Shining Up Sacramento’s Lackluster Public Utility — Episode 172 of Local Energy Rules

Derek and Fatima, welcome to the podcast.

So that’s an ongoing issue. And then the other piece is that energy creates a housing burden. And quite frankly since the pandemic we’ve all been home more, we need electricity especially to manage the hotter and colder temperatures. And as I think about what was important to me then, and it’s still important to me today, is the cause of energy, right? And who can afford it and pretty soon it’s gonna become a luxury. I’ll start with the equity piece right here in SMUD territory, as you know, it’s a public utility. During the pandemic, and even now, brown and Black families are affected at a disproportionate rate with the increased burden of energy costs, housing burden. And I think that we have not resolved that when one in three SMUD customers are behind on their utility bills and they’re at jeopardy of having their power shutoff and or now power shutoffs have begun that we’re a little delayed during the pandemic.

And so it’s this like wave of emergency and almost I’ll say disaster, a situation that low income families, specifically brown and Black families are experiencing. Are we gonna get to climate resiliency when we haven’t resolved? Those who are not able to access right now a very fundamental resource, which is energy at an affordable rate. Equity for sure has been a concern. And we haven’t resolved that. There’s this bandaid of energy assistance programs. But I mean when your SMUD bill is four, $600 a month and you get assistance for how many months, it’s not solving the larger issue here. So I’ll just say we’re not gonna survive without a new way of doing business. So for me it’s really about what are we doing to transition into this new era of climate change, right? Of extreme weather patterns. And now that everyone is home or requiring more energy and the cost of energy is going up, whether you’re a private or public utility. So it’s not reliable, affordable. So yeah, so those are some of the concerns we have that I have when it comes to low-income families here in Sacramento and across the nation actually there is a disproportionate burden for communities of color when it comes to energy and meeting those energy needs.

And I was quite frankly shocked two, three years ago when I explored putting rooftop solar onto my house and called an installer that had done one for one of my neighbors. And they came and informed me that they had a financing model called a power purchase agreement where they would install a rooftop solar system on my house at zero cost to me. I’d enter into a contract with them to purchase power from them at a cheaper rate than SMUD for the next 20 years. And that program made electricity very affordable for people who can’t afford a 20 or $25,000 upfront cash payment to install their own system. And sadly, what the contractor informed me at the time is they were gonna have to discontinue that program if SMUD changed their net metering rates. And in fact, that’s exactly what happened. SMUD did make that change and they have discontinued that program. So I think we’re gonna see a real contraction in rooftop solar and distributed energy in SMUD territory, with the exception of new homes that now have a statewide mandate to have solar installed with them. But I think that’s a big mistake for any utility, particularly in this age of electrification, where due to climate concerns, we need to electrify our homes with heat pump water heaters, heat pump air conditioning and heating units, and moving on to electric vehicles. We’re going to need to double or triple our electric production. And that either means we’re gonna use a lot of open space for utility scale solar and wind projects or we’re going to need to push towards a distributed energy model. And I’ve been disappointed that SMUD has been basically taking the same hostile posture towards that as the investor-owned utilities all across the country because they are all viewing it as competition to their monopoly on providing electricity.

Everyone’s paying that same fixed fee. It’s a little bit like charging a bicycle or a Toyota Prius carpool or a semi truck the same toll to cross a bridge cuz you’re saying, well you’re all using the public infrastructure. But yeah, we’re using it in radically different ways and SMUD brags about this rate structure into their bond documents. They say we’ve devised this fee to ensure that we get sufficient revenue even from people that are doing a lot of conservation or a lot of self-generation. And so it’s put in place as a disincentive to rooftop solar and other distributed energy and, and also quite frankly is a disincentive to spending a lot of money on conservation cuz you’re not gonna save as much on your bill as a PG&E rate structure with higher rates, lower fees.

And so that is the first kind of question at hand, right? Is having maybe a new rate structure to account for those who can’t afford the current rate and or charging a little more for those who can afford a little more or who are using more, right? So I think there’s certainly a need for just greater rate structures to address equity income based. And so in addition to that though, for me as a public utility, SMUD can buy power from anyone, right? And they could buy it above market to help low-income communities. And so I guess my suggestion would be that, I think about the Navajo Nation that is now selling their power, right? How can we get disadvantaged communities that are suffering economically to be able to participate in this solar energy market when let’s be real, solar technology is the people’s technology, right? This really belongs to the people.

I’ll give you a little example. Like let’s put it in context, right? Good, bad or indifferent right? Now if I need to go get gas, at least I can go to a variety of different gas stations. I got options, I can go to the mom-and-pop independent distributor or I can go to these transnational kind of corporate places. But what happens when SMUD, the local utility company becomes the only gas station, right? Or the only provider of this, as you said, precious necessary resource at this point, which is energy. We all need it. And so it eliminates competition, right? It corners the energy market. Now the solar energy market, right? My hope and goal and dream right now is that communities that are disinvested, that are disadvantaged need to be part of producing energy both for themselves and for their neighborhoods, right?

Cause neighborhood economies are really necessary right now and I think it would help SMUD to achieve all of their goals. But unfortunately SMUD is really focused on solar farms and they’re getting ready to eat up like thousands of acres of just pristine natural land to build these solar farms and batteries which serves them but not the public or the people that need it the most. And so I think that would be, for me, kind of the biggest necessary change is how we do business and actually working with the communities that need it the most to help them produce power so it’s cheaper and or even purchase it from them so that they can rebuild their economies.

That same technology could perhaps be used in sort of the way we do lifeline telephone service, right? Where you’re always gonna be able to dial 911 even if you can’t make a long distance call to Europe. We could have circuits in a home that are connected to basic heating and cooling to keep a house healthy for somebody, especially if they’re immune compromised or elderly, or going through a health crisis or have healthcare equipment. But maybe if they have a pool, their pool pump wouldn’t be viewed as a human right? And so instead of shutting them off, they could be put on minimal life preserving power and then, okay, let’s deal with these other issues and payment issues for not, not even necessarily excessive, but other uses of energy would provide options besides just shutting somebody off or letting them run up an electric bill for things that are beyond necessary for just human survival.

And we see it also in SMUDs public relations and marketing budget, which is about 28 million per year. It’s like $43 per customer, right? So talk about an equity issue and this is to pay for billboards in our airport, just that’s saying SMUD is wonderful and smart. Not educating people about a rebate program or a rate program or anything like that. And LA Department of Power and Water dramatically less spending on sort of self, self-aggrandizement. That may be because the board members don’t have to run for reelection and aren’t trying to sort of bolster their own reputation. I’m not sure, but I think your organization and the folks that are looking at starting new municipal power plants should think about this and go, well, is it best to have them directly elected? Cause that does mean that they’re more prone to public pressure and we’ve seen some benefits from that in SMUD. Or does that turn your board into sort of mini politicians who are using it as a stepping stone for other office and are therefore reticent to be critical of the utility or hold it to account because they’re looking for kind of the good PR boost themselves. So I don’t know the answer to that, but I think it would be worth further study by all of us and in particular your group.

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I certainly see it operating more as a private company and not really responding to the community, the public or customer’s needs. And what’s even more fascinating to me, so just to give an example, I did a little research of my own, five out of seven of the SMUD board members run uncontested, right? So these seats, the folks in these seats have been there a long time. They’re comfortable. They pretty much are just like by default. And so the person that I ran against, he’s been on the board 12 now to be 16 years, right? And when you think about that, and I think about this too, it’s like there are no board limits or in terms of term limits, there are no campaign contribution limits. I mean, the state is kind of doing a little bit of that at the state level, but like when these local races, and especially local utility rates, customers don’t even know that they get to vote.

So there’s a lot lack of connection and knowledge there. And then as I think about even now, like running in, let’s say if I was elected, would I want term limits? If it’s the, let’s say right person in that seat, you want good leadership, but right now our leadership lacks luster. And so when you have lack lister leadership, it’s not good, right? And so I think we are starting to really realize like, wait a minute, these folks have been here way too long. They’re way too comfortable. And I think now with this whole conundrum around climate change and what to do about solar energy, the conversation is not changing to benefit those that should, right? Which is the customers, the public, it’s like this devaluation of, I’m gonna say customer produced solar energy, right? First and foremost. But also it’s like we have so many other challenges from, yes, Rancho sake of the nuclear power plant was shut down, but it hasn’t been decommissioned, right?

Again, for political or other reasons. We’re still spending money on, for whatever reason, kind of like it’s still there, but it’s still costing us money. So that’s a problem. It has not been decommissioned and closed. And then we have these gas powered plants, which again, three of five are in disadvantaged communities affecting asthma and respiratory problems and air quality, which then affects COVID and all those respiratory issues. So again, you have these compound issues of the policies that we have in place, but then the leaders who set those policies, and I think Derek’s hit a spot on too, of like the growth compensation of the CEO. Like that’s the highest salary in the state of California. And yeah, we believe in living wages, but at what point is it just atrocious and a bit maybe excessive?