GLENDALE — The proposed deregulation of some of California's electric utilities has spurred officials in the Glendale, Burbank and Pasadena power departments to consider a partial merger of the three municipal utilities in order to stay competitive.
The state Public Utilities Commission's proposed deregulation plan, expected to be implemented in 1997, only affects privately held utilities such as Southern California Edison and Pacific Gas & Electric. Still, city officials are worried they could lose revenues if big power users are lured to areas where competition forces rates down. There is also concern that federal deregulation may force cities to cut electric rates.
"I view this as one of the major issues facing us in the next few years," Glendale City Manager David Ramsay said. "The electric company plays a very important role in the overall financial well-being of this city."
The three cities have agreed to spend up to $105,000 to hire consultants to analyze their electric utility operations, from the power plant to the administrative offices and to identify tasks that might be consolidated to bring down each department's overhead costs.
Officials say they do not believe a complete merger of the three utilities will be feasible. Each city has its own power plant and will likely continue operating its facilities.
But there are several common functions that might be combined and run by a single staff or even an independent contractor, including billing, meter reading and purchasing, officials said. Other options include power-sharing with utility companies in other states.
"We're going to tell the consultants, 'do not constrain yourselves. Use your imagination,' " said Bernard Palk, Glendale's director of public service.
Palk predicted that there will be a window of five to 10 years after deregulation takes effect before "the hatchet comes down" and rates are affected.
Currently, the PUC is considering two deregulation proposals, both aimed at breaking up monopolies in the public power market and lowering electric rates, which are higher than the national average.
In the first, a "wholesale power pool" for investor-owned utilities would buy the cheapest electricity available from any source--traditional utilities, independent power companies or even out-of-state utilities. In the second proposal, called a "retail market model," customers ranging from industrial users to residents could buy power directly from generators or through their utility.
Meanwhile, the federal Energy Regulatory Commission, which oversees transmission lines used by municipal utilities, is also considering changes that could open up city-owned power lines to outside users.
"There are efforts at the federal level that could make the transmission systems open to any wholesale user at a fair price, so even though the municipals won't be directly impacted at the state level, they may feel some pressure," said Jim Booth, an adviser to PUC President Daniel Fessler.
In Glendale, sales of electric power generate about $100 million a year. Of that money, the city has a longstanding policy of funneling about $13 million a year into its general fund. Officials fear that practice may have to end.
"Private utilities receive a return on their investment and we believe the money transferred to the general fund is, in some ways, the citizens' return on their investment," Ramsay said. "But if it makes us less competitive, we may have to reconsider it. Our goal throughout this process with the other cities is to work more cleverly all around."