News Article

November 9, 2007
PG&E takes a stab at authority
By Eiji Yamashita / The Hanford Sentinel

Pacific Gas and Electric began an advertising campaign this week targeting a fledgling power co-op looking to provide cheaper electricity and rate stability to the South Valley in coming years. The San Joaquin Valley Power Authority slammed PG&E for going negative, calling the ads "deceitful in the extreme" and illegal.

PG&E officials, in return, said they are just raising questions out of concern for their customers. They openly oppose the public power authority, which they claim is destined to fail.

The company, which serves much of the region the authority plans to serve, denies that its opposition campaign is driven by territorialism.

"Our position is that we're concerned for our customers," said Jeff Smith, PG&E spokesman. "This specific plan by the authority isn't something we think would ultimately serve our customers." The authority -- formed last year by communities including Hanford -- hopes to offer customer savings of 5 percent on the generation component of their power bill, and place a 2 percent cap on a yearly rate increase through 2015.

The Kings River Conservation District, a nonprofit, will be the power generator and manager of the authority's program called "community choice." The program is enabled under a 2002 law that allows regions to become alternative power providers for residents currently served by investor-owned utilities like PG&E.

The authority cautions that the program remains a no-go until KRCD signs an energy agreement with Citigroup, a prospective financier, and unless the contract would guarantee the 5 percent cut and 2 percent cap. Details are still being worked out.

PG&E's attack ad comes just as the authority began a four-month countdown for the launch of the first phase of the community choice program.

The same full-page spread advertisement ran Tuesday in The Sentinel and Wednesday in the Visalia Times-Delta.

"Whatever happened to open government?" it read.

The ad, written in the form of a letter addressed to the authority, poses a series of rhetorical questions insinuating the secrecy of the authority's decision-making process.

"The advertisement which ran on Nov. 6 in the paper is deceitful in the extreme," said Tom Haglund, chairman of the authority and deputy city manager of Hanford. "They have four bullet points, none of which are true."

Haglund called PG&E's tactics illegal and said the authority is seeking a resolution through the state Public Utilities Commission, which regulates the industry.

PG&E claims the authority in mid-October voted -- with just one day's notice -- to assume the responsibility of buying power for homes, farms and businesses in the region.

Then PG&E goes on to question the authority: "Why did you make a decision that could commit local communities to billions of dollars of debt and power costs ...?"

"We feel that a far-reaching decision like this should not be rushed," Smith explained. "We believe that the public should have been given ample time to proceed with it."

"That's a lie," Haglund said, adding that notices were sent out early enough to meet the legal requirement. "They only say this in order to instill fear and confusion in both government entities and the public."

PG&E also claims the authority set the rates without an open public process.

Haglund said the authority has only set preliminary rates that are 5 percent below the existing PG&E and Southern California Edison rates in the generation portion of the bill.

The final rates will be set with a full public hearing, Haglund said. But that will come after the state Public Utilities Commission clears the rate increases that utilities are proposing, he said.

In another question, PG&E implies the authority is hiding the details of the power supply contract with Citigroup.

Haglund said the contract negotiation is ongoing and argued that no business, including PG&E, would normally disclose the terms of a contract until it is executed.

But KRCD will disclose the information to the public before it signs the agreement, and the authority will then decide whether to accept or reject it, Haglund said.

Moreover, PG&E complained the authority hasn't made clear to the public that unless they opt out, they will automatically be switched to its program and that an exit fee will be charged before they can return to PG&E or Southern California Edison.

That has been common knowledge for two years. Haglund said customers will be notified again once the program is ready for launch.

The authority currently involves 12 entities: Kings County, Hanford, Lemoore, Corcoran, Clovis, Dinuba, Kerman, Kingsburg, Parlier, Reedley, Sanger and Selma.

PG&E has a territorial interest in the South Valley. It serves a majority of those communities participating in the authority. The authority's success would mean a loss of business to PG&E.

Smith denies that is the reason behind the campaign.

"Our concern is strictly about what's best for the customers," Smith said. "It's not a revenue concern. We want to make sure our customers are in the best position. That's why we've been raising those questions."

Questions indeed still remain.

If the authority's community choice program comes on line, the Central Valley would be the first region in California to run a consumer-owned electricity provider.

The problem is, it's not been done here before.

Can the authority truly pull this off? Can it sustain the savings it has promised for its member communities?

Cities and counties have been asking those questions during the past several months as they face the decision to stay or leave the partnership.

Twelve entities have remained so far, with the city of Clovis being the largest.

But two key players, the City of Fresno and Tulare County, have taken the off-ramp.

Fresno decided to leave the authority in July.

Last week, Tulare County decided to exit the coalition just months after joining. Officials have expressed concerns about the financial risks, citing lack of details about the Citigroup agreement. Tulare County would have represented 40 percent of the power authority.

"We opted out because we didn't have the financial data to feel comfortable to stay in the program at this time," said Tulare County spokesman Eric Coyne. "We'll continue to monitor the program. It's possible we might consider it once we have all the details."

Kings County officials are still keeping faith with the idea.

"PG&E is really trying to get the jurisdictions to have second thoughts and Tulare did have some second thoughts, but we still view it as something workable and we're hopeful that we'll have cheaper electricity at the end of the day," said Kings County Administrative Officer Larry Spikes.

In stark contrast to PG&E, Southern California Edison, has taken a neutral stance.

The company has largely played an educational role in the process of the authority's formation.

"We want to help them understand what it's all about. Because of our expertise, we're prepared to provide information," said Edison spokesman Charlie Wilson. "For someone to be in the energy wholesale business, there are things to be aware of...

"We want them to have a reasonable chance to succeed," he said. "We want them to make informed decisions. Our interest in this is that customers be protected."

The reporter can be reached at 582-0471, ext. 3059.