|
Don Moore has lived and worked in Redding since 1956, when he drove up here from Yuba City on Old 99. He is now semi-retired; he was head counselor at Enterprise High School for 17 years, and at Pioneer High School for 18 years. He now does counseling at Shasta College for the GAIN program, helping AFDC recipients. This article is condensed from his 1961 Chico State Master's thesis.
One of the most vital issues before the people of California has been the development of the northern California water resources, along with the production and distribution of electrical energy. A look at the history of the electrical system of Redding is part of the larger picture of public vs. private power.
Redding does not produce power; Redding only distributes it to the homes and businesses of the City. Redding's first experience with the distribution of electrical power came when the City took over the street lighting system in 1916.
The history of this City public utility began with the early City Trustees' dissatisfaction with the street lighting system provided by the Northern California Power Company since 1914, and culminated with the buy-out of the electrical facilities of PG&E in 1921.
In 1915, Redding was on the path of the Pacific Highway that was being constructed by the State. Improved roads were beginning to radiate out from Redding as the automobile was making its appearance on the local scene. Redding's economic base rested on mining, forestry, farming, and railroad transportation, and it was an important freight depot for the northern counties. It was also the county seat.
Shasta County and Redding were favored in 1914, as today, with large water resources. At that time, the Northern California Power Company was producing about 54,000 horsepower of hydroelectric power in Shasta County.
In November 1915, the company representative told the City Board of Trustees that it would agree to certain improvements, "if the agitation about a lighting system" were dropped, and if the Board would sign a ten-year contract. The Board did not act on this, and the feeling was that the power company seemed to have a policy of "the public be damned."
Ernest A. Rolison, then city engineer, reported at the March 6, 1916, Board meeting that "64 arc lights had been found not burning during the month of February." In August, there were some 91 lights out. Since there were about 35 arc lights scattered around the City, this meant the system had many intermittent failures during the month.
In February 1916, the Board of Trustees passed a resolution indicating their desire to build a municipal lighting system. The proposed ordinance carried a petition with some 279 signatures. A municipal election was set for April 10, 1916, to elect City officers and for the ordinance, which read:
Shall the ordinance providing for the installation and equipment of a municipal lighting system for the City of Redding known as a low voltage series system be adopted?
The vote was 669 for, and 363 against. The City was committed to building its own system.
Many of the people who voted "yes" were prominent business men, and some, such as Sherman C. Shadwell, were on the Board of Trustees.
Redding secured the street lighting system, such as it was, built its own lighting facilities, and modernized the street lights so they provided better illumination than the arc lights and cost less to operate. By 1917, the lighting venture was so successful that the Board of Trustees was receiving inquiries from other municipalities about the project. It set a precedent for other cities to acquire their own street lighting facilities.
City Engineer Rolison had a set of plans outlining the system of the Northern California Power Company. He estimated a duplicate system at 1918 prices would cost $40,000, so the Board of Trustees went ahead and set a bond election for April, 1918, to allow the City to sell $40,000 of 6% bonds to buy the electrical utility.
The bonds passed by a wide margin, 739 for and 254 against. In the same election, all incumbent trustees were returned to office. The last payment on this issue of bonds was made in 1961.
In May 1918, immediately after the election, the City filed its application with the State Railroad Commission (the body empowered by the Public Utilities Act of 1911 to regulate utility rates) to fix the amount of compensation to be paid to the Northern California Power Company for its property.
The first hearings in this dispute were held in Redding on February 27, 1919, and in San Francisco on March 18. These hearings were only the first of many that would be held before the conflict was resolved.
The interesting question of the profitableness of the Redding system came up during the litigation proceedings, and a detailed analysis of the accounts of the Northern California Power Company's electrical business in Redding was made by the engineers for both the company and the Railroad Commission.
These figures showed revenue of $38,452. Expenses (including operation, maintenance, rent, taxes, cost of energy, depreciation, etc.) were $27,757, for a profit of $10,695. Obviously, the power company had been doing well in Redding.
In the fall of 1919, Pacific Gas & Electric Company (PG&E) bought the rights and property of the Northern California Power Company, and entered into the legal battle represented by Charles P. Cutten. PG&E became the eventual loser.
It took three years to reach the final settlement. The Railroad Commission (later known as the Public Utilities Commission) moved with great deliberation; they were aware of the importance of this decision. Because of the ramifications of the Redding dispute, the Commission eventually handed down four decisions before the electrical utility changed hands. The deliberations established a value of $57,352.68 (plus court costs of $3.50). Redding brought suit in the Superior Court of Shasta County to condemn the property for the City's use. In these eminent domain proceedings, the court accepted the Railroad Commission's findings on just compensation.
Redding moved quickly to acquire the distribution system. In December 1921, to make up the $17,000 or so difference between the bond issue and the purchase price, the trustees moved $10,000 from the general fund. In addition, some of the leading businessmen of Redding paid their electric bills in advance in return for a 7% discount on their electrical bill. The trustees also resolved that no preferential rates were to be given to employees of the City, or anyone else.
Redding took possession of the electric utility on December 21, 1921, at 2:00 in the afternoon. The City entered into a contract with PG&E to buy electric power at a wholesale rate, and began to distribute its own electricity on that December date.
By the end of the following year, Redding was successfully running its own electric distribution system, making a net gain of some $29,820 for the first year of operation. The money borrowed from the General Fund was returned and some $7,500 was transferred to finance road paving in the City. The first $1,000 bond was paid off, and the plant was improved some $6,699. Redding's municipal electrical distribution system was off to a flying start.
Redding was the first City in northern California to acquire a public electric utility through eminent domain proceedings, a significant step in the resolution of public vs. private power.
The City has been receiving its wholesale power from Federal sources since 1960. The work of those early trustees in acquiring a public utility through arduous hearings and numerous investigations (sans air conditioning) has given the citizens of Redding the electric utility they enjoy today.
- REU would like to thank Donald Moore and the Shasta Historical Society for this article.
1960 - Present
By Mary Franks
1961 - 1981
Historically, Redding has relied upon wholesale purchases from other utilities to meet its power requirements. In 1961, the City began purchasing its power from the United States Bureau of Reclamation (USBR). During the Carter Administration, the sale of USBR was turned over to the Western Area Power Administration (Western), which is part of the Department of Energy.
In 1971, the City was designated by the USBR as a load growth customer. This designation allowed the City, along with six other utilities, to grow within the 250 megawatts of unallocated power. However, in a 1980 judicial decision, the City was limited to a total of 116 megawatts. The utility was converted overnight from one with unlimited power to one with a limited power supply and a dangerously small reserve.
During the early 1970s, it became evident that continued reliance upon other utilities could not ensure the availability of reliable and low cost power to meet the City’s future long-term electrical demands. In 1976, the City began to develop a broad-based program to provide an opportunity for the City to exercise some control over the cost and availability of resources needed to meet demands. The program included suitable City-owned generating resources, participation in joint powers agency resources, and power purchases. Essentially, in 1976, the City initiated a program to develop sufficient power resources to meet the future power requirements of its customers in a reliable and cost-effective manner. During 1981, the program was consolidated into the first City of Redding Electric Utility Resource Plan.
June 1982
The need for developing a resource plan which contains a well balanced mix of power resources had been clearly substantiated. During the five-year period beginning in 1982, the cost of power purchased by the City from its major supplier, Western, escalated over 300%. In addition, in 1984, the City’s electric load exceeded Western’s contractual limit and required the City to purchase more expensive supplemental power from Pacific Gas and Electric (PG&E) during one month, at a total cost of $64,000. By 1988, the City’s electric load had grown to 154 MW, requiring the purchase of supplemental power from PG&E during four months, at a total cost of $3,100,000.
1987
While PG&E served the bulk of Shasta County, the City of Redding provided a unique energy source to its residents through an independent municipal utility district. Electric rates increased by an average of 6.5% in October 1989. This rate increase was attributed primarily to increased costs to purchase electricity from Western and PG&E.
During 1988, Redding, Anderson, and Shasta County officials, along with citizens’ groups, worked continually to reopen area libraries, which closed the previous year for lack of funds. Voters rejected Measure L, Redding’s utility tax proposal in September. To keep rates low, the City attempted to keep electrical demand down at peak times, and pursued alternative generation and transmission projects such as the San Juan coal-fired plant and the Whiskeytown hydroelectric project (both successfully completed), the Spring Creek pumped storage project, Lake Redding hydroelectric project, Lake Red Bluff hydroelectric project, various co-generation projects, and the California Oregon Transmission Project (COTP). Redding’s new 230/115kV Airport Substation opened in November and was a major addition to the City’s electrical system, significantly increasing electric service to new area development. The project also provided a second interconnection to Western's transmission system and transmission substation capacity, needed to receive increased power deliveries from Western and other sources via Western’s transmission system, which greatly improved the reliability of our system.
January 1991
The City was aggressively looking at new energy sources to meet projected demands. At the end of 1991, the City was also negotiating for the development of an additional natural gas-fired combustion turbine electric generation project at a site located on Clear Creek Road. The project was initially estimated to provide an additional 50-plus megawatts of electric generation to help meet the peak power needs of the community. Another resource project, the COTP a 500-kilovolt transmission line between Oregon and central California, once completed, would be capable of carrying 1,600 megawatts of power between California and the Pacific Northwest, of which Redding would own approximately a 95 megawatt share in the project ( eventually completed in late 1992).
1992 - 1993
REU made a major electric resource acquisition by purchasing the privately owned Redding Power Plant (RPP). The purchase price of $14.5 million represented a tremendous bargain to the City, as the price to build a similar facility one year later would be approximately $45 million. At the heart of the RPP is a steam turbine-driven electric generator capable of producing more than 30 megawatts of power. That amount of power is nearly 20% of the total amount of power required by City of Redding electric customers on the hottest summer days. Although it was originally designed to burn wood waste produced by an adjoining sawmill, the City converted the facility to burn natural gas – a more stable and economical long-term fuel source. Anticipated to be fully operating in 1994, it was estimated to significantly reduce Redding’s dependence on PG&E for power to supplement the 116 megawatt allowance from Western.
July 1994
A shift in focus from being a distributor of electricity to being a producer began in the early 90s. Although Western’s power was sold to the City at relatively low rates, PG&E’s power was more expensive and a major contributor to overall costs. By developing other power resources, the Electric Utility began plans to eliminate dependence upon PG&E, thus greatly changing the direction toward controlling power costs.
The conversion of RPP was anticipated to be completed and the unit available for operation by the summer of 1994. In addition, the City was constructing a natural gas-fired turbine generator project capable of producing more than 70 megawatts of additional power, which was anticipated to begin commercial operation in August 1994. The City arranged for the purchase of additional power from outside sources at competitive rates, in addition to electric generation projects.
January 1995
The power generation facilities the City had acquired and developed on Clear Creek Road proved extremely valuable to the City and its electric customers. These two distinct power generation projects represented an investment totaling approximately $80 million. The first, the Redding Power Steam Plant project, was completed in early 1994 and fully operational throughout the summer peak season. This, and some favorable purchase power contracts available through the City’s participation in the COTP transmission line, allowed the City to stop purchasing supplemental power from PG&E early in 1995 at a significant long-term savings to ratepayers. The second project, the Redding Power Combustion Turbine project, a peaking power generation project utilizing natural gas-fired jet turbines, was expected to be completed prior to the 1995 summer peak season.
In the spring of 1995, the City’s new Corporation Yard facility was nearing completion on a site off Viking Way in northeast Redding. The facility would house the General Services Department, Parks Department staff, and Public Works.
1996 - 1997
Due to major storms during the winter of 1996/97, more than $28,000 in damages was caused to the City’s electric system.
During 1996 and 1997, state and federal legislators and regulators made significant changes in the electric utility industry. The primary intent of these actions was to deregulate the electric service business as has occurred in the telephone, airline, banking, and natural gas industries. In California, State legislators passed Assembly Bill 1890 (AB 1890), which was signed into law by Governor Wilson in September 1996. This legislation was designed to reduce electric costs in the state as a whole by increasing competition in the generation of electricity. AB 1890 was principally driven by large businesses within the service territories of the three major investor-owned utilities in California whose electric rates were approximately 150% greater than the national average.
The Redding City Council took significant steps to help prepare the City for deregulation and to make the Electric Utility an active participant in the competitive environment. In 1996, the City Council initially commissioned an independent consultant to perform a management audit of the Electric Utility’s operations to assess the Utility’s overall performance. As the audit progressed and the regulatory world around the Electric Utility changed, the focus of the audit was broadened to include an assessment of the Utility’s ability to compete in the new market structure. However, based on the then-pending legislation, the auditor’s focus on the Utility’s cost structure highlighted the City’s potential exposure to financial risk in the competitive market. The audit identified several issues and suggested potential actions that would need to be taken to improve the Utility’s competitive position. While some of these potential actions seemed bold, it was evident that as a community-owned utility, the Electric Utility’s customers should be actively involved in formulating any actions to be taken. Therefore, the City Manager and the City Council created a committee consisting of a cross section of Redding’s customers to review the audit and other information on deregulation to provide recommendations to the City Council on certain policies for the Electric Utility in order to benefit the customers, the City, and the Utility.
Based on their review, the Citizens’ Committee recommended that the City reduce its outstanding debt by approximately $200 million through an interim rate surcharge in order to retain the competitive position of the Utility in the deregulated environment. The City Council received the Citizens’ Committee Report in March 1997, and the interim rate surcharge went into effect the following month.
Throughout 1996, the City Electric Department assumed new projects, conducted a self evaluation, and began planning for the future. The Redding Power Plant was now capable of producing 94 megawatts. The three combustion turbine generators and steam turbine power generation unit supplied both summer peak needs and emergency power during outages and system emergencies, such as the blackout on the Western state grid July 2 and August 10, 1996.
This was the second year that REU conducted surveys and individual meetings with its 100 largest customers, primarily commercial or government users. Utility deregulation was the biggest issue and the area of greatest change in 1996. Assembly Bill 1890 mandated that by 2002, deregulation opened competition among electric utility companies in California, allowing customers to select their utility supplier of choice. REU anticipated many new challenges in the deregulated environment with the greatest concern being the unanticipated changes in long-term costs that are currently paid by the City’s fixed customer base. With deregulation, the City’s highest priority was to maintain the existing customer base.
During FY97, REU sold approximately 715 million kilowatt hours of electricity to retail customers within the City. This was a 3.8% increase in sales from the previous year’s sales, and was accompanied by a new system peak demand of 198.7 MW.
Two particular instances that occurred during 1996 demonstrated the value of the Redding Power Plant to the City. On July 2, the COTP, which is used to transmit bulk power supplies between the Pacific Northwest (PNW) and California, was shut down due to system failure. As a result, California utilities relying on power from the PNW were left “short” on resources as there was not a sufficient supply of electricity to maintain the voltage and frequency requirements of the transmission system around the state.
Similarly, on August 10, the entire west coast region suffered another system disruption, again due to a failure in the PNW. Redding Power was called on to provide system support and generated electricity for the benefit of customers throughout the remainder of the month as transmission system and local dispatchers continued to monitor and stabilize the power flows around the state. Because Redding Power was available to support the system during these two events, Redding avoided paying potential emergency power purchase penalties of approximately $2.6 million.
1997 - 1998
During FY98 the Electric Utility developed new programs, instituted improvements to the system’s operation, and enhanced customer service. The Electric Utility’s debt was reduced by $53 million of the original targeted $200 million. To assist customers’ efforts to use energy more efficiently, several services and programs were developed: meetings with community members were held to address concerns and answer questions; production of educational and informative publications; development of a series of public benefits programs that provide low-income assistance, encourage energy conservation and renewable resource development; and promotional research and development of new energy-related technologies. REU also established a Low Interest Business Loan program for small and large commercial customers to assist business customers' efforts to upgrade to more energy-efficient equipment. In 1998, an Economic Attraction Service Pricing program was established to attract prospective manufacturing and industrial customers.
During FY98, the Utility was faced with the implementation of the California electric system’s new operating paradigm with the inception of the California Independent System Operator and the California Power Exchange. Under the state’s new operating procedures, the Utility performed well in the wholesale power markets and generated wholesale sales and revenues far in excess of previously forecast levels. The Electric Utility’s overall performance during FY98 provided Redding with significant cost reductions and enhanced revenues. Accomplishments during this period include: 135 million kWh in wholesales sales (more than double for FY97); $3.1 million in wholesale revenue (almost three times as much as FY97); Redding Power generated 16 million kWh in support of increased wholesale sales activities; and renegotiation of the Bonneville Power Administration contract that lowered Utility operating costs by more than $2 million per year.
1999
With the passing of another year, the Electric Utility’s debt was reduced by $92 million of the original targeted $200 million, with a balance of approximately $108 million by the end of calendar year 1999 in outstanding REU direct debt.
As a result of the cancellation of a long-term contract with Western, there was a $7.5 million shortfall in revenue compared to FY98. This shortfall was more than offset by the vigilant marketing efforts which produced increased sales to existing wholesale power customers and expanded the range of opportunity for sales into new areas of the wholesale market. 599 million kWhs in wholesale sales, more than four times those in FY98, realizing $17 million in wholesale revenue.
Since 1999, REU committed 2.85% of its retail sales revenue to Public Benefits Programs for customers ranging from substantial rebates for commercial heating and cooling system upgrades to providing financial incentives to customers that purchase Energy Star appliances.
2000
In February 2000, the Electric Utility moved into the new City Hall on Cypress Avenue. The Electric Utility continued to work at its debt reduction strategy, with an eye toward removing the interim rate surcharge two years earlier than originally promised. The debt had been reduced by nearly $91.1 million, leaving a balance of approximately $108.9 million at the beginning of FY 2000.
Much of 2000 was dedicated to improving infrastructure and operational efficiencies. Relocation of the Electric utility field services crews to the Redding Corporation Yard on Viking Way was completed. In preparation of the competitive marketplace of the future, REU introduced a new automated utility customer information and billing system. This state-of-the-art system was designed to support customized electronic transactions and customer account access.
2001
REU celebrated 80 years as the locally-owned and locally-controlled municipal electric service provider for the City of Redding.
In 2001, REU successfully negotiated a 10-year power purchase contract with Enron, which would begin in late 2004. In December 2001, Enron filed for bankruptcy, casting serious concerns regarding the future ability of Enron to deliver on REU’s Enron power contract. After several months in U.S. Bankruptcy Court, REU prevailed and the parties agreed to a settlement of all claims wherein REU was able to terminate all proceedings against Enron, and signed a new 10-year power purchase contract with the supplier, American Electric Power (AEP). Under this contract, REU would save approximately $1 million per year, or $10 million over the term of the contract.
The Rebate programs, established to support energy-efficiency improvements and renewable resource development were well received from residential to commercial customers alike. CARES (Community Assistance for Redding Electric Service) and SHARE (Simply Helping Another Receive Energy) programs were developed to offer community support and assistance. CARES is a shut-off prevention and assistance program that provides financial aid to customers that have sustained an unexpected hardship. SHARE was developed as part of a community outreach program to assist senior citizens to meet the extremely high cost of natural gas charged by PG&E. Approximately $1,000 per month has been donated to this effort of helping residents and continues to this date.
In cooperation with local high school students, REU delivered 25,000 compact fluorescent lamps to more than 12,500 Redding customers in a one-day mass distribution effort. REU converted all existing traffic signals in the City to light-emitting diodes (LEDs). Through grant and loan funding, Redding was the first municipality in California to complete its LED project on-time and within budget. Overall, cost savings anticipated to be approximately $100,000.
REU hosted its first Services & Energy Fair, bringing together local contractors, dealers, merchants, and City officials showcasing energy efficient products and services. The City-wide event provides customers with information concerning energy-efficient products and services for their homes and businesses, as well as providing a forum for all of the City’s service departments and exhibitors to meet with customers and introduce their organizations, functions, and products.
2002
The most significant change during 2002 was REU’s removal of the 23% interim rate surcharge. In June 2002, the City Council declared the successful conclusion of REU’s debt reduction program and terminated the rate surcharge that was developed in 1997. The surcharge, in combination with REU’s comprehensive cost-containment efforts to reduce operating costs and robust wholesale power sales opportunities, enabled REU to accelerate its debt reduction program and remove the surcharge a full two years ahead of the original schedule.
The market uncertainty for the electric industry continued during 2002. Ongoing factors that could have drastically impacted REU in many ways were PG&E filing for bankruptcy; litigation between Western and PG&E, which could significantly increase the price of power provided by Western; legislators and regulators in Sacramento and Washington D.C., deliberating on a variety of measures that would affect the future of the electric utility industry as a whole; and, issues surrounding the California State government, who became the largest buyer and seller of electricity of the state investor-owned utilities
In spite of these uncertain issues, REU proved to be a shining example of the right way to deliver electric service. Thanks to long-term planning, REU’s electricity generation resources and purchase contracts created dependable power supplies for Redding customers at stable prices while insulating the community from the problems that the power crisis caused for many parts of California. Through cost reductions and selling excess power on a wholesale basis, REU reduced its long-term debt obligations by $133 million – leaving approximately $67 million in outstanding generation and distribution debt.
2002 saw the initial deliveries of natural gas to the Power Plant under REU’s long-term natural gas contracts finalized in late 2001. The gas transmission contracts provide REU with an ownership-like interest in several major pipelines into and through California. The pipeline capacity contract portfolio improves REU’s control of gas transportation costs and provides the ability to deliver approximately 80% of the daily natural gas requirements at Redding Power. The pipeline capacity portfolio was developed in response to the highly volatile gas market in the winter of 2000-01 when California’s natural gas prices soared 2,000% above the average annual price.
To further meet the challenges within the changing utility industry, REU began construction of a new generator at the existing Redding Power Plant. The Redding City Council authorized the development of a new, highly efficient combustion turbine generator in December 2000. When completed in June 2002, the generator would increase REU’s electric power generating capability by 43 megawatts for a total of 140 megawatts. The project combined an Alstom GTX100, one of the most efficient combustion turbines available in its size, with a heat recovery steam generator to create a combined-cycle operating unit.
During 2002, the City remodeled the first floor Customer Service Center to improve efficiencies and provide more privacy for customers. The remodeling also included the implementation of an automated customer queing system.
2003
New efforts were underway at the State and Federal level to “fix” the market weaknesses that have been exhibited in the California electricity market design. The primary focus of the design is to enhance reliability of the State’s electric power grid by ensuring sufficient generation is available to meet the forecast peak demands. Prior to the deregulation process, this was the responsibility of local utilities like REU. In the post-AB 1890 world, this essential task was left to the “market.” Unfortunately, as evidenced by the catastrophe in the Independent System Operator-based market during 2000 and 2001, the market could not ensure an adequate supply of power at reasonable prices.
Beginning with FY 2002-03, REU began budgeting $500,000 annually to replace overhead power lines with underground power lines in selected high visibility areas of the City. During 2003, these funds were used to underground approximately 3,000 feet of overhead utility lines along Cypress Avenue from Pine Street to just west of Athens Avenue.
2004
To date, REU’s Vantage rebate program has aided more than 14,000 customers, reduced energy consumption by approximately 16 gigawatt hours, and trimmed system peak demand by more than 5 megawatts.
REU continues to maintain its self reliance and proactive approach to power resource development and will continue to meet the ongoing challenges faced with the utility industry. As a result of being locally-owned and locally-controlled, REU has maintained focus on its primary objects – to provide low-cost, highly reliable electric service to the citizens of Redding.
- REU would like to thank Mary Franks for contributing this article. Mary is an Executive Secretary and has been with the City of Redding for 16 years. |
The City of Redding had a population of about 5,000 people in 1914. It had four hotels, four banks (with over $2 million in deposits), a postal savings bank, a large department store, four grammar schools and one high school. The City had its own municipal buildings and ran its own fire department. It operated a gravel crushing plant for the construction of City streets, and maintained its own sewage system. The privately owned Northern California Power Company, Consolidated, supplied the City with water, gas, and electricity.
For some time, the City trustees had been dissatisfied with Northern California Power Company's street lighting system. The arc lights provided by the company for the City were not as effective as they should have been.
On January 23, 1918, the trustees met to discuss the expansion of the system by taking over all of Northern California Power Company's electrical distribution system within the City. The company provided gas and water as well as electricity, but the trustees were interested only in the system for distribution of power and light. They asked power company officials to submit a price for which they would be willing to sell. The power company asked for the sum of $261,309.01, which the trustees thought too high, and litigation followed.
