Return to News Exchange San Francisco Municipalization Study Used Pacific Gas & Electric's Numbers

A San Francisco Environmental Commissioner has charged a consultant to the city, Economic and Technical Analysis Group (ETAG), with grossly distorting the costs associated with municipalization in its preliminary municipalization feasibility study for the city, and is calling for an investigation of wrong doing.

ETAG's report, released October 11, concluded the city would risk a 15% increase in rates, or at best achieve a 5% decrease, if it kicks out Pacific Gas & Electric (PG&E) to municipalize its electric distribution system. The conclusions were based on five "scenarios" which estimated the cost of acquiring PG&E's system at between $315 million and $1.2 billion. Figures this high are seen as a death knell for municipal takeover in San Francisco.

But the report may have been rigged. According to Joel Ventresca, a San Francisco Environmental Commisssioner and a member of the Technical Review Committee to the Board of Supervisors, each of ETAG's "scenarios" can be traced to figures generated by PG&E during its 1982 media campaign against San Francisco municipalization initiative Prop. K, and during its court battle against Sacramento's (successful) municipalization effort in 1989. "Of the five ‘scenarios' employed by ETAG in its valuation, scenarios one, two, three and five depend on PG&E's 1982 anti-municipalization propaganda." Ventresca said that ETAG's fourth scenario, known as the "income valuation method," was directly used in court by ETAG president Bob Knecht against the city of Sacramento when he worked as for PG&E as a consultant in 1989. In this case, Sacramento attorneys accused Knecht in legal documents of using the income valuation method to "manufacture sums" and of violating California evidence codes to maximize the value of the holding company's distribution system to the tune of $51.4 million. PG&E finally settled on a figure of $13 million for the system, one-fourth the cost that Knecht's income valuation method produced. "This same model was the source of ETAG's fourth scenario in the San Francisco study," said Ventresca.

Technical Review Committee members had originally voted against hiring ETAG in favor of American Public Power Association-approved J.W. Wilson & Associates in May, but were mysteriously overruled by the City's Public Utility Commission under advisement from Hetch Hetchy General Manager Larry Klein, who as a T.R. Committee member had voted with the pro-ETAG minority. Joining him in the minority were Susan Carter of the Natural Resources Defense Council (NRDC) and Eva Bruce of the San Francisco City Controller's office.

Some suspect foul play, referring to a number of irregularities in the selection process. During the original Technical Review Committee hearing October 16 to discuss ETAG's report, it was also revealed that (1) ETAG had fraudulently qualified itself as a bidder in the city's Request for Proposals by falsely claiming to have worked on a successful municipalization effort, and that (2) ETAG had received a hitherto undisclosed $140,000 in consulting fees from PG&E over the past ten years.

There was substantial consternation among committee members at the appearance of impropriety and the impression that political and financial forces are making a mockery of the process, an impression worsened by ETAG's failure to appear at the hearing to answer questions about its $150,000 report.

Ventresca and fellow Committee member Eugene Coyle called for immediate termination of the city's contract with ETAG, and Ventresca is asking the San Francisco Civil Grand Jury and District Attorney's office to investigate the process by which the City Public Utilities Commission awarded ETAG the contract against the Technical Review Committee's recommendation.

The future of municipalization in San Francisco was damaged by ETAG's report, and will be hurt by the term-limit imposed retirement of public power champion Angela Alioto from the Board of Supervisors. The Board's new President, Barbara Kaufman, has threatened to dissolve the public power committee outright. Meanwhile, Alioto says she intends to draft a ballot initiative in 1997 to let San Franciscans vote on whether to continue with a full feasibility study.