Privatizing Utility Is a Bad Idea, Anaheim Officials Tell Council

Prospects of privatizing Anaheim’s electrical utility, Orange County’s only city-owned power company, dimmed last week after the city’s staff and consultants said the move could lead to higher bills, erode customer service and force cutbacks in staff.

Both Southern California Edison and Houston-based Enron Corp. said they could save the city $30 million over 10 years if allowed to operate the utility, which the city’s energy consultant called seriously inflated.

Anaheim’s top utilities official told the City Council on Tuesday that the proposals by Edison and Enron could end up costing the city money in the long run and said power bills would be lower if the city continued running the utility, which provides power to 300,000 residents and 15,000 businesses.

Under the proposals, the city would keep control over billing, rate-setting and other management responsibilities. The council delayed action last week but is expected to vote on offers by the end of August.

“We are interested in different ways of doing something. This just isn’t the right way,” said Edward K. Aghjayan, general manager of the city’s utilities department. “It looks like short-term savings, but it really isn’t.”

Anaheim began exploring privatization in 1997, looking for innovative ways to help the city-owned utility prosper in a new, highly competitive marketplace created by the deregulation of the electric industry. Selling all or a portion of the municipal utility also was considered.

Edison’s proposal prompted harsh criticism from Aghjayan, who reminded the council that the company has had a long, contentious relationship with Anaheim and has lobbied against the city’s interests in Washington and Sacramento. Edison was forced to refund $161 million to Anaheim after overcharging the city for wholesale power in the 1970s and 1980s, city officials said.

Just this month, Edison lobbied against a measure before Congress that would allow Anaheim and other municipal utilities to sell their surplus power, which would allow the cities to lower rates for their customers, according to city officials. The utilities could not be reached for comment on the measure.

“A number of [Edison’s] corporate interests are at odds with what is best for the ratepayers of Anaheim,” Aghjayan and Assistant City Manager David Morgan wrote in a July 27 letter to the council.

Although both Edison and Enron assured the council they would hire most of Anaheim’s 130 utility employees, the companies estimate privatization would lead to a 20% staff cutback through early retirements or other departures. Councilwoman Lucille Kring expressed concern about possible staff cuts and was disappointed to hear that neither company would promise to hire every city utility worker who wished to stay.

Executives from Edison and Enron said staff cuts were needed to help bring about the savings. Edison also would close the Anaheim crew center and transfer utility crews to other Edison facilities in Santa Ana or Fullerton. Enron, in its proposal, would keep the Anaheim service center open.

Edison Vice President A.L. Grant said Anaheim would save $30 million to $60 million over 10 years if it allowed the company to operate the system. Grant also reminded council members that Edison provides power to most of Orange County and has more than 100 years of experience running local utilities. Enron Vice President Mike McDonald also promised savings of $30 million.

Proposal Called Net Loss for City

Aghjayan and the city’s utility consultant, Kenneth J. Mellor of R.W. Beck Co. in Sacramento, both recommended rejecting bids from the two companies.

“The cost savings we see are soft or nonexistent,” Mellor said. “Service to customers would erode.”

Aghjayan said he was wary about Enron’s offer because the company, despite being highly regarded and one of the nation’s biggest energy and communications companies, has very little experience running a local power company.