MUD in Your Eye

A small group wants to foist a municipal utility district on the city without evidence its version of "public power" will work. Demand evidence.

Watching Gov. Gray Davis, the Legislature, and the state's three major electric utilities go about "solving" the energy crisis has reminded me of a board game from my youth, the name of which escapes me but the object of which was to spend one's way into bankruptcy ahead of one's opponents. In just four moves, Davis et al. have taken a large lead in a new version of this game, hereby renamed "Power to the Poorhouse":

1) A few years ago, when the state insisted on instituting a half-baked program to deregulate the electricity market, California's three major utilities used their political influence in Sacramento to rig the program in (what they thought would be) their favor.

2) The rigging backfired, resulting in a situation in which energy suppliers could manipulate the power market, forcing utilities to pay far more for electricity than they were allowed to charge customers under the rigged price structure the utilities themselves had fashioned. The utilities lost billions.

3) The utilities, huge campaign contributors all, prevailed upon Davis and the Legislature to provide a bailout, now under way, that has the state dedicating billions of dollars of taxpayer money to buy electric power at high rates and sell it low. In effect, Davis et al. have transferred responsibility for a large part of the losses the utilities had fixed upon themselves to the state treasury -- that is, to you and me.

4) Because even the government of California cannot eat multibillion-dollar losses forever, the state Public Utilities Commission hiked electric rates by more than 40 percent, leaving consumers in the pleasant position of paying, through both their electric and tax bills, billions of dollars to keep the state's entire, half-baked electric deregulation program from imploding, for a while, until someone figures out a way to do something about electric power that won't bankrupt the utilities and cast Gray Davis and the entire Legislature into the dustbin of political history.

Let's be clear here: Nothing is clear here. The economics of California's electrical system is trapped in an untenable no man's land located somewhere between the lethargic predictability of state-regulated electrical monopolies and the less predictable but (in theory) more cost-effective system promised by a properly conceived open market. The current electric power regime is financially unsound. There continues to be a multibillion-dollar gap between what utilities (and now the state) pay to buy electricity on the wholesale market, and what can be charged to retail consumers. The situation cannot last.

But given the huge political and financial interests now competing to control our electric future, no sane bookie would give odds on how the current regime might change during the next year. Reregulation? Further deregulation? A year from now, will wholesale and retail power rates be higher, lower, the same? No one knows.

It is into this nearly perfect state of energy chaos that San Francisco will dive when it considers this fall whether to create a new governmental entity dedicated to supplying electricity to the city.


There is nothing revolutionary about the idea that a city would own and run an electric utility. Municipalities across America have operated such utilities for a long time. It is clear that government ownership of electrical service can, under the right conditions, be good for consumers. Los Angeles and Sacramento both have publicly owned electric systems, and citizens in those cities appear to be suffering less in the current energy crisis than the rest of us are. It is also clear that "public power" can be something less than a heavenly ideal. The corruption that made the movie Chinatown so compelling was, after all, a reflection of events related to Los Angeles' publicly owned water and electric utility.

In November, voters will decide whether to create a new governmental entity, called a municipal utility district (MUD), that would take control of electric service for the cities of San Francisco and Brisbane. Under ordinary conditions, this election would present voters with a policy choice to be debated, more or less, on merit.

The MUD proposition on November's ballot is, however, no ordinary policy proposal. It is -- oh, how to put this civilly? -- an unstudied ideological belief that a relatively small set of people would love to slide down San Francisco's collective throat, before San Francisco figures out what's been stuffed into its collective mouth.

The MUD proposal is in substantial part the brainchild of Bruce Brugmann and his San Francisco Bay Guardian, a weekly newspaper that for more than 30 years now has been railing about the malevolence of the Pacific Gas & Electric Co. Now, I have absolutely no problem with skepticism toward electric utilities, including PG&E; utilities do indeed have a natural tendency to capture governmental regulators and twist them to do the utilities' bidding, rather than the general public's. The utilities ought to be watched closely, and whacked -- hard -- when they misbehave.

Brugmann and his paper, however, have a sort of anti-PG&E mania, a propensity to see ghosts and conspiracies beneath every PG&E bed. Under normal conditions, this propensity is widely recognized as a relatively harmless fact of life in San Francisco. The Guardian had a "story" this week criticizing PG&E, you say? Well, did the sun rise in the east? Was fog spotted upon the Pacific?

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