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Why we must NOT sell our electric utility

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Posted: Saturday, March 6, 2010 12:00 am | Updated: 11:33 am, Thu Jul 22, 2010.

We will soon be celebrating a milestone in Lodi. One hundred years ago, our city fathers made the decision to own the power system and run it as a public service.

Electricity was pretty new at the time, but they understood its importance. It would be a key to the city's future, and they wanted to ensure control stayed close to home. The same issues are brewing today.

Some in the community remain highly critical of our utility, and suggest the answer is to sell the electricity system to PG&E. In my book that would be a mistake, as shortsighted today as it would have been 100 years ago.

I want to lay out some facts so you understand what is at stake. Would we lose more than we gain? Yes. Would our rates go down? No. Would a private corporation be responsive to our local needs? I don't think so. If this is such a great idea, why aren't other cities in California lining up to sell their electricity systems? Fair question. Some have been tempted, but after careful analysis, not one has bit the apple.

Let's start with the fundamentals. An investor-owned utility answers to shareholders around the world who are seeking a profit. But in our case, you are the shareholders, as well as the citizens and customers. Your shareholder "dividends" stay right here at home, flowing into police and fire protection, parks and recreation, low-income assistance, and rebates for residential customers investing in energy-efficient appliances and insulation. Over the past 10 years, Lodi Electric has also provided more than half a million dollars in energy efficiency grants to our industrial and commercial customers, lowering their bills, keeping them competitive. Lodi customers know they can count on us. Over the past five years, we kept the lights on 99.99 percent of the time.

Last year, Lodi Electric contributed nearly $7 million to the city, a sustaining revenue stream that accounted for 17.5 percent of the city's general fund. These are payments in lieu of taxes. If Lodi Electric did not provide these funds, and we received our service from an investor-owned company, we would need to make up for these lost revenues, possible through a Utility Users Tax. In some cities, the Utility Users Tax accounts for as much as one-third of their General Fund revenue.

Environmentally, we are at the forefront. Today's citizens of Lodi are the beneficiaries of some sound decisions made decades ago to invest in geothermal, hydro-electric and other forms of renewable energy. As a result, we have 27 percent of our power coming from renewable resources while PG&E is at 15 percent. The state is moving forward adopting a 33 percent mandate for non-hydro-electric renewables by 2020. If they do, the city of Lodi is well-positioned.

Comparing electric rates among utilities can be tricky given the different classes and tiers of customers, and the influence of location, climate and seasonality on rates. But comparing apples to apples, PG&E's average residential rates are now higher than those in Lodi, and in fact higher than those in all other municipally-owned electricity systems in Northern California. Our rates are also lower for commercial and industrial customers.

Most importantly, this gap will grow larger with time. Also certainly, PG&E's rates will increase faster and steeper than our own. Their residential rates increased by 8 percent last year, and based upon filing with the Public Utility Commission, they are asking for 8.6 percent more for this year. Add it up: That is a 16.6 percent increase in two years.

Lower rates, local control, high reliability, better customer response, and closer ties to the needs of the community are the main reasons not to sell the city's largest asset. There are 40 municipally owned electric utilities in California, and over 2,000 publicly owned systems in the U.S., and you would be hard pressed to find a single one that went private. Sure, some have looked into it, but they back off.

The city of Anaheim was tempted in the late 1990s. They had two bidders: Enron and Southern California Edison. What they teased out of their analysis was that these bidders were not about to pay full value for their system.

Redding twice looked into selling, and decided in both cases that they would lose more than they gained. Santa Clara hired a consultant whose analysis showed the value of retaining public ownership was 2-3 times greater than selling it. This makes sense when you think about it. If there is only one buyer, why would it offer full value?

Speaking of value, in my next article I will introduce you to the exciting benefits and future value of the Lodi Energy Center, a cutting edge investment coming on line in 2012.

Larry Hansen is a member of the Lodi City Council and chairman of the Northern California Power Agency.

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18 comments:

  • posted at 1:33 pm on Thu, Mar 11, 2010.

    Posts:

    Lodi Ken is right! None of the money we pay for electricity should flow into the general fund! This enterprise should be revenue neutral, but our city leaders treat is as a profit center. This money gives our city leaders a lot of "flexibility" and makes it easy for them to fund pet projects such as the "approved" but unfunded water treatment plant.Lodi Ken is right!

     
  • posted at 3:06 am on Thu, Mar 11, 2010.

    Posts:

    From the article: "These are payments in lieu of taxes" This guy is an absolute idiot. These are taxes in lieu of representation!I think the city should own the utility but there is no way the general fund should see any of it's profits. If there is a profit use it to lower the rates the next year.

     
  • posted at 1:33 pm on Tue, Mar 9, 2010.

    Posts:

    Lord Hansen tells us that the Lodi Electric contributed $7 million dollars to the General Fund. However the budget was $7.3 million, that .3 adds up to $300,000 dollars. To sell the electric utility would mean that $7.3 stays in the general fund, along with a franchise tax that the new owner would pay. Anyone got a problem with that.

     
  • posted at 7:01 am on Tue, Mar 9, 2010.

    Posts:

    Well, everyone look on the bright side. With the installation of water meters, there will be a whole new way to dig into your pockets. It may help stabilize utility rates for a while.

     
  • posted at 5:00 am on Tue, Mar 9, 2010.

    Posts:

    Hanson says:"Last year, Lodi Electric contributed nearly $7 million to the city, a sustaining revenue stream that accounted for 17.5 percent of the city's general fund. These are payments in lieu of taxes."These payments ARE taxes. Our huge utility rates are an overt form of TAXATION. Every time Lodi wants to spend a bundle on some stupid, socialist program, rates increase.I am all for REASONABLE taxation levels so long as our elected leaders are responsible custodians of the public's money. We have neither. Instead of selling, I want to see lower taxes, reduced government spending and a return of intelligent, fiscally-responsible leadership. Selling off our utility won't make any of this happen. Voting idiots out of public office should do the trick.

     
  • posted at 11:31 am on Mon, Mar 8, 2010.

    Posts:

    Lodi has by far the highest rates around. I lived in areas all over California and the highest utilities by far are in Lodi. Sell it and our bills will be much lower.

     
  • posted at 5:00 am on Mon, Mar 8, 2010.

    Posts:

    Outside audit---An audit done by an accounting company (OTHER THAN THE ONE OUR CC HAS USED IN THE PAST) would tell the truth about how efficient our electric utility is, and how owning it benefits us rate payers/tax payers.An "unbiased audit" could prove Hansen's claims and restore a little bit of his credibility---or prove his comments are misleading and self serving.

     
  • posted at 4:52 am on Mon, Mar 8, 2010.

    Posts:

    I would like to see how Hansen is coming up with his figures. i know i get robbed when i slip into the third tier. I dont even like to set up christmas lights anymore because i fall over in January when i look at the bill. i have also heard lodi is not friendly when it comes to "fees" to convert your house over to solar, but people will still pay it.

     
  • posted at 3:00 am on Mon, Mar 8, 2010.

    Posts:

    Column translation: The electric utility for the City of Lodi is way too big a cash cow for them to ever let you have a rate decrease with PG&E. Because with that, would become more responsible spending. So, just shut up and dig a little deeper.

     
  • posted at 1:26 am on Mon, Mar 8, 2010.

    Posts:

    I'm with Obeserver in that I want to see the facts. I am glad you received competitive rates over the past 30 years but are they competitive today for the residents of Lodi. The LNS could easily do an article comparing not just rates but what the actual bill is each month for the below average, average and above average user. Lodi runs a 5 tier rate structure. Most others are 2-3. A lot of games get played with the rates and volume per tier by the utility. Plus, 7mil into the General Fund from the utility is outrageous. How about cutting expenses. Mr Hansen, are you reading the papers and watching the news lately. We are broke as a nation and you cant just keep going to the taxpayer to fund a bloated public employee system. Watch what happens in Stockton. The firefighters are not going to move anymore on concessions so layoffs are going to happen there. I guess if Stockton owned their own utility they could just raise the electric rates.

     
  • posted at 7:08 am on Sun, Mar 7, 2010.

    Posts:

    Hahaha... I hope no one believes this crap. Lodi council needs a make over. Vote them all out!

     
  • posted at 3:25 am on Sun, Mar 7, 2010.

    Posts:

    The electric utility is paying the city bills. Why do you still have an interim director at LEUD and not a pemanent hire? Is CCHansen going to take that position, too? Why, in lean times like these, do you have an assistant city manager? Assistant city attorney? Assistant public works director? And does the city manager and assistant city manager require a communications specialist and spokesman to talk for them? Is this what LEUD is paying for? The assistants and communications director are unneeded in these bad financial times with more budget cuts coming for at least the next two years. Stop the waste at city hall and those savings could reflect on down to your LEUD ratepayers instead of contributing to those overpaid computer pushers?

     
  • posted at 2:52 pm on Sat, Mar 6, 2010.

    Posts:

    Why is CCHansen speaking and not your mayor?

     
  • posted at 2:00 pm on Sat, Mar 6, 2010.

    Posts:

    Mr. Hansen is entitled to his own opinion but not his own facts. It is not possible for Hansen to be objective on this matter because he is the chairman of the Northern California Power Agency and a member of the gob network. Talk about conflict of interest.Hansen says "local control" of utilities is a plus. I say local control creates opportunities for fiscal mismanagement city management. I trust a government regulated utility much more than I trust the three amigos and our highly compensated city managment team.I expect PG&E will respond to some of Mr. Hansen's criticisms regarding PG&E rates, customer service. I hope the LNS will print their response.

     
  • posted at 3:58 am on Sat, Mar 6, 2010.

    Posts:

    And if you don't like Hanson or any other council member you have the opportunity to vote them out of office every four years. I can't say the same for PGE.

     
  • posted at 3:56 am on Sat, Mar 6, 2010.

    Posts:

    I too believe that the City should continue to own their own utility. I would like to see the factual information regarding our rates compared to others for the 100 year period. As I have posted in previous articles, I was once a high consumer of power in my former business and therefore followed rates very closely. There was no question that during those 30+ years I saved a great deal of money with Lodi Electric. And as far as General Mills and Cottage Bakery getting the benefits of commercial rates......I say it's wonderful. We need to do more for those businesses that provide employment and produce revenues for our City. Keep it local!

     
  • posted at 3:10 am on Sat, Mar 6, 2010.

    Posts:

    CCHansen is still blowing that same smoke out of his ears, and other unmentionable orifices. LEUD is supposed to be a nonprofit? If that's the case, why do I see those 2 and 3 million dollar transfers to the general fund every two weeks in the approved spending posted online from the cc meetings? You, CCHansen, have given large corporations like General Mills and Cottage Bakery, among many others, electricity at costs lower than you can deliver it for to keep their profits up. I've heard that these companies have power leftover at the end of the billing period that they sell back to LEUD too. Is that true? I'm tired of my high residential rates going to supplement profits to these, or any other businesses. If you're paying city bills with these funds, shouldn't you lose your nonprofit status? You need to produce documents that show us the proof that LEUD is lower than PG&E. Residential users are paying the tab for the NCPA and their lackluster performance. You are just their gofer that falls for their ploys. Step back,CCHansen, and let the LEUD management do their job.They say you forced Morrow out and want control of LEUD.

     
  • posted at 2:26 am on Sat, Mar 6, 2010.

    Posts:

    There is not a single convincing reason in this letter as to why the Electrical utility should not be sold. The only argument that is even close is that the city steal $7 million from the utility every year to fund the pork in the city. Why not cut the pork, sell the utility and let the taxpayers in the city have a break.Oh that's right Mr. 3% @ 50 Hansen already has his great retirement package and is breaking the bank, but who cares there is more blood to suck from that corpse called the taxpayer.

     

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