Factors to be considered by the City of Lodi in purchasing electric power from the Bureau of Reclamation

90 Pages·04.201 MB·English

by  Walker, Randal Richard

FACTORS TO BE CONSIDERED BY THE CITY OF LODI
IN PURCHASING ELECTRIC POWER FROM
THE BUREAU OF RECLAMATION
A Thesis
Presented to
the Faculty of the School of Public Administration
The University of Southern California
In Partial Fulfillment
of the Requirements for the Degree
Master of Science in Public Administration
^>y
Randal Richard Walker
June, 19?1
UMI Number: EP64517
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UMI EP64517
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This thesis, written by
Randal. R Waller.............
under the guidance of h.A&.JFacuity Committee,
and approved by all its members, has been
presented to and accepted by the Council on
Graduate Study and Research in partial fulfill­
ment of the requirements for the degree of
Master of Science
in. Publ.i c. A^ini s t r at i.QJa.
D a t e . M a y S .....
Faculty Committee
TABLE OF CONTENTS
CHAPTER PAGE
I. INTRODUCTION...............................* 1
Why the problem is of significance to
public administrators. . . ................ 4
5
Available literature on the subject.......
Method of the study. .............. 6
Limitations of the study .................. 7
II. THE PLACE OF PUBLIC POWER................. 9
Effectiveness of regulation.................. 11
Cheap public power ........ • • • • • 14
Relative efficiency.................. 15
Federal tax avoidance...................... 17
Possible system integration............... 20
Effect of lower rates.................. 22
Public and private policies.......... 23
National interest.......................... 26
First step to socialism. • • • • • • • • . • • 27
III. HISTORY OF THE CENTRAL VALLEY PROJECT,. . . . 29
Present water supplies in the valley.... 29
Governmental studies in the valley....... 32
Central Valley Project Act • • • .......... 35
The Federal Government enters the Valley . . . 37
CHAPTER PAGE
Present development of the Project.......... 42
Attitude of Lodi toward Bureau Power........ 47
IV. COMPARATIVE COSTS............ 49
How favorable are Lodi’s electric rates
at present.................. . ............ 56
Will Bureau Power mean increased Federal
taxes..................................... 59
V. COMPARATIVE DEPENDABILITY..................... 65
Dependability of PG&E power . 66
Dependability of Bureau power.......... 68
VI. COMPARATIVE FREEDOM OF OPERATION. . . . . . . . 72
Bureau requirements ......................... 72
Regulations governing the supplier.. . . . . 74
VII. SUMMARY AND CONCLUSIONS....................... 76
BIBLIOGRAPHY.......................................... 84
CHAPTER I
INTRODUCTION
This study was undertaken to consider the various
factors which will confront the City of Lodi in any possible
decision to purchase electric power from the Bureau of |
Reclamation instead of continuing its present contract with*
the Pacific Gas and Electric Company. If Lodi makes such a
decision it will do so through its City Council* The
Council may call upon the City Administration either to
supply facts and figures relating to the decision or make
a recommendation backed with positive arguments* In such
a case it is felt that the present study may be of assis­
tance to the City Administration in advising the Council on
its decision*
The City of Lodi is a growing city of 15,000 persons
situated between Stockton and Sacramento in the Central
Valley of California* The City has a municipally owned
and operated electric distributing system* The Lodi system
1 ;
Is one of ten municipally owned systems in central and !
i
northern California-all purchasing bulk power from the
1 Alameda, Biggs, Gridley, Healdsburg* Lodi, Palo
Alto, Redding, Roseville, Santa Clara and Ukiah*
Pacific Gas and Electric Company* The municipal distribut­
ing systems of Modesto and Turlock are parts of irrigation
districts which are in turn supplied by the PG<SE* The City
of Sacramento is supplied by the Sacramento Municipal
Utility District which is also supplied by PG<SE. The rest
of the commercial power business in the state is conducted ,
by the PG<SEf a billion dollar company made up originally of ■
2 1
449 small water and power companies* The Company employs !
16,797 people, operates 58 hydro-electric plants, 15 steam ;
generating plants, and is presently engaged in a i billion
dollar post war expansion program*3
The Bureau of Reclamation, a part of the Department
of the Interior of the United States Government, has since
4
1938 been engaged in the construction of a $384,000,000
Central Valley Project composed of 3 dams, 5 canals, 3
electric power generating plants and 2 major electric
; transmission lines* Within the next few years the Bureau
will be able to make project power available to the City of ,
1
Lodi* The Bureau has already offered contracts to Lodi,
1
2 Robert De Roos, The Thirsty Land (Stanford, 1
jCalifornia5 Stanford University Press, 1948), p* 104. j
3 Pacific Gas and Electric Company, Forty-Third
iAnnual Report (San Francisco, 1948).
4 At 1945 prices*
3
Roseville, Santa Clara, Alameda, and Palo Alto, the Glenn-
l
Colusa and Anderson-Cottonwood Irrigation Districts, numer-
i
ous reclamation and drainage districts and the Sacramento
Municipal Utility District# So far only the City of
Boseville has signed a contract#
A decision to buy from either the Bureau of Reclama-
tion or the Pacific Gas and Electric Company is not a simple
choice between two competing sources of bulk electric
power# It is a complicated choice between a public and a
private agency, each presenting different contracts and 1
operating under different restrictions# A contract with
the Bureau would require that the City Is system be operated
on a non-profit basis# Such a requirement would have a far
reaching effect on the Cityfs system# The determination
of comparative costs, dependability of power, and freedom of
operation under each contract are all knotty problems
which will be discussed in this study#
The problem is also made more complicated because
the Bureau did not begin generating commercial power to
fill a specific need or to correct an unfair situation*
No serious charges have been made against the quality of ;
the PG<SE*s operations# Competition has come rather as an
outgrowth of the building of water facilities of which j
i
power is a by-product• The construction of dams to control
flood waters, improve navigation and provide irrigation
and municipal water also provides a site for the installa­
tion of hydro-electric generators used to produce electric
power*
WHY THE PROBLEM IS OF SIGNIFICANCE
TO PUBLIC ADMINISTRATORS
!
A decision to purchase power from the Bureau of
Reclamation will involve setting up the Cityrs electric
system as a separate business entity rather than having it I
continue to operate as a part of the general city govern­
ment* This is specified in the proposed contract with
Lodi*^ The contract also specifies that the CityTs
interest in the system would be repaid out of electric
revenues over a period of years* After such time the City
would not profit by the system*s operations except for an
in lieu tax payment* Since the City now makes a large
profit on its system, a substantial part of the general
costs of government would be shifted from the electric
power users to the taxpayers. To accurately judge the
value of such a change an administrator must have a clear
5 U*S* Department of the Interior, Bureau of Reclama­
tion, Contract^for Electric Service to City of ReddingT Art.
5, Sec* 2, p. 5 * Bureau officials have indicated that the ;
same type of contract offered to Redding will be applicablei
to Lodi*
idea of how the electric system operates, what part it plays
in the City's finances, and what the effect is of having the
system combined with the general government* A study of
this problem should give administrators a better idea of
how the electric system operates, what part it plays in the
Cityfs finances, and what the effect is of having the ;
system combined with the general government* A study of ,
this problem should give administrators a better idea of
the place and importance of Lodi's municipal electric
1 system in the city government and the value of having an
electric system operated as a separate business entity*
The study of the present problem should also aid
administrators in judging the quality of their own bulk
power sources if their city operates its own electric
system* ,
i
AVAILABLE LITERATURE OR THE SUBJECT
i
i
; i
Information on the PG<SE vs* Bureau struggle is quite
i
limited* Public statements, reports to congress, and ,
testimony before congressional committees are the main j
sources of information* Two popular books have been i
written on the Central Valley Project: The Thirsty Land *
by Robert De Roos, 194-8, which gives both sides of the
|
! Bureau-PG<&£ feud, but favors the Bureau, and They Would ;