Cities, Counties Consider Operating Power Plants

California’s electricity crisis has prompted desperate cities and counties to consider cutting decades-old ties to private utility companies and form their own municipal power agencies.

But although the rhetoric may be easy, the reality is tough.

“We tell communities: It will take a long time, cost money and you’re up against a formidable adversary: the investor-owned utilities that do not want to lose customers,” said Madalyn Cafruny, of the Washington-based American Public Power Assn.

Meanwhile, officials at the state’s 30-plus utilities already owned by the public--including the giant Los Angeles Department of Water and Power--are stifling any impulse to gloat. Although municipal power companies are not immune to the effects of the crisis wrought by deregulation, their customers don’t face the same prospect of rate increases that are looming for customers of the private utilities.

Municipal utilities can operate their own generating plants and sign long-term, fixed-price contracts for power from outside generators.

Nationwide figures compiled by the Department of Energy show that in 1999, customers of municipally owned utilities or other government-operated utilities paid 18% less than those of investor-owned utilities.

A case in point is Anaheim Public Utilities, which has been doing so well that in January its customers will see a nearly 3% cut in their electric bills as certain fees are eliminated.

Although deregulation forced private utilities to sell most of their power plants, Anaheim Public Utilities has been able to retain a larger percentage of its energy-generating infrastructure.

And even when the company has to purchase energy from other sources, 92% of the time such energy is purchased through less expensive long-term power contracts, spokeswoman Melanie Nieman said.

For all the advantages that municipal power companies enjoy in the current crisis, only one major or even moderately sized California city or county has shifted from investor-owned to publicly owned since World War II: Sacramento in 1947.

“It’s a daunting process,” said Stuart Wilson, assistant executive director of the Sacramento-based California Municipal Utilities Assn. “I’m telling agencies that call that: ‘If I were in your shoes, I’d be looking at it too, but be prepared. It’s not a magic bullet.’ ”

There are legal hurdles, a lengthy process to get permission from the state Public Utilities Commission, possible opposition from the investor-owned utilities, and possible multimillion-dollar infrastructure costs.

In addition, municipal power companies are not exempt from problems in a statewide crisis.

Most municipal agencies generate only a portion of their own electricity and thus in an emergency would suffer the same blackouts as the investor-owned utilities because their ability to buy power from the electricity grid is restricted. Also, the municipal agencies have signed contracts to provide the grid with power during shortages.

“We’re intimately tied to the grid,” said Bob Tang of Azusa’s Light and Water Department. “It’s a nervous time.”

Pasadena just agreed to become part of the energy grid last year, although it has enough power for its customers from its own plants and contracts with suppliers.

The utility now sells its excess capacity and buys it back when it needs power. This arrangement generally helps bring money to the city and keeps it from suffering the woes of the market, said Eric Klinkner, director of power supply.

Because it also produces the majority of its own power, the Los Angeles DWP has--so far--been insulated, along with the cities of Burbank and Glendale, which depend on DWP for reserve power.

But DWP still could be affected by unplanned blackouts in adjoining areas, officials said.

“If your neighbor is suffering reliability problems, he’s going to take down your system,” said Scott Blaising, special counsel for the municipal utilities association.

Still, elected bodies as disparate as the left-leaning Berkeley City Council and the all-Republican San Diego County Board of Supervisors are looking for ways to avoid the skyrocketing bills looming under the state’s energy deregulation program.

Although the goal is the same, different cities and counties envision different strategies to pursue if they become municipal utilities.

In San Francisco, a public-power movement is pressuring the Board of Supervisors to put the issue on the ballot to allow San Francisco to assume control of Pacific Gas & Electric Co.’s power system. The plan is being pushed by the alternative weekly Bay Guardian newspaper.

Unlike San Francisco, the supervisors in San Diego County have no desire to buy out or assume control of the local power company. “We’d rather work with them rather than against them,” said Supervisor Bill Horn, who met Wednesday with officials of San Diego Gas & Electric Co.’s corporate parent, Sempra Energy.

Horn said the county would like to buy power from outside sources and then pay SDG&E; for use of its transmission lines.

Chula Vista, a suburb south of San Diego, is considering construction of a smallish power plant to be switched on during peak hours. The cities of San Marcos and Escondido also are looking at municipal power.

Nowhere is the pain more palpable than the desert community of Borrego Springs in eastern San Diego County.

As part of the SDG&E; service area, residents of Borrego Springs, where air-conditioning is a must four months a year, saw their monthly bills double and triple last summer.

But just seven miles away in Ocotillo Wells, residents were shielded from the high rates as customers of the El Centro-based Imperial Irrigation District, which provides some of the cheapest electricity in the country.

“So close but so far away,” said Linda Nordstrand, Borrego Springs Chamber of Commerce board member.

Borrego Springs leaders appealed to shift from SDG&E; to the Imperial Irrigation District but were rejected because of a “no-raiding” agreement between the two companies.

On Wednesday, for example, Imperial Irrigation District’s costs were 8 cents per kilowatt-hour and stable, SDG&E;’s were 25 cents and volatile.

“This community cannot survive another summer like last summer,” Nordstrand said. “We have two grocery stores and one pharmacy; if they close, this community is finished.”

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Times staff writer Hector Becerra contributed to this story.

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Power to the People

More than two dozen cities, counties and special districts in California run their own electricity companies:

Not shown: Surprise Valley, Plumas-Sierra and Anza rural electric cooperatives

Source: California Municipal Utilities Assn.