Founder's Note: February
From February 2006
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Grid Economics
By Warren Smith
My head is spinning from the claims of PG&E and SMUD over the annexation of the Yolo utility service area. (See Out of Their Minds, page 22). As expected, the battle has turned ugly and it’s about to get worse.
PG&E’s next tactic is to “let voters decide” by initiative on the next ballot by asking Sacramento County users to give a yes to PG&E. As of this writing, SMUD is about to counter with its initiative. Brace yourselves for an expensive and intruding campaign.
But the assault won’t be fair. SMUD’s public entity status precludes it from spending on matters of the political kind. PG&E, however, as a private company, can launch a campaign of presidential proportions. To sift through the propaganda will be difficult, but our first question should be: Why does PG&E care so much?
For PG&E, the Yolo service area is a large geographical area with nominal usage and marginal profit. However, PG&E has the big picture in mind. San Francisco and other large metropolitan areas are exploring establishing municipal utilities such as SMUD for their community. You can bet that PG&E will spend lavishly to prevent a precedent-setting event that could dramatically affect their main profit centers.
This is not a matter of a public entity taking over a private enterprise. PG&E and the other “private” power companies can not claim the same risks as other competitive companies. Operating a monopoly is hardly capitalism, and, through California Public Utility Commission governance, PG&E is guaranteed an 11 percent ROI annually. At least SMUD is held accountable by citizens who can vote the board out of office for underperformance. As the 2000–2001 power crisis shows, accountability is not mandatory at PG&E.
I say both SMUD and PG&E provide service in Yolo and Sacramento counties. The outcome would be a win for consumers. Competition would keep prices competitive and enhance customer service. Let the big boys compete like the rest of us in business do.
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