Public Power in California

By Ted Bradshaw

"Public Power in California" examines the structural and economic issues affecting the expansion of municipal electric power utilities in the state of California. Although the discussion centers on specific examples in California, the implications of the analysis presented in this book are relevant for the viability of future municipalization of utilities in the United States.

• Language: English
• Publisher: Xlibris US
• Release date: Sep 25, 2003
• ISBN: 9781469118123

Ted Bradshaw

Ted met the living Jesus at 27. Baptized in the Holy Spirit, Ted graduated seminary as M. Div. Served as a Student Pastor, later Pastor of a yoked parish - Baptist and Congregational churches. Ted became a Christian Counselor, worked in parachurch organizations, on staff in an Episcopal church. Ted went short-term missions to Slovakia; Pakistan; St. Petersburg, Russia; Micronesia (3 times); Philippines and Bulgaria. Ted has written “Servant of the Servants of God”; a novel “Saul – The Traitor!©” His wife Ruth of 57 years has given him two daughters. He has seven grandchildren and 4 great grandchildren."

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Copyright © 2003 by Ted Bradshaw, Tapan Munroe & Richard Lee.

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

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Contents

Executive Summary

Chapter One

Public Power

in California

Bibliography – Chapter One

Chapter Two

Public Power and Deregulation

Bibliography – Chapter Two

Chapter Three

Economic Issues Regarding Municipalization

of Electric Power Systems

Bibliography – Chapter Three

Biographies

Acknowledgment

Executive Summary

The purpose of this report is to

examine the issues affecting the

potential expansion of the municipal utility sector, focusing on the structural and economic issues that may determine the viability of further municipalization in California. It consists of three chapters.

• Chapter One: Public Power in California – examines the historical and current status of municipal power in the state and specifies the key issues of the sector.

• Chapter Two: Public Power and Deregulation – examines the implications for new municipal utilities (MUs) in the aftermath of deregulation and analyzes the advantages and disadvantages of new MUs relative to the existing investor owned utilities (IOUs).

• Chapter Three: Economic Issues – Municipalization of Electric Power Systems – focuses on the analysis of economic issues surrounding municipalization of IOUs.

Conclusions of Chapter One include:

• Electricity in California has been supplied primarily by IOUs, with a small proportion of cities and communities forming MUs.

• For the last 75 years the number of California MUs has been stable. In contrast, the national trend has gone in the opposite direction, with a net loss of MUs from 1980 to 1995.

• With deregulation and restructuring of the electricity industry, as well as the maturation of alternative and dispersed technologies, we expect significant changes that will reshape the way both public and private utilities operate.

• Even in the emerging system, only communities that have an inherent advantage – such as access to inexpensive power – may be able to justify the cost and difficulties of forming a municipal utility.

Conclusions of Chapter Two include:

• MUs have significant tax and other incentives that provide them with advantages over IOUs, and these incentives have been institutionalized in law for a very long time. The benefits held by the MUs are not likely to be changed to any significant degree.

• MUs seeking sources of electricity will have to compete for and pay about the same price as IUOs for power.

• The current MU advantage of access to low priced hydropower will not be available to new MUs.

• MUs were more reliable during the recent energy crisis because they were not required by deregulation to divest ownership of their generation capacity.

• The costs of California’s failed deregulation scheme (power purchases by the state in the spot market and long term power contracts) will be borne by existing IOUs and, for the most part not by the existing, MUs. However, new MUs will not be able to avoid paying their fair share of these costs. Overall, in the period after deregulation MUs have few advantages over IOUs despite their ongoing tax incentives.

Conclusions of Chapter Three include:

• The capital costs of acquisition and establishment of an MU will be substantial; it is likely to exceed a typical city’s annual revenue.

• Substantial capital costs raise other issues, including a city’s bonding capacity, and the need for voter approval for any new taxes required to finance municipalization. This is a particular challenge in times when the economy is in a recession and municipal finances are weak.

• The most recent data suggest that cities can expect to pay between one and two times the book value of an IOUs facilities. A recent Bay Area Economic Forum study suggests that if cities can negotiate a purchase price below 1.63 times book value they may be competitive with IOUs.

• Even when some cities with ideal conditions such as compact and efficient distribution networks, moderate climates, and access to cheap power