October 19, 2007

Promises and Power Lines

By Steve Padilla

Promises are important. For most of us they represent commitment, integrity and reliability. They make up a sort of glue, a structure, through which we understand one another, and how we should do business with one another. We rely on that structure to tell us what to expect, and what and whom we can trust. Promises take many forms, from the very informal “word is your bond” to those that when understood and accepted, constitute contracts and legal arrangements. They tell us what we are to give, what we will gain or loose, and what happens if we do not deliver. Whether a handshake or formality, we view these matters seriously, at least most of us do.

In the ever changing and confusing world of the gas and electricity industry structure is also very important to the bottom line. At least as of a few years ago, most public utilities like San Diego Gas & Electric actually were primarily in the business of delivering power, not generating it. They made most of their income through building what is called “transmission infrastructure,” the transmission grids, lines, transmitters and trenches that deliver power. Through the convoluted way we “regulated” the electricity industry, building, owning and operating this infrastructure, and finding more to build is where the real money was made.

We do not need to be reminded of the crisis in California a few years ago and how difficult and devastating it was. Bad enough production could not meet demand, people and businesses suffered. Jobs were lost and people were ruined, some even died. Trust in the system suffered most of all.

Not long before the crisis, a harebrained scheme on “de-regulating” the industry was hurried through the California Legislature. It kept government regulation of delivery and let loose the production side. In a very clever way, loopholes allowed the same entities to control it all. Production, refinement and delivery of power would in fact, essentially be controlled by the same entity, although on paper they were separated. It helped make the building of new delivery systems all the more important. Build it, and it will come. We had suffered a shortage after all.

Next came the revelations about price spiking and market manipulation. The Attorney General got involved.

Against this backdrop, cities around the nation and in California in particular set about researching ways in which they might free themselves from the mercy of some of utilities and the crazy system of laws which “regulates” them. Chula Vista was no exception.

Beginning in 2003 and with public support, the city set out to retain experts from around the nation, many of whom had worked in the industry to study ways in which the city could gain a little more control of its energy future. This of course included taking advantage of the tremendous growth occurring in the city at that time. With each new neighborhood, more of that infrastructure to deliver power was necessary. SDG&E loved that. So did the city, when it considered that it could own the infrastructure and lease it for profit. See, the public utilities like SDG&E have to be granted a franchise by the local city in order to place, own and run their transmission systems within its borders. They did not have to own it, nor did they have the first right to. But they would sure make money if they did, and loose money if they did not.

SDG&E wanted to place additional, larger power lines along Chula Vista’s bay front in order to carry much needed power to the region. The city wanted to help kick-start development long wished-for on its neglected bay front. You had a recipe for a deal.

At the end of 2004, Chula Vista passed on many options in order to secure an agreement with SDG&E of great long-term benefit to the city. Old and new power lines along the bay front would eventually be placed underground. This would be a dramatic improvement from a safety, environmental, health and of course an aesthetic standpoint. It would help make the bay front land more attractive to investors, share costs and assist clean up and development on the bay front.

SDG&E now says they may not come down at all. The power plant may go away, so what is the point they say. Besides said one representative, he doesn’t know why they agreed to it in the first place.

The agreement acknowledged that the South Bay Power Plant would someday be re-located or replaced. Besides, it is only partially important to the overall agreement in the first place, and may run for years to come.

Promises are important. The integrity that gives them strength is as important as the strength of the lines carrying the much-needed power. Let’s hope our civic leaders remember that.

Padilla served as Chula Vista Mayor from 2002-06 and on the California Coastal Commission from 2005-07. He is President/CEO of Aquarius Group, Inc. and can be contacted at: spadilla@aquariusgroup.org

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