Urgency Legislation to Streamline the Creation of a Municipal Utility District

DATE: January 23, 2001 
TO: Board of Supervisors
SUBJECT: Urgency Legislation to Streamline the Creation of a Municipal Utility District

SUMMARY:
The County of San Diego is the first under California's deregulation laws to be exposed to the effects of an open market. As a result, rates have nearly tripled over where they were only a year prior and this has caused the State to issue price caps on what SDG&E can charge the ratepayer. However, the difference in what SDG&E can charge and what they are paying in electricity rates is being accumulated in a balancing account that will need to be recovered in 2002 or 2003. In the meantime, the County of San Diego has been at the mercy of the State in solving this energy crisis.

On September 12, 2000, the Board of Supervisors directed the Chief Administrative Officer to explore the feasibility of San Diego County becoming a municipal energy provider in order to purchase and sell power. During this investigation, which is currently proceeding among County staff, it has been determined that the process in which to create a Municipal Utility District was over complicated and non-specific to the needs of San Diego County.

Today's action will help give authority back to the County by helping to create a long-term and permanent solution to this unpredictable climate of the electricity market.

Recommendation: 
CHAIRMAN BILL HORN AND SUPERVISOR DIANNE JACOB:

Direct the Chief Administrative Officer and County Counsel to:

1. Draft proposed legislation that would clarify and streamline the process authorized under current law for the creation of a municipal utility district, and design the proposed legislation so that it is only applicable within the jurisdictional boundaries of the County of San Diego.

2. Draft proposed legislation that would authorize the County to become an aggregator of electrical power in order to provide reasonable rates to the residents, businesses and government agencies within the County that choose to participate.

3. Authorize Chairman Horn and Supervisor Jacob to work with State Legislators to sponsor this proposed legislation.

4. Report back to the Board on February 27, 2001 with a recommendation on the proposed legislation.

Fiscal Impact: 
The fiscal impact is undetermined at this time.

BACKGROUND: 
In August, 1996, the State Legislature unanimously enacted Assembly bill 1890, which deregulated the electricity market in California and opened the door for competitive prices to be charged based on market demands for energy prices. The intent of the legislation was to allow for competition in the electricity market and to lower electrical rates for consumers. The lack of competition in the California marketplace, however, led to the creation of an unregulated monopoly in San Diego instead of a growing free market.

In the summer of 2000, San Diego consumers experienced exorbitant electrical rate increases, subsequently we are experiencing a devastating effect on the economy of San Diego County. Consumers have seen their bills triple while energy use has remained constant. Small business owners have seen their bills increase and their customer base decrease. Manufacturers have had their production and supply costs increase. Business in San Diego is placed at a disadvantage and cannot compete globally. Citizens' livelihoods and very lives are at risk in San Diego if a long term solution is not found. Rapid action must be taken to turn back the tide of economic and civic disaster that San Diego is facing as a result of AB1890.

On August 17th, the Board of Supervisors hosted an electricity conference to develop a plan to attack the rapid increase in electricity rates. On September 12, 2000, the Board directed the Chief Administrative Officer to review the solutions proposed during the conference and to return to the Board with recommendations to permanently reduce and stabilize electricity rates for San Diego consumers.

During its review of the feasibility of municipalization, County Counsel, along with General Services has determined that legislation that governs the creation of a Municipal Utility District was ambiguous and non-specific for the needs of San Diego County.

We are requesting the Board to approve moving forward with creating State legislation that will streamline the ability to create a Municipal Utility District and that will also allow us to act as an energy aggregator to purchase electrical power.

Respectfully Submitted,

BILL HORN
Chairman, 
Supervisor, 5th District

DIANNE JACOB
Supervisor, 2nd District