August 17, 2001
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An energy plan for S.F
Welfare reform's failure
City Park Balkanization
An energy plan for S.F.
Ed Smeloff, the new energy policy chief at S.F.'s Public Utilities Commission, offers a detailed plan for the city's energy future. A Bay Guardian interview.
Ed Smeloff is unusual: He's a San Francisco city employee who isn't afraid to talk openly about the importance of public power and the need for sustainable energy policies. A former board member at the Sacramento Municipal Utility District, Smeloff met with the Bay Guardian for more than two hours Aug. 8 and shared some of his visions with us.
Bay Guardian: Well, why don't we start out, for the record, as to how you got here from Sacramento.
Ed Smeloff: I'll start by going back to Sacramento. I was part of a political community in Sacramento that I think people would describe as progressive. I got out of college in 1973. It was kind of a bad generation, Vietnam, civil rights and so on. And energy policy was kind of a key area of interest among environmentalists, political activists in the 70s.
We had district elections for the first time in 1976 in Sacramento for the Board of Directors of SMUD. Senator Al Rodda passed an amendment through the [state] MUD act that set up district elections.
BG: Just for Sacramento?
ES: Just for Sacramento, and not for other MUDs. From '49 to '74 MUD was controlled by an elite part of the business community in Sacramento. And actually, people would run for election, and after they got elected, they would step down and appoint their successor, and then that person would run for election. So it was sort of a self-perpetuating board of directors.
But there weren't really any issues, either. Rates were going down in the 1950s because of SMUD's ability to acquire power from the federal government and then building the Upper American River Project, a low-cost hydro project.
The controversy first began with nuclear, in the 1960s. But everybody supported nuclear, from the Bee to the Sierra Club, in 1968, when SMUD got into Rancho Seco.
BG: When was Rancho Seco actually built?
ES: It was ordered in 1968, actually the same time as Diablo Canyon. They both were ordered the same year. It was completed in six years, went up in operation in 1974, and then it had some problems. SMUD's original plan was to build three nuclear plants in Sacramento. It was really the nuclear issue that got activists organized to try to change SMUD.
BG: Was that the push for district elections?
ES: That was the push for district elections. The very first thing that happened in 1974 just was a handful of activists called Sacramentans for Safe Energy, gathered signatures to put on the ballot a referendum to challenge the issue [of] more bonds to build the second nuclear plant. Under the MUD act, it takes 3 percent of registered voters to put on the ballot an aye or nay vote on revenue bonds.
Bechtel was the architect for Rancho Seco, and they spearheaded the campaign for building the second power plant in Sacramento. So the pronuclear side won and it began to set the momentum for a progressive public power movement.
And Rodda changed the MUD act so you had district elections. His brother Richard Rodda was the political editor of the Sacramento Bee.
And one of the things I need to say is that there would be no public power in Sacramento, clearly, without the Bee and the McClatchy family and there wouldn't have been the closure of Rancho Seco without the Bee and the McClatchy family.
They played, and the Bay Guardian has played, a kind of critical role for a very long time in the pushing for public power. And Al Rodda, Richard's brother, was a long-standing state senator, very well respected in Sacramento. So he amended the MUD act.
In 1976 I'd just come back, I had been teaching in Mexico. There was kind of a movement Tom Hayden was running for U.S. Senate, there was the Nuclear Safeguards Initiative, which would have prevented any nuclear plants from being built.
And then two young activists, [Richard?] Castro and Gary Hersh were running for the SMUD board. And they won, spending less than $2,000 each on the campaign. So it kind of galvanized the movement in Sacramento. We could control the public, progressives, environmental community we could control a $1 billion dollar institution if you could get a third person elected on a five- member Board of Directors.
Of course, after that, in 1979, Three Mile Island happened. Rancho Seco was a twin of Three Mile Island. [There was a] big movement to shut down Rancho Seco at that point. But it was interesting, we did some polling, Tom Hayden's group the Campaign for Economic Democracy had some political sophistication. They did some polling, and the interesting thing they found out is hardly anybody knew that there was a nuclear plant in Sacramento. Only about 20 percent of the public even knew there was a nuclear plant.
Now, I got involved through those campaigns in 1976, and decided to run myself in 1982. To be the third vote, I ran against an incumbent who was the controller of the largest industrial user in Sacramento. And I lost in that election, but kind of cut my teeth on what it takes to run an election, to run a campaign. It was just the beginning of personal computers. I had a little Osborn computer with CP/M, doing thank-you letters and all kinds of tracking of precincts and this and that. So it was kind of interesting.
Rancho Seco broke down in December of 1985. And it was a very serious incident that, if it had occurred later, could have ruptured the pressure vessel there and caused a catastrophic nuclear accident. SMUD tried to hide the extent of the damage, and made commitments that it would have the plant back operating in two years.
It was really the Rancho Seco accident there that set the ground for the transformation of SMUD. The plant ended up being down for 28 months. I ran for the Board. The progressive community was defeated in the subsequent election. Those two initial people who won for $2,000, the business community said, not going to let that happen again, so, elections started costing $50,000, $75,000, $100,000 to run for a seat on the SMUD board.
In 1982 it was the first time they had blanket television being used for SMUD elections. And so by 1984, the business elite in Sacramento had all five seats. And I ran in 1986 against the same person, and won pretty handily. The public was pretty fed up with SMUD. The problems with Rancho Seco triggered rate increases.
I came in calling for the closure of the nuclear plant, but arguing that we needed to look for a long-term resource and look at alternatives to nuclear power and decide whether continuing to pour money into the plant made economic sense.
And the Bee latched onto that argument and supported me all the way through. They endorsed me, they also called for this economic analysis.
C.K. [McClatchy] got very involved. I met with C.K. on many occasions to talk to him about it. The Bee put enormous resources in this. They hired a Pulitzer Prize-winning writer from the New York Times, Tom Knudson, who worked on this, and then they had a second reporter. They did a number of specials.
And so there was just this enormous coverage in the Sacramento Bee that took the level of awareness from 20 percent way up there. I got elected. Being on the inside is very interesting. A public agency, like SMUD, had lots of closed sessions, meetings with legal counsel, and I was able to work with the Bee in getting a lot of that information out to the public. Probably the most important thing I did at SMUD was just opening it up.
The plant ended up coming back on the line in 1988. But, if you'll recall, in April of 1986 Chernobyl happened, and so then people got out and gathered signatures and in about four weeks, [even though] it was the Christmas holidays, gathered 50,000 signatures to qualify under the initiative proportion a vote, yes or no, on operating Rancho Seco.
Since it was SMUD's property, the voters' property, the voters are sovereign, they can decide whether to use or not use their own property. It was different than any other nuclear election because in every other case it was a takings issue, something that's owned by a private party. And then there's also federal preemption on regulating nuclear safety.
So all these nuclear issues, none had succeeded until it occurred in Sacramento. And we lost the first election in 1988 because they put on a second election, which I called a "kick the tires" election. We spent $400 million repairing the plant, let's give it a test drive. Don't just throw that money down the drain. It's ready to run, it's brand new.
BG: Who led the opposition?
ES: The opposition was led by Duke Power, and the Nuclear Energy Institute. They raised $3 million. Duke kicked off the campaign with a $100,000 donation. They then contacted every other utility in the United States that owned a nuclear plant; each one kicked in $10,000.
We'd never seen anything like this. And we just got ... I mean, we got 47 percent of the vote but they did a six-week saturation of TV buy, very sophisticated. They knew the swing vote on nuclear was women, so they had all these commercials with women in the kitchen and this and that to swing the vote.
BG: Who ran the campaign for them?
ES: Oh boy. Well, I don't remember the details. Duke Power brought in their specialist, whose name you actually now see in this latest crisis, Kathy Roache, who's still their spokesperson.
You know who Richie Ross is? Richie [a Sacramento political consultant] ended up helping out on our campaign, the second campaign where we won. And he had this idea that we had to make Duke Power our central focus: this out-of-state, North Carolina company that just controlled the state of North Carolina. He said, we need to make them the focus.
BG: As a carpetbagger?
ES: As a carpetbagger, sending $100,000 into the campaign, trying to buy the election. So they sent me out to Charlotte, and I went to their shareholder's meeting to tell them to back off and stay out of Sacramento. It was a strange experience.
And then Richie also sent a TV crew to film the whole thing. This is the first election, the one we lost. I've never seen ... you go to a shareholder's meeting, and, this thing was like the Soviet Politburo, everything was orchestrated. I was just a fly in the ointment. They sent this big, 6'6'' Tar Heel linebacker who was my bodyguard.
Anyway, I spoke there. We got tons of free media. It did make Duke the issue. Duke was going to come in and take over Rancho Seco, not buy it, but become the operator, and do it for a fee.
It was more of a grassroots election the second time. There used to be ... the FCC had this ... Fairness Doctrine. For every six weeks of time, we were able to convince every television station to give us one-third to one-fourth the amount of time for free. And it just drove the industry mad that we were able to do that. We put all our ads in the last two weeks.
Anyhow. We shut down the plant, elected another progressive. We elected a swing, which just came out of the blue, nobody knew, a guy who'd just come from New York and had been in Sacramento for about a year. He ran for one of the seats and won. So we had this really odd situation where we had two conservatives on the board, two progressives, and this person nobody knew.
And eventually I was able to bring him over to my side. He was sort of a working class New York guy. His heart was in, we need to protect residential customers. But he also was ... he was on the make, he wanted to rise in politics. But I was able to convince him we needed to focus on energy efficiency, focus on conservation, bring in new management. I became the board president there, in 1990.
The first thing I did ... well, we did a number of things, but one of the things was bring in Dave Freeman to come in as the general manager. He was at the lower Colorado River Authority, sometimes known as the little TVA. Little Colorado River Authority is where Lyndon Johnson got his political start.
Dave had been at Tennessee Valley Authority under Jimmy Carter, got kicked out by Ronald Reagan, was up in Seattle, and then got hired at the LCRA. I had met him in the late 1980s and talked him into coming to SMUD.
What we really want to do at SMUD is put all our resources into energy efficiency, develop local resources, cogeneration plants, and renewables. In about three years, we put it all together.
Rancho Seco rates had gone up 83 percent from 1985 to 1989, to pay for the repairs at Rancho Seco. That increase was so high that once we closed the plant down and accessed the wholesale power market, which was just beginning to open up, in the western United States, we were able to buy power at 2 cents a kilowatt hour. It was costing us 4 1/2 cents to run Rancho Seco.
So all of a sudden we were able to buy cheap power, had rates that were pretty high, we had this margin that we were then able to plow back into community things like energy efficiency. I think we put together the biggest energy efficiency program in the country.
Then in 1997 Freeman left to go back to New York and run the New York Power Authority for Mario Cuomo, and we brought in new management. Things at SMUD were just going extremely well. The new management carried forward, it almost became institutionalized. The values we had brought on the board now filtered down to a senior management.
Then I went to New York, to head up the Pace Law School Energy Project. And I was interested in, what triggered me was the opportunity to be on the national stage, to work on climate change policy. I went there in June, the Kyoto meeting was coming up in December. There was an opportunity to begin to shape climate policy in New York, where a lot of the media elite was and some of the foundations. So that was my interest in going back there.
So I was there for four years doing energy policy. Willie Brown, I think, decided at some point, maybe in December or January, that the energy situation was really going to have an impact on the general fund and on the city government, and that he needed to bring in a new management team. The team that was there was just not dealing with this crisis.
So he recruited Freeman to come here and be the manager of the SFPUC. Freeman agreed to do that. I guess they had negotiations. Freeman had met with the PUC members and senior staff. And then [state Treasurer] Phil Angelites and Freeman Phil's a good friend of mine and Freeman became a pretty good friend of Angelites Freeman convinced Angelites that the way to get out of this crisis was to create a California Power Authority, and to have the Power Authority do several things: one, take over the transmission system; two, be the developer of last resort, or new power plants, and to be involved in promoting energy efficiency and renewables across the state.
And then state Sen. John Burton got on board and pushed the idea, put through his bill that set up the California Power Authority. Freeman was then brought in by Governor Davis to do the negotiations. Once the utilities went into bankruptcy and lost their credit worthiness and couldn't buy power out of the power exchange any longer, the Department of Water Resources took over. The governor brought in Freeman on a temporary basis.
Freeman had a falling out with [Mayor Richard] Riordan in L.A. I think Riordan was pushing Freeman to maximize revenues for the LA DWP and Freeman was saying, we shouldn't gouge or take advantage of this situation. So Freeman was ready to leave, and then when Freeman was in negotiations with the mayor, Governor Davis asked him to head up the California Power Authority.
The mayor said, you're leaving me in the lurch; who do you recommend? And so I was in New York on a Thursday. I got a call from Freeman saying come to San Francisco on Monday to meet with the mayor, something really interesting. I said, that's going to cost me a lot of money to fly out to San Francisco on four days notice. He says, it's worth doing, just do it.
And so I came out and, it's a curious meeting. I just said hello to the mayor. I met with [mayoral aides] Steve Kawa and Eleanor Johns. We talked about the position, and told them what my background was.
So I went back not knowing if this was going to result in anything. But the mayor was going to be out in New York the following week, [and] agreed to meet with me. So I did have a breakfast with the mayor, spent a few hours with the mayor. We talked about his vision of transforming the PUC into a broader power agency, for renegotiating the arrangements with Modesto and Turlock so they were more favorable to the city, and to bringing public power here.
BG: He was committed to public power at that time?
ES: He was committed; Freeman had convinced him that public power was the way out of this problem.
BG: And this was public power in the sense of....?
ES: This was ownership of the wires, and possibly ownership of the natural gas system. Clearly ownership of the wires, which is a big step ... the mayor was committed to that when he met with me. I mean, I wouldn't have come here if ... later, it was interesting, later, in talking with Steve and Eleanor, it wasn't clear that they had gotten that message, so I felt a little nervous.
BG: As recently as January, Willie was speaking at a convention out here, Alternative Newsweeklies convention, and we asked him, specifically, about this point. Because he was talking about public power, and we asked him specifically, have you changed your position, are you now in favor of taking over PG&E; facilities? And he said, no, no, no, I don't want to take over their facilities. We'll do something else, but whatever we do we're not buying PG&E;'s lines and facilities. So somehow between January and when he hired you he changed his mind on it.
ES: And I assume it was his conversations with Dave Freeman that changed his mind on that.
BG: One of the things we really wanted you to talk about is, playing off what you did in Sacramento, during that three-year period when you really turned things around, what is the vision for San Francisco? There's a certain amount of power we can get from Hetch Hetchy, you can probably get a little more by developing that system a little bit better. What's the model that brings us close to the amount of energy we need in this city without having to buy a lot that isn't available on the market right now, or without having to build a lot of fossil fuel mines?
ES: Well let's talk about Hetch Hetchy. It's an incredibly valuable resource, to have a debt-free power plant. And transmission lines all the way to Newark. So let's just say the power plant replacement value is at least $900 a kilowatt, probably more than that. For 400 megawatts, that's something that's worth at least $360 million, maybe more, debt free. And you have transmission lines probably worth $100 million.
The potential revenue from that is very large. The fuel is pretty low, I mean the fuel's free, and you have some ongoing costs for capital additions for Hetchy. There's about 175 people up there at ... some of them do water stuff some of them do electricity stuff. The system does need some investment in it, but it's not large. Put another $50 million you can rewind the generators, fix up the turbines, make this thing a resource that will continue to produce for another 50 years.
Rewinding the generators will get some additional power out of it. You can maybe increase the power by another 5 percent. There's an opportunity to do I haven't looked at this in detail a fourth power plant. So you could get some additional hydroelectric capacity up in the Sierras.
Hetchy produces, right now, 400 megawatts rated capacity. That is, you're running all of the power plants flat out and producing 400 megawatts.
BG: And the fourth would produce?
ES: The fourth I haven't looked at it but probably somewhere from 100-150 megawatts.
BG: And that's when the water is running in the spring?
ES: You can run water through it just about any time you want to produce 400 megawatts, but you only have so much water. So in an average water year, you can run the power plant 50 percent of the time. So another way to say it is you have 200 annual megawatts production. Or an alternative way of looking at it is you have 1.7 billion kilowatt hours of electricity that can be produced by Hetchy in a normal water year.
BG: And what is San Francisco using right now?
ES: The entire city of San Francisco all the residents and businesses in the city and county use 5 1/2 billion kilowatt hours. Now, Hetchy goes right now to serve municipal purposes, and much of that is actually outside of San Francisco; it's the airport, it's the filtration plants in Alameda and San Mateo county.
The total amount of power that we sell to Modesto and Turlock and [outside] the city is about 2 billion kilowatt hours. So you see we're short.
BG: That's 5.5 plus 2?
ES: Plus 2. But if you didn't have to sell all that power to Turlock and Modesto, then ... that's the number I don't want to tell you off the top of my head because I might be wrong, but I can give you that number ... probably about half of that is city load.
BG: So basically you need about 6 1/2 billion kilowatt hours to run ...
ES: ... to run the city and airport, and all the other things we have an obligation to serve.
BG: All right, so somewhere around there, 6 1/2 to 7 billion kilowatt hours is what we're going to need.
ES: So what you have then is ... how do you supplement, say it's 1.5 to 6 1/2. You need another 5 billion kilowatt hours to be able to meet the needs of San Francisco. Now I think the most important question that will determine how cost effective we can do public power in San Francisco, is what responsibility will San Francisco have for the contracts that the Department of Water Resources has entered into on behalf of PG&E;'s customers.
And I'm beginning to try to develop the arguments on that we should be responsible for less than a pro rata basis. The state of California, once PG&E; went into bankruptcy and Edison couldn't buy electricity, stepped in and they're buying electricity both on the spot market but they've also stabilized prices, entered into a whole portfolio of long-term contracts with power plant developers. Calpine and others, who are going to build power plants, they've already built some of them. So there's this obligation that the state has to buy power over a fairly long period, up to 15 years; it varies year to year.
Those contracts are being financed by state revenue bonds that will probably be issued some time in October. For the state of California to issue revenue bonds, they're going to have to assure the financial community the people who give the state the money that there's sufficient revenues over time and that there's no loopholes that prevent customers from getting out of having to buy power under those contracts.
So what's going to happen is, in Sacramento there's a debate to end direct access. Direct access is what so-called deregulation was all about, allowing people to shop. So they're saying, if you allow direct access and all the industrial customers can go out and buy power on their own, [the cost of those contracts] falls on all the residential customers and taxpayers in the state of California. So direct access will probably be ended.
And it probably also means that community access, or allowing that municipalization to get out from having to buy any of that power, will be prohibited. Otherwise, everyone would municipalize right away because you can get better deals than the state is getting.
BG: So you think ultimately San Francisco's going to be stuck with buying some of that power?
ES: Undoubtedly, San Francisco is going to be stuck buying some of that power. The question then is how much. Most of these power plants are being built in the Central Valley, the Mojave Desert, to serve the needs of all of PG&E; and Edison.
San Francisco is at the tip of the peninsula. It can only import a certain amount of power. And I'll give you the number. We can only import, during peak times, 550 megawatts with the existing transmission lines coming up through San Mateo County.
There are no transmission lines coming into San Francisco from across the bay.
So the argument that some will make is that San Francisco rate payers, like all other PG&E; ratepayers, should just pay based on a pro rata basis. They use 5 1/2 billion kilowatt hours, and all of PG&E; is (I'll make the number up) 50 billion kilowatt hours, they should pay close to 10 percent of all those contracts.
My argument would be, and we really need to get the data on this, that we shouldn't be assigned all those contracts because we can only import so much power up our lines. Plus we have Hetch Hetchy that's already using those lines. So there's only a certain amount of free capacity on those power lines to bring up any additional power beyond what we're scheduled in Hetchy. And that any assignment should be limited to that or less.
San Francisco has to produce power. The way things work right now inside the city of San Francisco, you can't keep the lights on unless you have power plants in San Francisco, or you build new transmission lines. But I think the probability of building any lines over the bay are very unlikely.
BG: Because of the expense?
ES: Because of the expense, because of the political opposition. Because the nearest place you can connect to large sources of power is Moraga, or Pittsburg. So you'd have to build lines over the city of Oakland to meet San Francisco. And that's not going to happen.
BG: Looking back, one of the real scandals, in this whole thing of scandals, was when San Francisco supervisors rolled over and did not bring the power lines from Newark into the city back in '27.
ES: And it probably could have gotten support a number of times, either bringing it to the city in 1927....
BG: Do you think the situation where the communities are going to have to buy a lot of the power that the state bought during the crisis, is that going to pit Davis against a lot of communities?
ES: I don't know. It doesn't seem to me that it's a highly visible issue right now. If it hits anyone it's the industrial customers, the people who are most focused on trying to get low rates. And the people who really pushed deregulation were large industrial customers, particularly things like oil refineries, manufacturing, auto assembly, those kind of things that use a lot of electricity don't want to pay the high prices that are in these contracts.
So that's where the opposition, you know, it'll come through the Republican party, to the Davis administration. I don't think there's so much opposition yet from the communities.
So you're going to have some kind of power coming up that you're assigned from the state. Then the question is, does the city want to buy any power from PG&E.; PG&E; has two sources of power left the river hydro, cheap, clean; Diablo Canyon, pretty cheap compared to prices that are in these contracts, or on the market.
So then the question is, should public power buy any power from PG&E;?
BG: Suppose, ideally, we want to buy as little as we can with PG&E;, as little as we can from the state, and basically be as energy self-sufficient as we can and get like you did at SMUD fill as much of that 5.5 billion as possible through conservation and renewables. What's that plan look like?
ES: At SMUD, the plan looked like this: we built three cogeneration plants, which used fossil fuel, but used it very efficiently, because it produces both heat and electricity. One of the neat little stories is we saved about 1,400 union jobs at Campbell soup by putting in a cogen plant there when Campbell's was going to relocate to Modesto.
San Francisco's a little different. You don't have much heavy industry here. In Sacramento it was food processing and the other big one we had was Proctor and Gamble.
You do though have new developments like Mission Bay and the University of California. Most UC campuses have district heating district cooling systems where you're putting in a small turbine recovering the waste heat for either chilling process or direct heating. So I think there are opportunities to do cost-effective power cogeneration systems. How great those are, I don't yet know. I need to get a better handle on that.
In Sacramento, about half of what was needed to replace Rancho Seco was met by cogeneration. Then the rest was a combination of energy efficiency, wholesale market purchases, and renewables.
BG: In your mind, how much of the 5.5 can we knock out through a concerted energy efficiency effort in San Francisco?
ES: Well we , just this year, we saw what the public was willing to do without a lot of capital investment. How much of that is sustainable, how much bounces back ... 8-10 percent is what we saw in June. Now there's a little bit of bounce back as people begin to see no rolling blackouts. This may have been more a crisis of power plants calling in sick rather than an absolute shortage. We're seeing an increase in consumption again.
I think the Ammiano goal in his charter amendment of 100 megawatts over 3-4 years is achievable.
BG: 100 megawatts translates into how many kilowatt hours?
ES: What you really want to do is peak. You want to produce the peak because then if you reduce the peak you avoid having to produce power plants. And if we're 950 megawatts peak demand, PG&E; projected growing another 300 megawatts above the 950 in 10 years. So 100 megawatts is about 10 percent of that peak.
BG: We're talking 950 is San Francisco's peak, and if we can get 100 out that's 10 percent ...
ES: It's not that difficult.
BG: In other talks you've given, you've mentioned the solar reservoirs. Do you have a plan for that?
ES: A pretty concrete plan. We've done financials, we've identified sites, there's a whole package, I did this whole presentation on Leno's Finance Committee on that.... I have nice pictures.
BG: Do you know what's going to go on what?
ES: We're looking at University Mountain Reservoir, 800,000 square feet. Kind of as a rule of thumb it's about 5-7 watts per square foot for solar. So you can see that 800,000 square feet is an enormous size. I think we could easily put within a short period of time 30 megawatts of wind, and enough energy efficiency to lower the city's bills to be able to pay for that without having to raise any of the municipal bills.
BG: So the $100 million [in the bond act], that's 30 wind and 10 solar, and that's from University Mound and where else?
ES: It's from University Mound, it's parking lots like Mission and 6th, it's other parking lots we've looked at, possibly out at the airport, maybe down at the ports, some of the piers.
BG: Where are you going to put the wind?
ES: The wind we're looking at Calaveras Reservoir. And then there's Ammiano's charter amendment that then allows the Board of Supervisors to issue additional revenue bonds.
BG: And those can work together, there's no real competing?
ES: There's no incompatibility in them at all. One is the first step, Leno, you get the money now.
The voters saying yes to $100 million for renewables has national implications. I mean never in any city election have the voters voted for that much money to go to renewable technologies. So people are calling me from the national groups the Solar Energy Industry Association they're really interested in this. So that's a first step.
And then the charter amendment allows the Board of Supervisors to issue additional revenue bonds to advance renewables when others are not ...
BG: The wind at Calaveras, how are you going to do that?
ES: Hydro and wind just is a perfect fit. They really match. The way we operate Hetchy right now is, we run the system to be sure we have enough water for San Francisco and the bay area. To do that, we never know if in any year there's gonna be a drought.
So we hold water from August through November, and produce very little power, provide enough water to keep the lower reservoirs full so you have water coming in. You try to keep Hetchy as full as possible, and the reservoirs below Hetchy as full as possible during those months. Then the rain comes in November or December, and you get the snow melt beginning in April, so we begin dispatching more water and power in those months.
And then, particularly in the spring during snow melt, April and May, we're running things full out, particularly if it's a good water year. And in some years, when you have so much water you actually spill, and so you're not even producing power. So you're running things 400 megawatts flat out in the spring.
Now what's nice about wind in California, it's a summer resource. A summer resource beginning in May through September you got your best wind machines. It usually picks up in the late afternoon and then goes through midnight or so and the things calm down. Wind, because it's intermittent, is seen by many as a less valuable resource. Because you can't really predict it.
But when you have a hydro, which is really the only major source of electricity you can store, you can use the hydro to firm up the wind and have a valuable, firm, predictable resource. That's why doing some wind development helps us manage Hetchy better.
BG: Where would this be, this wind development?
ES: The Calaveras Reservoir is in Alameda county. We have the anemometers, they're just the wind measuring device, used to measure the velocity of wind. Wind is a peculiar resource. The energy is the cube of the velocity of the wind. So if you can move from 15 miles an hour to 16 miles an hour you get a heck of a lot more energy out of it. So you want to get it in a site where you have really high velocity.
BG: What's the investment?
ES: Wind's cost effectiveness is about $1,000 a megawatt, so for $30 million you can get 30 megawatts. And wind produces, in a good wind regime it'll produce around about 30 percent of the hours during the year.
BG: So then what's the maximum, if we had all the money in the world?
ES: We could just keep doing it. There's really there's a huge wind resource. And if you go to the Altamont pass, a lot of the facilities were built there in the 1980s, they're kind of at the end of their life. You can repower them, put up the more efficient, Danish turbines and get a lot more power.
BG: How much do you get there now?
ES: I think about 1000, 1200 megawatts come out of Altamont Pass.
BG: So in theory, with $300 million, we could produce 300 megawatts of wind?
ES: Yeah, it's only money.
BG: You can do that with a revenue bond, and then ...
ES: There's three ways of getting money. One is the MUD, if it comes into existence, has the authority to issue revenue bonds, it could do so. The charter amendment gives the authority to the WAPA, the Water and Power Agency, to issue revenue bonds, so if it was the public power enemy, it could do so. And then Ammiano's charter amendment gives the power to the Supervisors.
BG: I'm just doing quick calculations here. 950 megawatts peak, right. Two hundred we get from Hetch Hetchy ...
ES: Actually you could schedule during peak. Now peak occurs two times in San Francisco. Summer peak usually in September, winter peak usually in December, and the winter peak's almost as high as the summer, you know, 5 o' clock in December when you don't have much light, you're using a lot of electricity.
And those, actually, are probably times during the year when we're using Hetchy less than in spring. But 200 is a good measure. Yeah, you could run 200 megawatts at Hetchy during peak.
BG: So I got 200, I got 100 from energy efficiency, I got 10 from solar, 30 from wind. We need 600 more. Where is that going to come from?
ES: Well, at least 400 of it has to come from in the city.
BG: From the two power plants from in the city?
ES: Or any new plants in the city.
BG: And numbers are based on the minimum for safety?
ES: You've got 550, you can import it with the transmission lines ... you've got to get 400 from in the city.
BG: So what's your recommendation for what to do with the power plants that are in the city right now?
ES: That is a good question. Right now, I am observing how Mirant is making its proposal to the community on its proposed Potrero site. And I'm very concerned that, if that were to go forward as configured, 540 megawatts of this new plant , 207 in the existing unit in Potrero, that would give Mirant enormous market power.
Then the only player in town is Mirant, and the only protection consumers have with Mirant is the ISO. The ISO currently is governed by appointees of Governor Davis. But there is a fight between Governor Davis and President Bush over who's going to control the ISO, and there is also an effort to eliminate in ISO in California and form what's called a regional transmission organization which would cover the entire west.
BG: This is nothing to depend on, this is the slenderest of slender reeds.
ES: A thin reed of consumer protection.
BG: So is this not a compelling argument for the MUD or the charter to take it over, boom?
ES: I think it's a compelling argument for developing alternative sources in San Francisco, so that Mirant's not in a dominant position.
BG: Let's say you're head of the world, and lay out what ought to happen.
ES: What I would do, in a hypothetical situation, if we had already had public power here, is I would look at multiple alternative sites, and natural gas plants. Because you need to have reliability, you need to have a plant that you can actually turn on, and it'll start up it could be cogeneration, or it could be a peaking plant, or it could be a combined cycle power plant.
BG: Where in the world do you put those, without raising the wrath of the locals?
ES: That's the challenge of any public power agency, is to put together a process that consults with the locals, that looks at multiple sites, that explains why you need to have power plants in the city for reliability.
We did it in Sacramento; we built three cogeneration plants, not in residential neighborhoods, but not far away. And you have to mitigate, you have to get offsets ... I've actually done a little bit of prospecting. I would think you need to put these power plants somewhere where they're fairly close to natural gas lines and electric transmission lines.
You can build at the airport, and we are proposing to build at the airport. The problem with building at the airport is that it's not in the city and you still have to bring the power up the same transmission lines ... so that doesn't help with that 400 megawatts.
BG: If you did this, if you built three or four small, separate plants, would you then endeavor to take Mirant down, stop them, shut that down?
ES: Then it's a question of, once Mirant doesn't have market power, whether you actually want to own the old plant out there or just contract with Mirant to buy the power at market rates. Once they lose market power, they want to sell.
And you actually own power plants that are more efficient than the one at Potrero.
BG: So what are the emissions from these plants and the environmental problems?
ES: Well, for natural gas plants the primary emissions are from oxide to nitrogen. And you can reduce them quite a bit, you can get them down to 2 1/2 parts per million through the best available control technology. But you can't reduce them to zero.
But the city, if it were doing this, would be in the position to say, you know, we're going to buy these emissions or find offsets that are acceptable to the community and that improve the air quality of the neighborhood.
The big source of nitrogen oxide emissions in San Francisco is vehicles. So if you could do ... we're already electrifying the bus fleet, moving from heavy-duty vehicles that use diesel to natural gas. Changing our school buses to natural gas would be another way.
And then the other piece we haven't talked about is fuel cells. I see fuel cells in the next 10 years being the new premiere electric generation technology. Apply it, takes very little emissions, they don't combust, they make electricity chemically like a battery, you could site them pretty much anywhere. There's one in Central Park at the police station, there's one in Times Square, they have two in Sacramento, one at Kaiser hospital, one at our headquarters. ... A 200 kilowatt fuel cell would fit in this room. And there's smaller ones that are coming out.
BG: How much power could you get if you got, say, a third of the private residents and businesses in the city to put solar on the roof? What we haven't talked about yet is decentralized solar.
ES: Well, it's hard ... are those customers willing to pay more? Even if they could access low-cost capital, and could roll it into their mortgage, or the city had a 3 percent loan program. The cost of solar still is quite a bit higher than conventional power.
The way we did it at SMUD, of course, is we spread the cost over all the generators, rate basing it, and we tried ... we were thinking long-term, 10, 20 years. What do you do to build the capacity to produce solar, improve the technology ... there's some new solar technology that's more efficient.
BG: You need to back this up. Are there local resource facilities, local foundations, is it out there?
ES: I think the private sector is ready to go if there's some money, if there's demand for the product, and maybe some economic development money to build the facilities.
BG: Now this is the Smeloff vision, politically. Can this vision be implemented through the MUD, or the charter, through what we have now?
ES: It can be implemented either one of them. It's just a question of leadership, and political will, and bringing in the talent.