste of time.”

Meanwhile, Gourley again tried to play down the importance of the decision, much as he did in September when the council voted to pursue bids for the study.

“The ratepayers are not going to be jeopardized tomorrow by the vote we take today,” he said. “This is a request for more information.”

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Should it ever get that far, a takeover attempt would probably hinge on a judge’s determination of how much Edison’s system in Culver City is worth. Presumably, the city would seek to purchase the franchise for its original cost minus depreciation. But Edison officials said courts are leaning toward the utilities’ asking price of current replacement cost minus depreciation.

Of the 202 localities within Edison’s geographic service area, 13 have municipalized service.

Power rates of municipally operated utilities tend to run somewhat lower, but Edison maintains that is only because they are older systems that long ago locked up long-term federally subsidized energy contracts that are no longer available.