GILROY
– Will the well-known initials
”
PG
&
amp;E
”
someday stand for
”
Powered by Gilroy Electric?
”
To Gilroy Mayor Tom Springer, having the city step into the
power business may not be such a bad idea.
GILROY – Will the well-known initials “PG&E” someday stand for “Powered by Gilroy Electric?”
To Gilroy Mayor Tom Springer, having the city step into the power business may not be such a bad idea.
On Springer’s suggestion, the city is exploring the feasibility of creating its own “paper-based” municipal utility, an idea he says would cost little but yield benefits for consumers and businesses.
By stepping in as a middleman between Calpine Corp. and Pacific Gas and Electric, the mayor says the city could potentially stand to produce cost savings for residents and customers and also ensure it has a guaranteed source of power in coming years for new economic development and existing businesses.
“There would be some small savings for the consumer, and more importantly, there would be a guaranteed source of power for the city,” Springer said. “Calpine would be permanently operating their plant for the benefit of the city.”
The city would not take ownership of the power plant, lines or other physical infrastructure and shouldn’t have to hire additional employees, Springer said. Rather, the new “utility” would be a legal entity created purely on paper.
Through it, the city would contract with Calpine to purchase power generated at the plant, and pass it on basically at cost to PG&E, which would still act as the distributor and biller and perform service work.
“The advantage is you basically remove the profit portion from the generator side,” Springer said. “Obviously Calpine will make a profit, but you’re removing the profit from the normal supplier source.
“If it was PG&E buying power from a supplier, they’d add a profit margin as they sell it, which is regulated by the state. The city would remove that profit margin and charge only an administrative fee.
“You simply cut the overhead price on the contracts,” Springer added. “When PG&E buys from out-of-state, there’s a markup on the contracts, whatever the market will bear. We can eliminate that markup.”
While Springer envisions some cost savings for consumers, he said the biggest advantage for the move would be stability.
“The biggest aspect is we have a guaranteed source of power in our own backyard,” he said.
The stability could have big advantages for the city’s business community and economic development efforts, Springer said, becoming a desirable quantity for the city to market to interested industrial businesses and their fields of power-gulping computers and machinery – especially in light of the state’s recent electricity deregulation woes.
“As industrial businesses expand or move here, they’re looking for a stable source of power” and ask for guarantees of certain amounts of energy, he said. “We could say ‘Yes, we can guarantee you that.’
“If you have sustainable power as this proposal theoretically gives us, we might be an even more attractive place for these businesses to locate.”
Stability in energy supply – and more importantly, price — is a factor that interested businesses consider, said city Economic Development Director Bill Lindsteadt.
“I think if we could make it happen, I’d be totally in favor of it,” he said.
The stability could also help existing small businesses, Springer said, where blackouts can have devastating effects within their slim margins.
“A small business, especially a three-to-four-person operation like a barber shop, dry cleaners or a supermarket that loses power for three or four hours can’t operate their cash registers, gas pumps or regular things and could lose a significant amount of business,” he said.Springer admitted the state is not in the same power crunch as it was a few summers ago. But the state is still short on power plants and energy sources – and could still be vulnerable if it loses power to another part of the country.
“Our power problems are not all solved,” he said.
If the Gilroy plant proves to produce more power than the city needs, officials could perhaps invite Morgan Hill, Hollister or surrounding communities into the arrangement, Springer said, perhaps by forming a new joint-powers authority.
The proposal is currently in the “investigative” stage, Springer said. City staff are looking into applicable laws and regulations to gauge its feasibility after Council agreed to take a closer look at the retreat. Depending on the outcome, it could return to councilmembers for a study session as early as this summer.
Springer noted the idea may not turn out to be viable or provide significant enough benefits – or it could prove to be more expensive than envisioned.
“We’ve taken it from the germination stage to the legal stage to see if it has merits,” he said.
So far, Calpine officials were “very interested” in the idea when it arose during discussions about peaker plants, Springer said. The incentive for the company is that the move would give them a local customer, he said.
“It gives them a customer they can deal with directly,” he said. “Rather than putting a contract out on someone else’s terms, they could negotiate terms with us and come up with (terms) slightly better than what they have …”
Very brief discussions with PG&E officials were “encouraging,” Springer said. He said the company could benefit through a stable local power supply, freeing up capacity while reducing leakage and maintenance concerns about transmission over long-distance lines.
“They did not have a problem with it,” he said.
City Council was initially receptive after hearing a presentation from Springer during its recent retreat, approving the use of city staff time to look into the idea further.
Councilman Craig Gartman noted that when he lived in Santa Clara – a city with its own utility, although by a different arrangement than Springer’s proposal – he paid lower rates and did not have power outages that other cities had during the energy crisis.
“Having lived through that, I think it’s a great idea to explore,” he told the Council.
Councilman Peter Arellano called the idea “interesting.”
“I would need to hear more details,” he said.
Councilman Bob Dillon said the arrangements the city has now seem to work adequately without burdening city staff with the additional work of researching the idea.
“I don’t see a need …” he said.
