Power down

Jeff vonKaenel

Twenty years ago this month, when we started the Sacramento News & Review, the overriding issue of concern for Sacramentans was the upcoming June election deciding whether Rancho Seco should be closed. Shutdowns, cost overruns and repeated bungling by SMUD management at the ill-fated nuclear power plant had made our own public-utility company a national embarrassment.

SN&R weighed in so heavily on this issue, urging our small number of readers to oppose the plant, we were actually accused of starting the paper for the sole purpose of closing down the power plant (while this is untrue, I assure you that given the closeness of the vote, I am very glad we started paper in April and not July).

The vote to close down Rancho Seco, combined with the emergence of the new board of directors led by Peter Keat, ushered in a new philosophy at SMUD: Conserving energy, as opposed to just building more power plants, became a primary goal. Instead of touting its conservation measures on billboards, the publicly owned company implemented concrete programs, like weatherization, solar energy and hydroelectric power.

Two decades later, SMUD has a well-deserved reputation as an environmental leader among the nation’s publicly-owned utilities. Its electrical rates have consistently run 30 percent lower than “investor-owned” utilities such as PG&E. SMUD can offer these rates because 20 years ago, it made a commitment to conservation, as opposed to building much more expensive electrical power plants.

In light of SMUD’s recently announced two-stage 13 percent electrical-rate hike, some customers are crying foul, concluding that there’s no point in conserving electricity if SMUD is just going to raise rates anyway. The conclusion is not only erroneous, it ignores the complex realities of running a modern-day public utility.

For example, an emphasis on conservation doesn’t negate the need for continuous maintenance of the electrical grid. It doesn’t grant SMUD immunity from sudden spikes in the cost of natural gas. Conservation alone can’t make up for the hydroelectric-generating capacity lost after three successive years of drought.

Meanwhile, as the economy continues to crumble, customers are falling behind on their monthly payments at double last year’s rate. The company projects sales to be $90 million lower than originally anticipated, creating the possibility that SMUD’s creditworthiness could slip, dramatically increasing interest payments on its debt.

In fact, the pressures forcing SMUD to raise rates are mitigated by energy conservation. These pressures are bound to increase over the long term, leading to the natural conclusion that SMUD should put even more effort into conserving energy, not less.

Keep in mind, even after the 13 percent rate hike goes into effect, SMUD’s rates will still be 27 percent lower than PG&E’s rates. Conservation doesn’t just save energy, it saves consumers money. That’s a lesson SMUD began teaching us 20 years ago, and Sacramentans are the better for it.

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About the Author

Jeff vonKaenel
Jeff vonKaenel is the president, CEO and majority owner of the News & Review newspapers in Sacramento, Chico and Reno.