More than 15 years ago, Culver City embarked on a plan to create its own electricity utility so that the city government would eventually be able to offer its residents more affordable rates. Since then, other California cities have created their own municipally-owned entities or community choice aggregators, which allows local governments to purchase blocks of power to sell to residents.
It also permits them to construct municipal electricity generation facilities, which means that cities and counties can become competitors to private utilities.
But if Proposition 16 is approved by the voters June 8, city leaders seeking to establish local power utilities will find it much more difficult to do so.
The ballot measure, known as the Taxpayers Right to Vote Act, would require a two-thirds vote of the electorate before local governments could engage in the retail power business. It is funded by San Francisco-based utility company Pacific Gas and Electric, which has spent nearly $35 million to promote the initiative. Last year, PG&E recorded more than $1.2 billion in profits.
Southern California Edison, which supplies power to Culver City, has taken a neutral stance on Prop. 16. Municipal utility companies, like the Department of Water and Power, are prohibited from contributing to political campaigns.
On the afternoon that the council was set to vote, former Culver City Mayor Albert Vera thought he had secured the necessary three votes to move ahead with developing a locally owned utility. Armed with an independent analysis that indicated the city could reap more revenue than Edison through franchise fees and the support of 10 other regional governments, Vera was confident his colleagues would back his plan.
“I remember thinking, ‘We could make history for our residents,’” Vera recalled recently. “We were sure that after we had the support of other cities that were convinced that this could help their citizens, bringing lower rates to Culver City would be one of the best things that we could ever do for the people as elected officials.”
The vote ended in a 2-2 tie, effectively tabling the motion to create a municipal power utility.
Dr. James Boulgarides, who was a member of the council that pursued a local electricity entity, gave much of the credit to Vera for taking it to the brink of success.
“Albert did a yeoman’s job pushing it,” Boulgarides, a retired professor, told the News. “It wouldn’t have gotten as far as it did without Albert’s efforts.”
Edward Wolkowitz, who served on the council from 1994 until 2002, did not think having a city-owned utility made sound financial sense.
“I opposed the Edison takeover in 1994 because the cost of acquiring the Edison electricity distribution infrastructure would have bankrupted the city,” he asserted. “As it turns out, not long after the council voted not to proceed with the Edison municipalization, the state ‘deregulated’ electricity distribution in the state in a rather interesting way.
“The new laws continued to control the cost of electricity to the consumer, but eliminated all controls on the prices charged by producers to the utilities. This played a significant role in the bankruptcy of PG&E,” Wolkowitz, a bankruptcy attorney, explained. “It would have had the same effect on Culver City had it acquired Edison.”
Wolkowitz, never one to mince words, has strong feelings about Prop. 16, however.
“I think it’s the most venal form of special interest legislation,” he said. “It shows how a dispute between one city and one utility can escalate into a ridiculous statewide ballot initiative.”
Culver City Unified School District President Steven Gourley, who was on the council during the quest to create a city-owned power utility, supported Vera’s efforts.
“A lot of people did,” he said. “The sheer viciousness of the way that Edison attempted to stop us made you want to support Albert.”
Gourley was the lone councilman who was unable to attend that meeting.
If Prop. 16 is enacted, residents of municipalities like Roseville, a city near Sacramento, could face some interesting challenges. According to its Web site the city, which owns Roseville Electric, residents and businesses within Roseville may be forced to pay different electricity rates and receive different levels of service, since geographical location will determine whether customers are served by PG&E or Roseville Electric.
The California Chamber of Commerce supports Prop. 16.
“Requiring a vote will ensure that the complicated and risky choice to create a government-run electricity business gets the public discussion it deserves,” said Allan Zamberg, president of the state chamber. “These are long-term deals that can commit generations to hundreds of millions of dollars of debt.
“And to pay for them, more cuts in local programs might be required or, perhaps, even new taxes or fees.”
While the state chamber has endorsed the proposed initiative, Culver City’s chamber has taken the opposite position on the controversial proposition.
“We are officially opposed to Proposition 16,” Steven Rose, the president of the local chamber, told the News. “The general issue of -ballot-budgeting doesn’t really work, in my opinion.”
The League of California Cities is also opposed to Prop. 16. At its February 2010 meeting, the organization’s environmental quality policy commission recommended taking a strong position against the ballot measure.
“The committee was particularly concerned that the ballot measure is an infringement on local control, as cities and their municipal utilities work to provide the best service possible for their constituents,” the organization’s board of directors said in a statement.
That sentiment is exactly what Vera is advocating.
“The League of Cities says it best,” he said. “They know that this is about cities making decisions for their residents. Besides, there are ways that the public can let their (councils) know if they don’t want a city-owned utility: they can express their beliefs in a public hearing or at a council meeting.”
Rose believes initiatives like Prop. 16 can have the adverse effect of giving the public a voice in how they are governed, which is what proponents of the ballot measure claim.
“As a general rule, I believe that propositions make governing very difficult, especially when they’re backed by a special interest group,” Rose, a former Culver City mayor, said. “It seems to me that Proposition 16 is very specifically targeted toward the electricity industry.”
The California Municipal Utilities Association filed a legal challenge against the measure in March, charging that PG&E Chairman and President Peter Darby made false and misleading public statements regarding Prop. 16’s true intent. According to court papers in the lawsuit, Darby made the following statement at an investors conference in March:
“You know, rather than year after year different communities coming in, this or that, and putting this up for vote and us having to spend millions and millions of shareholder dollars to defend it repeatedly, we felt that this was a way that we could sort of diminish that level.”
On May 5, Sacramento Superior Court Judge Allen Sumner rejected the lawsuit. He told the plaintiffs they waited too long to file the legal action.
“The question is whether the title and summary of Proposition 16 adequately disclose its purpose — not the motivation of its sponsors,” the judge wrote in his ruling.
Vera is dismayed that Culver City’s council, unlike Palo Alto and others, has not addressed Prop.16 at any of its recent meetings.
“I’m disappointed that no one (in public office) has informed the people yet about how dangerous this proposition will be,” he said. “After all, this is going to affect how they (govern) and their ability to pass ordinances that benefit the residents.”
Wolkowitz would like to see elected officials as well as concerned citizens take larger interests in controversial ballot measures.
“I’d like to see municipalities and the public in general weigh in on false and misleading propositions and the people who foist them on an unsuspecting public,” he said. “Calling Prop. 16 the ‘Taxpayers Right to Vote Act’ makes a mockery out of both the process of voting and the intelligence of the electorate.
“But, as Winston Churchill once said, ‘the greatest argument against democracy is five minutes with the average voter.’”
Like his former council colleagues, Gourley is against the ballot measure.
“It is not in the public interest to keep consolidating power in large utility companies throughout the state,” he said. “This is an effort of various monopolies to make their monopoly stronger.”
Boulgarides views missing the chance to create a city-owned utility as a loss for Culver City.
“We would own it by now,” he said. “I think we would have most of it paid back by now by using stockholder dividends. It was a lost opportunity.”
Vera laments the vote as well, even more than a decade later.
“I haven’t had a lot of disappointments in my professional life, but that probably was the biggest one,” he acknowledged. “We truly missed a chance to do something really great, and I think everyone should realize exactly what we could have done with our own (utility).”
Boulgarides advised the public to watch who is supporting Proposition 16.
“People should look behind the curtain to see who’s pulling the strings,” he warned. “It will be a real tragedy if people get fooled by this proposition.”
