Municipal Utilities Seek Exemptions From Blackouts

A group of California cities that run their own electric utilities and have plenty of power to weather the energy crunch this summer will ask the federal government today to exempt them from blackouts.

Their quiet campaign challenges the very foundation of the power grid in California, and could change the dynamics of how electricity is doled out--just as the state is bracing for a summer of rolling outages.

Most Californians pay large, investor-owned utilities like Southern California Edison Co. for power. But about a quarter of households, from the tiny desert city of Needles to the state capital, are billed for electricity by cities, counties or local districts that run their own nonprofit utilities. There are 30 “municipal” utilities.

Four of them--serving Los Angeles, Burbank, Glendale and the Imperial Valley, east of San Diego--are independent of the state power grid and do not face any outages. But the others are required by contract to give electricity back to the California Independent System Operator, which runs the grid, by participating in rolling blackouts--although they have plenty of power to serve their customers.

“It makes them wonder why they went out and did their jobs,” said California Municipal Utilities Assn. attorney Tony Braun.

These utilities argue that they are suffering for the myopic decisions behind the deregulation of California’s electricity market and the power shortage.

“We believe our power was purchased for the citizens of Riverside and that we don’t have the right--nor does anyone else--to take it away from them when they need it,” said Riverside Utilities Director Tom Evans. “Our customers are being denied something that they are fundamentally entitled to.”

Leading the campaign is the tiny Los Angeles County city of Vernon, which filed a complaint last week asking the Federal Energy Regulatory Commission to exempt it from rolling blackouts.

Vernon’s public utility has 2,000 customers, all but 30 of which are industrial operations such as glass manufacturers and meatpacking plants. The city launched its own distribution system primarily to lure industry with electric rates that are typically among the lowest in the state, said Jorge Somoano, Vernon’s assistant director of resource management.

FERC set a deadline today for other municipal utilities to support the campaign. Up to half, including Riverside, are expected to either file their own complaints or file documents supporting Vernon, said Washington attorney Bonnie Blair, who represents municipal utilities in Azusa, Banning and Colton.

Even the campaign’s supporters are unsure whether it will succeed. Blair acknowledged that there is no precedent for presenting this type of legal challenge to FERC, which is expected to decide on the issue by mid-June. And, she said, municipal utilities might have a tough time proving they have done enough to insulate themselves from the energy crisis.

Some cities with municipal utilities, such as Anaheim, are not planning to join the campaign.

Marcie Edwards, general manager of Anaheim Public Utilities, said the relationships between municipal utilities and Cal-ISO are too complicated to make a clean break. She said it is rare that a power shortage can be blamed entirely on the large investor-owned utilities--including this summer’s energy crunch. And until that can be proved, she said, municipal utilities still have an obligation to support California’s power grid.

“It’s not right to go either way 100%,” she said. “The fact remains that municipals still have an obligation to serve.”

Most of the municipal utilities are linked to the grid through agreements with Cal-ISO that call for them to share electricity in an emergency.

Those utilities tend to believe that the agreements were reserved for natural disasters, such as earthquakes, or other sudden and monumental problems, such as a plane running into a transmission line.

“The failure or inability of other utilities to schedule sufficient supplies,” Vernon contended wryly in its papers filed with FERC, does not constitute an emergency.

“The obligation to share in [rolling blackouts] did not contemplate situations where some utilities were not meeting their basic obligation to provide resources to serve their customers,” Blair said. “If they are forced to participate in rolling blackouts, the effect is that the ISO is taking energy that has been bought and paid for by some customers and effectively giving it to somebody else that has been unable to buy it.”

Jim Detmers, Cal-ISO’s vice president of operations, said the organization plans to fight the campaign. He said emergency provisions of Cal-ISO’s agreements with the municipal utilities cover the current energy crunch.

Detmers said that exempting municipal utilities from blackouts would increase the share of those events shouldered by communities that do not have their own electricity distribution. He compared the exemption request to a homeowner declining to fight a fire at a neighbor’s because he wants to keep his water for himself.

Detmers said, “We want to make sure that we are making the right choices when everyone’s lives are at risk.”

Ronald Nunnally, Edison’s director of federal regulations and contracts, said the municipal utilities have an obligation to uphold the integrity of the power grid to which they are connected.

“The ability to use the grid requires to keep it whole, if you will, under all circumstances,” he said.

Blair said those arguments don’t hold up. Indeed, she said the municipal utilities will argue that the California Constitution expressly prohibits giving public property, such as electricity bought by a municipal utility, to a private enterprise, such as investor-owned electric companies.

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Power to the People

More than two dozen cities, counties and special districts in California run their own electricity companies. But only four-- Glendale, Burbank, Los Angeles and the Imperial Irrigation District--are independent of the state power grid and exempt from blackouts.

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

Source: California Municipal Utilities Assn.