Power for the people
Palo Alto is relatively stable as state plunges into energy crisis

by Marv Snow

Despite the rolling blackouts that recently hit Palo Alto, the city's control over its own utility services is paying dividends for residents.

While the balance of the state of California is seeing increased rates in both electricity and gas, Palo Alto utility users are-- for now--protected from electrical shock when they open their monthly statements.

"The utilities are owned by the city. That's all we look out for, our customers," said John Ulrich, director of the Palo Alto Utilities Department. "All the decisions are made right here and all are approved by the City Council."

As of Jan. 1, according to Ulrich, anyone who used 100 therms of gas (which comes from Canada via pipeline) in Palo Alto paid $62.23, while residents in other communities who receive gas from PG&E paid $179.85, almost three times more.

Those who receive electricity in Palo Alto paid $40.80 per 750 kilowatt-hour against $91.29 from PG&E, less than half the amount.

"We've not seen the financial or rate increases because we purchase our electricity on a long-term basis," said Ulrich.

Palo Alto Utilities is the only municipal utility west of Colorado that owns its electric, water and gas operation, with which the city contracts on a long-term basis. Although the city's contract with the Western Area Power Agency (WAPA)--a provider of hydroelectric power--expires in 2004, Ulrich said the city has already signed a new 20-year contract with the federal agency.

Palo Alto, according to Ulrich, receives more than 75 percent of its power from the WAPA-run Shasta and Trinity dams. Sometimes that amount grows to 95 percent, depending on the time of the year.

About 15 percent of the city's power is provided by the Northern California Power Agency (NCPA), of which the city is a member of. The city shares ownership of the Calaveras Hydroelectric Power Plant Project with the other agency members, which include Santa Clara and Alameda.

The city also buys geothermal power from a Healdsburg plant and other power from Alameda and Lodi "and from other sources," said Ulrich.

However, purchasing power isn't the same as having it delivered, said Ulrich. The city still must rely on having electricity and gas supplied over a grid network.

"The Independent System Operator (ISO) does have an effect on us," said Ulrich. ".<\p>.<\p>.Our power can't get here unless there is reliability in the power system."

The ISO controls 75 percent of the power grid in California, including power transmission lines formally owned by PG&E, Southern California Edison and San Diego Gas & Electric. The network covers approximately 124,000 square miles. More than 164 billion kilowatt-hours pass over the lines each year to 27 million homes.

The ISO was created when the state Legislature approved the deregulation of utilities in 1996. The organization has come under fire because of its alleged secret dealings with out-of-state power and gas suppliers and its lack of public accountability. Federal investigators have recommended replacing all members of the ISO, who have connections to the power industries, with independent members.

Despite such complications, however, the benefits enjoyed by Palo Alto and other communities with their own utilities has other Bay Area cities--such as San Francisco, Berkeley and Hercules--considering their own options.

However, it is much more expensive to launch a utility today than in the early 1900s, when Palo Alto set up shop.

"When prices go up, people look at other ways to save," said Ulrich, in reference to communities seeking to own utilities. "It is much more difficult now to form a locally owned utility than 100 years ago."

Today, if municipalities want to build their own plants, they have to meet a myriad environmental concerns. In California, that can be a monumental task with many stumbling blocks.

"They have to balance growth with the environment. Every system has its dynamics. It's a new challenge all the time, an exhilarating business to be in. Gas and electricity is something everyone needs," said Ulrich.

The need is so great that the state Legislature recently passed an emergency bill that allows the government to purchase energy, a move that would hopefully make it easier to keep power flowing into homes and businesses.

Since Palo Alto's utilities are not subject to the California Public Utilities Commission, Ulrich could not determine the local impact of the bill, and pointed out that smaller utilities companies have not been invited to participate in the legislative process.

"I'm not entirely sure what impact the bill could have on us," said Ulrich. "Municipal utilities have not been a part of the discussions the governor has had."

Although there is a drive to have customers conserve power to avoid rolling blackouts, some utilities are urging their customers to use small electrical heaters in rooms instead of gas heating units. The reason has nothing to do with supply, but everything to do with cost.

"Our rates have gone up significantly in the last several months due to a much higher demand for gas," said Ulrich. "As our demand for gas goes up, prices also go up, which is passed along to our customers. We've seen a 40 percent increase in gas rates. By April it will be closer to 60 percent."

Ulrich said municipalities like Palo Alto--and there aren't many of them--have the ability to provide services without the support of the state, but what the state may do to alleviate the current power shortage and financial increases may alter that fact.

"We're not immune from increased costs of utilities," Ulrich said. "Ultimately it will impact Palo Alto.

"On the positive side, it may reduce prices," said Ulrich on the prospect of the state regulating pricing and signing contracts to maintain the price. "But what about the long term? Because there is more supply, the price will come down, and then the state will be saddled with long-term contracts."

Ulrich said the city has asked customers to conserve energy to avoid outages. The city has a number of energy programs in existence for lighting, insulation, solar heating and photovoltaic systems (creating electricity through light-sensitive cells).

Photovoltaic, however, is still an expensive option, Ulrich said. "It's becoming more efficient and cost effective," he said.

Ulrich said the city has seen a significant decrease in the use of power. According to Ulrich, last week the everyday use of 150 megawatts was cut back to 142 megawatts. "People here do believe in conservation and help when there is a shortage," he said.

Although Ulrich sees changes ahead, he remains optimistic that the city will continue to weather any future energy crises.

"I think we're going to do quite well," said Ulrich. "We do have long-term contracts and we expect to maintain those, but the prices will go up. We do a lot planning for the future."

Because it plans for the future, the city sometimes ends up with surplus power, so it does some old-fashioned horse-trading.

"There are times we have more than we need, so we do sales or trades," Ulrich said. "We are doing that (trading or selling) continuously. We are trying to offset the times when we have to buy it. We have exchange agreements with other utilities."

Ulrich said at no time is there an exchange of cash, and the negotiating that is done is "sophisticated and complex."

"None of the resources you can take for granted," said Ulrich, "because they are not always available due to breakdowns and droughts."