Clean Energy

The dirty fight over clean power

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› amanda@sfbg.com

A charter amendment for renewable energy and public power appears headed for the November ballot, and already Pacific Gas and Electric Co. is rounding up front groups and touting inaccurate figures in an attempt to scuttle the plan.

The San Francisco Clean Energy Act, introduced by Sup. Ross Mirkarimi, would mandate that the San Francisco Public Utilities Commission "produce a comprehensive plan for providing clean, secure, cost-effective electricity for city departments and residents and businesses."

If passed, San Francisco would exceed state standards by requiring 51 percent clean, renewable energy by 2017; 75 percent by 2030; and 100 percent by 2040. Workforce development is also part of the plan, and if it’s determined that public ownership of the grid is the way to go, any employees fired by PG&E will be hired by the SFPUC.

"The San Francisco Board of Supervisors is talking about taking over PG&E," Brandon Hernandez, the corporation’s manager of government relations, said at a June 27 Rules Committee hearing on the legislation. "PG&E’s system is not for sale," he asserted. He then went on to say a takeover would cost the city "at least $4 billion."

PG&E spokesperson Darlene Chiu told the Guardian: "That’s our estimate for what our system costs in San Francisco."

But the California State Board of Equalization says all of PG&E’s state-assessed San Francisco property was worth $1.2 billion in 2007. The board’s appraisers assess PG&E’s property for tax purposes and their final figure includes millions of dollars of property that San Francisco would not want to own.

PG&E threw other punches at the city. Hernandez threatened the loss of as much as $29 million per year in taxes and charitable giving. "We no longer will be contributing to San Francisco’s nonprofits and service organizations," he said of groups that received $5 million from PG&E last year.

That money buys some political loyalty. The only organizations that spoke against the measure — the San Francisco Chamber of Commerce, the Bay Area Council, and the A. Phillip Randolph Institute — all received bucks deluxe from PG&E. Between 2004 and 2006, the Chamber of Commerce Foundation received $166,000 from the utility; the Bay Area Council and Economic Forum grossed $132,500; and APRI banked slightly more than $100,000.

The Chamber’s vice president of public policy, Rob Black, criticized the move toward municipalization because it would make San Francisco, like other municipal utilities, exempt from the state-mandated 20 percent renewable energy by 2010. "The Los Angeles utility is at 48 percent coal. That’s not green, that’s not renewable. That’s something we need to be very careful about," he told the committee.

According to the Los Angeles Department of Water and Power, their power mix is actually 44 percent coal. But Black didn’t bother to check; he just took his figures from PG&E moments before, while conferring with Hernandez and Chiu. When questioned by the Guardian, Black said, "They didn’t come to me. I went to them."

He reiterated the concern that municipally-owned power isn’t required by the state to be clean and green, and becoming so could increase rates. "If we’re creating cheaper energy, where’s the incentive to do conservation?" he asked.

According to statistics from the meeting, the average PG&E household spends $74.55 per month on electricity, with 12 percent of the energy used hailing from renewable resources. An equivalent customer in the Sacramento Municipal Utility District has a bill of $46.60 for 18 percent renewable.

APRI’s James Bryant said his Bayview community group has issues with the costs and the idea that former PG&E employees would be hired by the city and subsequently receive worse retirement plans.

When asked if he was there because his organization gets money from PG&E, Bryant said, "Not really." He added, "I don’t have anything to do with their decisions. They don’t have anything to do with my decisions.

"Of all the amoral things PG&E does, they fund very worthy grassroots organizations and then lean on them to speak against things," Sup. Tom Ammiano said when expressing his support for the legislation. "Not only is San Francisco going to have public power, the state of California is going to have public power."

Other public comments overwhelmingly supported the measure. Some energy activists have been concerned that the legislation would derail or delay efforts to move toward renewables through the community choice aggregation (CCA) program.

Clean Energy Act excites supervisors

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At today’s Rules Committee, Supervisors Bevan Dufty, Tom Ammiano, and Chris Daly, all expressed enthusiasm for San Francisco’s Clean Energy Act. Daly and Ammiano even broke into chants of “victory, victory” during discussion of approving the measure for November’s ballot.

“In 2002 I supported Prop D and I look forward to supporting this measure,” said Dufty during his comments on this new public power ballot initiative. “I think PG&E has not held the public trust in San Francisco well,” he added, citing the smear campaign PG&E launched against Mark Leno during his bid for State Senate.

The measure, known as the “San Francisco Clean Energy Act,” would amend the city charter to require that, within 120 days of passing the legislation, the San Francisco Public Utilities Commission must “produce a comprehensive plan for providing clean, secure, cost effective electricity for city departments and residents and businesses.” This may include construction city-owned transmission lines, as well as procuring the resources to advance the Community Choice Aggregation plan of 51 percent renewables by 2017.

It actually goes one step farther and says if CCA falls through, the city must still get 51 percent of their energy from renewable and clean sources, 75 percent by 2030, and 100 percent by 2040. A green jobs workforce development must also be part of the plan, and if it’s determined that public ownership of the grid and resources is the way to go, any employees fired by PG&E, the private company that provides our power now, will be hired by the PUC.

Sup. Ross MIrkarimi, who introduced the measure, rattled off figures from Alameda, Santa Clara, Palo Alto, and Sacramento, all of whom have publicly-owned utilities and all of whom charge the average household rates far below PG&E.

His figures, for a 500 kilowatt hour household:

Clean Energy — tomorrow!

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The Board of Supervisors Rules Committee will hold a hearing tomorrow (Friday) to discuss the new clean-energy charter amendment. It’s a long-overdue measure that would give San Francisco control of its own energy future and set aggressive mandates for sifting to renewable resources for electricity.

The measure is sponsored by Supervisors Ross Mirkarimi and Aaron Peskin, and includes the following:

1. A mandate that 51% of the city’s electricity is generated from renewable resources by 2017, 75% by 2030, and 100% by 2040. This would be one of the few laws in the country that requires a city to move toward a 100 percent renewable portfolio. It also requires the Public Utilities Commission to issue a report every two years explaining how the city is meeting those goals. This would be a model for cities around the nation (and around the world), and would put San Francisco in the forefront of the movement to reduce carbon emissions and slow climate change. Since state and federal governments are moving far too slowly on the most important environmental issue of our lives, cities are going to have to take the lead, and San Francisco – one of the most progressive communities in the nation — should be showing everyone else how to do to that.

2. A mandate that the city move toward acquiring its distribution system for the sale of electricity. Pacific Gas and Electric Company, which now supplies the residential and business customers in San Francisco, is spending a huge amount of money on a greenwashing campaign to convince residents that it’s moving away from fossil fuels. That’s a big lie: PG&E’s current power profile is 44 percent fossil fuels, 24 percent nuclear, 20 percent large hydro, and only 12 percent renewable – and the utility admits that it will not even make the state’s mandate of 20 percent renewable by 2010. . The only way this city is going to have a truly environmentally sound energy program is if we run it ourselves.

Of course, a publicly run utility has other big advantages. Public-power agencies all over the country have lower electric rates and many bring in huge amounts of revenue, which the city desperately needs. And public-power is good for the economy

3. Mandate green jobs and job training for San Franciscans. There’s a lot of money in renewable energy, and thousands and thousands of good jobs. The measure mandates that the PUC as part of creating a public power agency create job-training programs to help San Franciscans build careers in green energy.

The hearing is at 10 am. Be there and support this crucial legislation.

Stunning doublespeak on electricity rates

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While PG&E is requesting the California Public Utilities Commission allow them a 6.5 percent electricity rate hike over the next six months, ostensibly to cover skyrocketing natural gas prices, they’re telling local citizens they’re expecting prices to drop.

In Marin County, our neighbors to the north have been listening to PG&E lobbyists criticize their county’s plan to provide 100 percent renewable energy to residents through Community Choice Aggregation. Their CCA plan, called Marin Clean Energy, will offer customers 25 percent renewable energy by 2009 twice what PG&E offers, and for the same rate. Customers who want to pay a little more can go 100 percent renewable right out of the gate. Ultimately, they’ll scale the 25 up to 51 percent by 2013, and 100 percent thereafter.

Marin argues that 100 percent renewable energy is a more fiscally responsible way to go – precisely because natural gas prices are volatile and will continue to rise. But PG&E says Marin’s plan is too risky and too costly. You can read PG&E’s critique of the plan, and Marin’s apt rebuttal, here.

But recent testimony from Dawn Weisz, MCE’s planner, sums it up pretty succinctly.

“Their [PG&E’s] main criticism is that we won’t be able to achieve the cost benefits,” Weisz told a May 23, 2008 meeting of San Francisco’s Local Agency Formation Commission, who had invited her to brief them on their CCA’s progress. Weisz said they had an independent third party analyze the CCA plan and PG&E’s critique.

The analyst found a key flaw in PG&E’s logic. “They’re using a gas forecast that assumes gas will be 14 percent cheaper in 12 years,” Weisz said.

At this, the entire LAFCO board broke out in laughter. Any sane person knows that isn’t going to happen. As Weisz pointed out, natural gas prices rose an average of 30 percent over the last five years, and as the San Francisco Chronicle reported today, they’re 63 percent higher than they were a year ago. Natural gas is a fossil fuel just like crude oil, and speculators are having their day with it, too.

But PG&E is using their estimate to contend their prices will be cheaper than MCE’s over the long run, so you best not switch services. And as we can see from the awkwardly placed chart to the left, PG&E”s rates have only and ever gone up.

As PG&E continues to cling to their fossil fuel infrastructure, and combats communities who attempt to prove viable, renewable alternatives are possible, we should expect to see PG&E pleading at the CPUC for more and more rate hikes.

Why is PG&E attacking Leno on education?

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It’s not like schools are their business – at all. But the $13 billion utility company is the big money behind recent television ads depicting Mark Leno as a foe of children and schools.

“San Francisco Assemblyman Mark Leno claims that he’s for better schools,” the ad informs, according to a transcript provided by the California Teacher’s Association. “Yet in 2004, it was Leno who joined Republicans, and with one vote to spare, cut $3.1 billion from California schools.”

Actually, said CTA in a news release, “It distorts Leno’s support for a state budget in 2004 that temporarily reduced some funding for schools. The budget was approved by the Legislature with bipartisan support in that financially difficult year for the state.”

CTA, which represents 90 percent of the state’s educators, endorsed Leno in the District 3 State Senate race, and held a rally today in Mill Valley to affirm their support and criticize PG&E.

“Why is PG&E behind this?” CTA’s Mike Myslinski wondered when we spoke to him. “Leno has a strong education record and parents and teachers are very disturbed by this ad.”

The ad was attributed to a political action committee called “Protect Our Kids,” which late independent expenditure filings [PDF] with the CA Secretary of State show is heavily funded by CALIFORNIANS FOR A CLEAN ENERGY FUTURE, A COALITION OF ENVIRONMENTALISTS, TAXPAYERS, AND PACIFIC GAS AND ELECTRIC COMPANY. [PDF]

Looks like the San Francisco Police Officers Association, as well as a couple of out of state companies, also kicked in to cover the $100,000 in cash that’s been spent on anti-Leno propaganda that has nothing to do with energy – clean or otherwise. But, as CTA points out, “The PG&E-funded ad comes at a time when one of Leno’s opponents in the Senate race, Joe Nation, is being criticized for his huge financial support from business interests. PG&E is a supporter of Nation.”

It wasn’t all that long ago Leno was shaking hands with PG&E over at the LGBT center.

Marin goes 100% renewable…with natural gas

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photo of PG&E’s Pittsburg power plant (now owned by Mirant) in front of a horizon full of SMUD’s windmills, courtesy Barbara George of Women’s Energy Matters

I’ve been reading through the Marin Clean Energy plan, which is designed to offer customers in 12 potential cities in Marin County the possibility of powering their homes and businesses with 100 percent renewable energy. How can this be, and how can San Francisco do the same?

Their community choice aggregation plan offers folks two options: “light” green (25 percent renewable, ramping up to 50 percent by 2014) or “deep” green (100 percent renewable right out of the gate.) Initially, this will be achieved through power purchase agreements with third-party renewable energy suppliers, while at the same time contracting to build their own renewable power sources and encouraging citizens, through incentives, to put up their own solar panels and wind vanes. (Studies have shown that Marin County has the potential for as much as 846 megawatts of renewables, mostly from solar and wind, though biomass and methane capture are also achievable, especially with all those dairy farms.) The county’s draw is about 240 megawatts.

But my question was if they would still need to rely on natural gas or any other “conventional” power sources as they transition, or to meet peak needs and state-mandated reliability standards.

I queried Tim Rosenfeld, of the Marin Energy Management Team, who has been consulting the county on the plan. “We can’t abandon conventional natural gas generation,” he told me. “It will still be there for firming and shaping our grid, but we will be able to ‘green’ it through our renewable generation.”

The real energy-policy choice

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EDITORIAL According to City Attorney Dennis Herrera, if San Francisco wants to see the Potrero Hill power plant, which spews pollution over the southeast part of the city, close down next year, the city’s going to have to operate its own fossil fuel plants in the neighborhood. Some environmentalists say that’s not true — that the city could develop enough renewable energy and use existing backup systems to obviate the need for the so-called peaker plants.

Opposition to the plants comes from the Sierra Club, Supervisors Chris Daly and Ross Mirkarimi — and Pacific Gas and Electric Co.

Even for people who spend an inordinate amount of time studying energy policy, it’s a confusing mess of a situation — and San Francisco, of all cities, shouldn’t have to be facing it.

The peaker dilemma exists for a reason: San Francisco has allowed private-sector companies like PG&E and Mirant, which owns the existing Potrero plant, to control the city’s energy systems. The good news is that the fight over the power plants is driving a new move for public power — a move that ought to bring together the public interest activists on both sides of the plant divide.

Sups. Ross Mirkarimi, a peaker foe, and Aaron Peskin, a peaker supporter, plan to introduce a Charter Amendment mandating that the city’s Public Utilities Commission create a plan to establish a retail power agency in San Francisco. The amendment would provide the badly needed kick start to get city officials to act on San Francisco’s historic mandate for a municipal electricity system.

Peskin and Mirkarimi may not agree on the three peaker plants the PUC wants to site at the foot of Potrero Hill, but they do agree that PG&E is up to no good here. The giant private utility desperately wants to keep the city from developing its own electric power plants: the city peakers would be competition for PG&E and would open the door for the city to get more directly into the electricity business. Although the fliers put out by the "Close It Coalition," funded by PG&E, talk about environmental issues, that’s just old-fashioned greenwashing. PG&E is building similar combustion turbine gas-fueled generators all over the state.

Why should this be the city’s only choice?

If there’s going to be a fight over energy policy in San Francisco, it ought to focus on the real long-term questions: Who should control the local grid, and the future supply of electricity, and the decision over how much of the local portfolio should be in renewable resources? Should PG&E continue to hold that power, or should the city take it over?

The movement for public power is exploding all over California. In Marin County, a group called Marin Clean Energy is mounting a sophisticated campaign for a community-controlled power agency that would use 100 percent renewable power. The South San Joaquin County Irrigation District is trying aggressively, against a full-scale PG&E political assault, to buy out PG&E’s distribution facilities and create a new public power system. Stockton is looking at becoming a public power city.

San Francisco is pursuing CCA, but needs to do much more. This is, after all, the only city in the nation that has a mandate under federal law to sell retail electricity.

If the city had created a public power agency years ago, the peakers wouldn’t be an issue. San Francisco would have been able to develop more extensive renewable power sources, create a long-term energy plan, and concentrate on shutting down fossil fuel plants instead of building them.

But whatever the outcome of that fight, it’s time to think about the future — and the future is community-owned energy programs. That’s the choice that ought to be on the ballot in November.

PS: Stop the presses — has Newsom buckled to PG&E? The mayor at the last minute May 13 has orchestrated a delay in the peaker vote — at the behest, we hear, of PG&E, which is begging the mayor to do anything to stop public power. Now he wants to retrofit the Mirant plant. That’s an unacceptable option and needs to be rejected.

PG&E’s attack on CCA

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EDITORIAL It’s a bit odd (if not terribly surprising) that the San Francisco Chronicle ran a front-page story April 16 on public power and alternatives to Pacific Gas and Electric Co. — and almost entirely ignored what’s going on in the paper’s hometown. And it’s striking (if, again, not surprising) that the story, by Kelly Zito, allowed a dubious expert from the University of California at Berkeley, who never supported public power and generally supports private sector and deregulation efforts to undermine, without rebuttal, the community-based anti-PG&E efforts.

But in the midst of this journalistic train wreck was the nut of a fascinating story: PG&E is on the ropes as communities try to find more renewable energy supplies — and is fighting back in ways that are demonstrably illegal.

There’s a message here for San Francisco, where plans for community choice aggregation are moving along slowly but steadily. The giant private utility will be trying to sabotage the efforts here, and City Attorney Dennis Herrera needs to be moving — now — to make sure there’s no illegal interference.

The focus of Zito’s story was Marin County, where there’s an active and aggressive move to create a CCA (community choice aggregation) system that would replace PG&E as an energy supplier in 11 cities. The program would function as a buyers’ co-op, purchasing electricity in bulk for all of the businesses and residents in those communities, then using PG&E’s lines to transmit the power to customers. Marin is pushing the environmental angle: PG&E uses at most 12 percent renewable power, and Marin Clean Energy can offer consumers 100 percent green power. While that option might cost a bit more (an additional $5 per month for the average customer) Marin’s CCA also says it can offer a 50 percent renewable option that meets or beats PG&E’s rates.

The Chronicle‘s expert, UC Berkeley professor Severin Borenstein, is quoted as saying that it’s risky for cities to get into the electricity business. But that’s just horse pucky: cities have been in the power business for as long as there’s been electric power. In the Bay Area, Alameda, Palo Alto, and Santa Clara all have established successful public power agencies — and all have cheaper rates than PG&E.

The state law authorizing CCA programs bars PG&E, a regulated utility, from lobbying against their implementation. In fact, in hearings before the state Pubic Utilities Commission, the company promised it would be neutral toward CCAs and wouldn’t try to discourage its customers from joining the public programs.

But in the Central Valley, where a group called the San Joaquin Valley Power Authority has been trying to create a broad-based CCA, PG&E has admitted it illegally tried to scotch the deal. Lawyers for the SJVPA filed a complaint with the CPUC, and on April 10, PG&E settled in a way that clearly admitted guilt. The company agreed to cease its illegal lobbying and pay the SVJPA $450,000 in legal fees.

It was a significant victory for public power — and San Francisco needs to make it clear right now that it will fight just as vigorously to stop PG&E interference in its own CCA efforts. The CPUC is accepting comments on the settlement, and Herrera should file a statement supporting SVJPA, in effect putting PG&E on notice that it will face immediate, furious legal action if it dares try to undermine a San Francisco CCA. Herrera also needs to put a legal team together to prepare to fight PG&E as the city’s own plan moves forward.

It’s embarrassing that San Francisco — the only city in the United States with a congressional mandate to run a public power system — is behind Marin County and the Central Valley in getting its own CCA up and running. But the process is moving forward€. And the city needs to be starting its own marketing campaign to inform the public that cheaper, greener power is on the way.

Marin has been sending out fliers showing how effectively the CCA can replace fossil-fuel and nuclear generation with greener energy options. The county has clear information about lower prices and consistent efforts to fight global warming. San Francisco is lagging here — and it’s time to get on the stick.

PG&E’s Green War Chest?

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Greetings, Californians for a Clean Energy Future! Welcome to the fold of innocuous sounding, pseudo-environmental political front groups. This one is brought to us by our buddies over at Pacific Gas and Electric Co.

The group, which doesn’t seem to have a Web site or any other physical manifestation outside of filings with the California Secretary of State, already has $340,000 ready and waiting for the upcoming election cycle. According to a Secretary of State spokesperson, the group was born on Dec. 21, 2007. The only contact is the law firm Nielsen Merksamer, which has a history of teaming up with PG&E to break the law for political gain.

So far, they haven’t spent a cent — all of which were dumped into the committee by PG&E in three lump sums. Wonder what they’re going to spend all that money on? Since it’s calling itself a “coalition of environmentalists, taxpayers, and Pacific Gas and Electric Company,” it could go for or against nearly anything — including boosting Prop 98 on this June’s ballot. If passed, the measure would kill rent control and make it illegal for governments to use eminent domain to seize utility infrastructure and use it to provide the services themselves, an idea San Francisco has considered in the past and Stockton is currently pursuing.

PG&E dropping the dime

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Last bus to Oakland! The cell phone photographer who sent us this shot said the driver of the rented vans had been hired by PG&E to bus people to City Hall from the East Bay to speak against the peaker power plants

Who got a robo-call last night about the city’s plan for new power plants? Was there something about three new fossil fuel power plants “right in the middle of the city” on your answering machine when you got home?

There was on ours:

“These new plants will further reliance of fossil fuels, add to global warming, and cost up to $500 million. And they aren’t even needed because there’s a green alternative. If you would like to join our efforts to stop the SFPUC, please press 1 or if you’d like more information please press 2. This call was paid for by the Close It Coalition with the proud sponsorship of PG&E. Find out more on closeitcoalition.org.”

PG&E…you’re so tricky. Your press office never has time to return our calls for comment but you’re dialing up half the city as part of your bogus campaign for clean energy.

The SFPUC will be discussing the peakers tomorrow — Wednesday Oct. 31 — at 2:30 in Room 400 at City Hall. Maybe PG&E will bus in some more people to speak against the peakers like they did for the last PUC hearing on Oct. 23.

Our source for that tidbit said he asked the driver of the rented Enterprise vans who had hired him and the response was PG&E and the A. Philip Randolph Institute. We asked APRI’s executive director Guillermo Rodriguez if they bought the vans. He denied it, and said he has complete control over APRI’s two credit cards and neither had been employed for such a task.

Up until two years ago, Rodriguez was Senior Director of Public Affairs for….Holy shit! PG&E. Last year, APRI received $85,000 in grants from PG&E. I wonder what they’re doing with all that money?

SOS: The Unethical Commission goes into session Monday night on the Case of the Grassroots Treasurer who went up against PG&E in a tight public power campaign. Come and support Carolyn Knee at the Ethics meeting at 5:30 p.m. in City Hall room 408

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By Bruce B. Brugmann

Carolyn Knee, the poster girl for how the Ethics Commission is unethically treating treasurers of grassroots campaigns, goes once more before the Ethics Commission at a hearing starting at 5:30 p.m. Monday (July 9) in Room 408 in City Hall.

Carolyn and her attorney have reached a settlement of $267 with the commission’s enforcement division, which is one per cent of the amount the staff originally recommended.
But public power supporters fear that the reason her case is on the agenda once again is because at least two commissioners intend to raise questions about the recommended amount.

Carolyn, a retiree on a fixed income, found herself threatened with $26,700 in fines by the Ethics Commission for several alleged violations of campaign finance laws during a random audit of San Franciscans for Affordable Clean Energy, the grassroots group that forced PG&E to the ballot in the 2002 public power campaign.
The point: SFACE raised peanuts during the campaign (a little more than $l00,000) while PG&E spent more than $2 million to defeat the initiative, $800,000 in the final days of the campaign (and PG&E didn’t report this critical amount until nearly a month after the election.) Knee was fined l4 times what James Sutton, treasurer of PG&E’s front group, was fined. And the commission hassled and hounded her for the past five years or so. (See Amanda Witherell’s excellent story, “The ethics of Ethics,” in the Guardian and on our website and an earlier Bruce blog headed “Free Carolyn Knee! Free Carolyn Knee from the Clutches of the Unethical Commission.”)

The ethics of Ethics

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Part one in a Guardian series

› amanda@sfbg.com

Back in 2002, Carolyn Knee did what many other citizens of San Francisco were doing — she volunteered her time and energy campaigning for a ballot measure she hoped would pass.

Five years later the retiree living on a fixed income has found herself threatened with $26,700 in fines levied by the Ethics Commission enforcement staff, who turned up several alleged violations of campaign finance laws during a random audit of San Franciscans for Affordable Clean Energy, the committee for which Knee was a volunteer treasurer.

At a June 11 probable cause hearing before the Ethics Commission, investigator Richard Mo itemized several infractions, including failure to report $19,761 in contributions on time, in addition to another $9,500 that came in right before the election but wasn’t reported until afterward; failing to notify two organizations that they were major donors who needed to file as such (one of which was the Guardian); not providing all the required information about two donors; and disparities between bank account statements and campaign finance reports.

Mo alleged Knee had "cooked the books," saying she "takes no responsibility" and "claims she was ignorant of the law, passes the blame on to her personal accountant. She cites her inexperience as a treasurer when in fact she served as treasurer for one prior committee."

It sounds like a litany of campaign crime, with Knee as the linchpin, but she maintains that none of it was intentional and that many of the reporting mistakes were made by her accountant, Renita Lloyd-Smith of the Simon Group, a company she’d hired to handle the complicated ledger of campaign finance reports. "Perhaps I was wrong in placing confidence in someone I had to hire because I didn’t know the rules," Knee told the Ethics Commission. "It was all in good faith. It was all done in love of my city. But I’ll never do it again."

Those words have a dual meaning: Knee hopes never to make another financial mistake, and she’ll never again take on the risk of steering the financial helm of a grassroots campaign.

Ethics Commission hearings such as this are usually held in closed session, but this one was opened at Knee’s insistence because she suspected she’s not the only one who’s had difficulties handling campaign finance laws or negotiating fair settlements. It was the first publicly aired probable cause hearing in the commission’s 13-year history, and both commissioners and attendees walked away with questions after issues of perceived bias and a lack of timeliness in the investigation were raised, as well as the possibility that the fines being threatened are inflated and arbitrary.

"There’s only one department in the city and county of San Francisco with no oversight — Ethics," Joe Lynn told the Guardian. Lynn is a former Ethics commissioner and staffer who still watchdogs the agency and has been openly critical of the laxness he perceives there.

His question is one of many about the commission: How does the staff conduct its investigations? Should smaller campaigns staffed with volunteers be handled differently than larger, more professionally managed operations? If resources are tight, should Ethics be more focused on going after the big guys? If the commission had more resources, would the public benefit from both a greater understanding of campaign laws and a more open, honest, and just government?

SFACE raised a little more than $100,000 during the 2002 election season (including about $29,000 from the Guardian and editor and publisher Bruce B. Brugmann), but the measure it supported — Proposition D, which would have allowed the city to set up its own public power system and break ties with Pacific Gas and Electric Co. — failed.

PG&E spent more than $2 million defeating Prop. D, $800,000 of it in the final days of the race, which campaign attorney James Sutton, the treasurer of the utility’s front group, San Franciscans Against the Blank Check, didn’t report until nearly a month after election day, a violation of campaign finance laws. That act likely scored SFACE’s opponents the win.

The Ethics Commission staff launched an investigation, and in 2004, Sutton’s old law firm was fined $100,000 — the largest amount ever levied by the city for breaking election laws. The state Fair Political Practices Commission also slapped Sutton with $140,000 in fines for vioutf8g the Political Reform Act (see "Repeat Offender," 10/27/04).

At Knee’s recent hearing, Lynn, who was once a finance officer for the Ethics Commission, pointed out she was being fined 14 times what Sutton was fined, and if the same formula had been applied, his fine would have been nearly $1.5 million. "You can’t change the standards arbitrarily," Lynn cautioned the five commissioners. "You need to establish standards for these fines, and you need to keep them across the board."

According to the governing law, which mirrors state mandates at the FPPC, commissioners may levy a fine of up to $5,000 or three times the amount of the violation, whichever is greater. Knee’s fine could be as much as $230,000, and Sutton’s could have been $2.4 million — about the same amount that it costs to run the Ethics office for a year.

The Ethics Commission has never imposed the maximum fine, and executive director John St. Croix doesn’t like to draw comparisons between campaigns. "They’re like snowflakes, very different," he said.

A review of the past three years of enforcement history, posted on the commission’s Web site, bears out this truth and shows fines ranging from a sliver to as much as half of the contested amount. In many cases, fines are dismissed completely for financial hardship reasons. The commission does not abide by a formula, fearing that would handicap it during negotiations, but a number of considerations are weighed, including the experience of the campaign treasurer, the appearance of intent, the overall outcome of the election, and a willingness to make right.

Eric Friedman, spokesperson for New York City’s Campaign Finance Board, considered by many good-government activists to be the national gold standard for ethics groups, said its members use similar tactics for settlements, but "the structure that they follow is precedent. They’ve seen pretty much everything at this point." New York’s board is about five years older than San Francisco’s and audits all campaigns.

According to investigator Mo, the $26,700 in fines pointed at Knee was an "opening salvo" designed to inspire negotiations, which have not been smooth. Knee and her pro bono lawyer, David Waggoner, initially offered $500 to settle. Ethics continued to press for more, but Knee didn’t flinch. "I don’t think I should have to pay anything," she said, pointing out that Oliver Luby, the commission’s current fines officer, recommended a complete waiver of all fines. St. Croix said Luby doesn’t work in the enforcement division and doesn’t know all the facts of the case. The current settlement offer from Ethics is $267, which Knee is willing to accept if the commissioners agree.

It’s unclear how often such hardball is played. "Frankly, we took that settlement because that’s what they were willing to pay," St. Croix said of the Sutton case. So too with a $17,000 fine imposed on Andrew Lee for a variety of campaign finance violations (see "Enforcing Equity," 5/2/07). St. Croix said that was what Lee was willing to pay on the spot.

"I’m not sure we could set a standard," said Commissioner Eileen Hansen, who thought both the Lee and the PG&E fines were too low and said if that’s the bar, it should be raised. She pointed out that the law does provide guidance, but read literally, it could mean exorbitant fines for the same slipup echoed through a whole season of paperwork. "I think it’s a good thing to have the law," she said, but "some should pay the maximum amount and some should pay less."

"I’m happy to pay $250 to get it out of the way," Knee said. "This has taken so much of my time and energy." When asked about her audit experience, she replied, "I would never do this again. It totally discourages grassroots" campaigns.

A legal assistant for 25 years, Knee was not a professional accountant but did have experience doing some bookkeeping. "The IRS is like kindergarten compared to the Ethics Commission," she said.

David Looman, a professional treasurer who’s currently managing about 10 campaign accounts and undergoing three audits by the Ethics Commission, agrees that the potential liability is a huge risk. "Twenty years ago when I started in politics in this town, nobody paid for a treasurer. Nobody had a lawyer. Nowadays you’d be crazy not to do both," he said.

The audits in Looman’s cases involve small grassroots campaigns similar to the one Knee oversaw. "There’s no good business principle for why these people should be audited," Looman said. "The fewer resources you have to employ, the more intelligent your decisions should be for how to employ them. Here they are auditing my $12,000 committee when there are clear miscreants running around."

Part of the Ethics Commission’s charter calls for mandatory audits of all publicly financed campaigns, and St. Croix said the agency does as many random audits as resources allow. Last year, he recalled, more than a dozen were completed. With full financial backing, St. Croix said, he would audit all campaigns. He said, "It’s funny. People know they’re going to get audited and they still try to get away with stuff."<\!s>*

Next: what does the Ethics Commission need to rein in the most frequent and flagrant violators?

Casting off

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› amanda@sfbg.com
Hornblower Yachts assumed control of the ferry service to Alcatraz Island on Sept. 25. As the new crew cast off the dock lines, spurned union workers — some 30-year veterans with the former contractor, Blue and Gold — rallied with supporters at the entrance, asking passengers not to board the boats.
Two union-friendly visitors from Sydney, Australia, ripped up their tickets and demanded refunds. “We don’t agree with what they’re doing to the workers,” one said, while in the background Supervisors Aaron Peskin and Tom Ammiano took turns with the bullhorn, also offering their support to the workers.
“All of our colleagues on the board are not going to stand for it,” Peskin said to the couple hundred laborers gathered on the sidewalk. “We’re going to stand with you and march with you.”
Terry MacRae, CEO of Hornblower, expressed little concern about the boycotting tourists and the rally at his gate. “I suspect there’s plenty more people who want the tickets if they’re not going to use them,” he told the Guardian. Visits to Alcatraz peak this time of year, with a couple thousand people turned away every day when tickets sell out, according to National Park Service spokesperson Rich Wiedeman.
The NPS decision to grant the lucrative, 10-year contract to Hornblower over Blue and Gold has resulted in more than just what some are calling the largest union layoff in San Francisco waterfront history. The story also has an environmental angle as slick as an oil spill and a nasty landlord-tenant tussle.
“The port and I are extremely concerned with how Hornblower has conducted itself,” City Attorney Dennis Herrera told the Guardian, referring to the company’s artful dodge of city and state permitting processes. “They’ve focused more energy on sidestepping public oversight than complying with it.”
Despite infuriating two leading San Francisco institutions — unions and city planners — MacRae has managed thus far to avoid too much of a stir by keeping another critical local constituency off his back with a well-played “green” card.
THE GREEN MACHINE
When NPS put out a request for proposals in 2004, three companies submitted bids for Alcatraz: Red and White, a local charter and bay cruise company that ran the service when it first started in the ’70s; Blue and Gold, which took over Red and White’s boats and unionized crew in 1994; and Hornblower Cruises and Events, which runs charter and dinner boat cruises from five California ports and is a subsidiary of a larger, $30 million company.
When Brian O’Neill, superintendent of the Golden Gate National Recreation Area, announced last year that Hornblower won the bid, union activists immediately challenged the choice. Mayor Gavin Newsom, Peskin, Rep. Nancy Pelosi, and both of California’s US senators expressed concerns about the decision. Neighborhood group Citizens to Save the Waterfront filed suit. Environmentalists, however, were elated.
For the first time since being passed by Congress in 1998, the Concessions Management Act applied to the bid for Alcatraz. In addition to forbidding the Department of the Interior from favoring incumbent contractors, the act also outlined new criteria for awarding contracts that included a mandate to improve environmental quality in national parklands.
“Bluewater Network has been advocating for more than five years for a solar- and wind-powered ferry for San Francisco Bay,” said Teri Schore, a spokesperson for the local environmental group. She added that diesel vessels in the Bay Area account for more pollution than cars and buses combined. “We’ve been talking to every ferry operator on the bay, and we also knew that the Alcatraz contract was up. We thought it was the perfect application.”
Hornblower’s MacRae wrote a provision into his bid that within two years of taking over the Alcatraz service, the company would build and launch a ferry to run on a combination of solar, wind, and diesel power. After one year of testing the vessel, a second would be built within five years.
That — in combination with a plan to make two initial vessels 90 percent more fuel efficient, as well as implement a clean energy shuttle service on the Embarcadero, power the landing facilities with solar panels, purchase green products, and vend healthy snacks — put Hornblower’s bid over the top.
Wiedeman said all bidders are informed that financial feasibility of the company and potential revenue for the government, as well as environmental and sustainability initiatives, were considered. But some criteria were more weighted than others, and Hornblower ranked strongly on all points.
“We’re ecstatic,” Wiedeman said. “We’re looking at higher-quality visitor services from the get-go.”
But some doubt whether the proposed vessels are anywhere close to a reality. MacRae said a final design and marine contractor have not been selected yet, although Solar Sailor’s model BayTri has been touted. A giant solar-arrayed fin provides auxiliary wind and sun power to the trimaran’s diesel engines. No such vessel has ever been built, but the model is based on a smaller solar ferry that services Sydney Harbor in Australia — with a top speed of just seven knots.
The proposed boat is emissions free and could go 12 knots with the aid of the wind, although it would need a push from auxiliary diesel engines to keep up with Alcatraz’s schedule. Boats now run between 15 and 19 knots.
The other concern is that MacRae’s commitment of $5 million for constructing the 600-passenger vessel might not be enough. The San Francisco Water Transit Authority has been looking into a similar vessel carrying no more than 150 passengers that would cost between $6 and $8 million.
“Their requirements for design are different than what mine would be,” MacRae said. “I think it’s possible to do it for $5 million.”
Bluewater Network founder Russell Long worries that the low-budget cap could hurt the vessel’s environmental potential. “We believe that Hornblower may intend to maintain this budget ceiling even if it compromises other aspects of the design, such as best management practices in regard to environmental components,” he wrote in a letter to NPS, urging reconsideration of the contract.
NPS awarded the contract anyway and Bluewater is hoping for the best.
“We will be watchdogging the progress and keeping track of what’s going on. If it doesn’t happen, it will be a huge black eye for the National Park Service, Hornblower, and the city of San Francisco,” Schore said. “At this point we have faith that it’s going to get built, because it’s in the contract.”
However, Hornblower’s snub toward union contracts and dodgy relations with the city suggest that playing by the rules may not be a top priority for the company.
THE PERFECT TYPO
Since 1974, boats to Alcatraz have run from the Pier 39 area of Fisherman’s Wharf, where waiting ticket holders can indulge in the myriad distractions the tourist hub offers.
MacRae launched his new ferry service from Pier 31, half a mile farther south on the Embarcadero, where he currently leases space and operates a charter and dining cruise business.
Pier 31 is little more than a parking lot with a ramp and floating dock, which only sees about 100,000 people a year, far fewer than the 1.3 million annual passengers Alcatraz draws.
MacRae has attractive plans for a complete overhaul of the area, which would include landscaping and sheltered seating, a bookstore, and an informational center. Such alterations would require a thorough run through the city’s planning process, which MacRae told the NPS he won’t be doing until 12 to 18 months from now.
Instead, interim improvements to the lot were planned, which sparked concern from the city that the sudden increase in foot traffic wouldn’t be properly mitigated. That area of the Embarcadero also hosts 250,000 passengers a year from cruise ships docking at adjacent Pier 35. The Port spent close to $200,000 last year controlling that traffic with signage and police officers. The addition of thousands more visitors streaming down the sidewalks seeking passage to Alcatraz could cause gridlock every time a cruise ship docks.
Monique Moyer, executive director of the port, sent repeated letters over the last year to MacRae asking for clarifications about his plans and expressing concern that the change in use of Pier 31 required a review of existing permits.
She wasn’t alone. On July 31, Citizens to Save the Waterfront filed suit against Hornblower, claiming that the amount of activity at Pier 31 would increase twentyfold. “That represents a substantial change in the intensity of use,” Jon Golinger, a representative from the group, told us.
A change in the intensity of use of a waterfront property triggers the need for a complete environmental impact review (EIR) from the Bay Conservation and Development Commission (BCDC), a state agency with jurisdiction over anything within 100 feet of the shoreline. As many city developers know, EIRs can take many months to consider all potential changes to the existing landscape that the applicant would cause. Delays of that sort could have hindered MacRae’s ability to assume ferry service on the contracted date of Sept. 25.
MacRae said the litigation kept him from divulging to the city his proposed plans for upgrades to the pier.
Just days before the lawsuit was to be argued in San Francisco Superior Court on Sept. 6, BCDC executive director Will Travis sent a letter to Moyer stating that Hornblower’s new service and alterations to Pier 31 did not require any new permits.
He cited a typo from Hornblower’s current BCDC-issued permit as an allowance for the increase in passengers. The permit states that the pier may provide “access to the entire bay via vessel for 200,000 to 5000,000 [sic] people/year.”
He footnoted the quote: “There is clearly a typographical error in the 5000,000 number, which is intended to state the maximum anticipated usage of the dock … the correct number is probably either 500,000 or 5,000,000. While it seems reasonable to believe that the correct number is 500,000, the record contains nothing to substantiate this conclusion.”
Travis also relayed that Hornblower plans to use temporary measures that include trailers with port-a-potties, a portable ticket booth, and hollow traffic barriers for guiding traffic and pedestrians on and off the boat.
Herrera told us that this was the first Moyer had heard of what was planned for the lot and there was concern about how other services in the area and traffic on the Embarcadero would be affected, as well as if any structures, signage, and other enhancements would require additional permits. “It certainly would have been nice if they had shared all these plans so the port could conduct the proper environmental review that we all agree is in order,” he said.
In a strongly worded letter to Travis, Herrera wrote that to allow Hornblower to proceed without any environmental review could violate the California Environmental Quality Act (CEQA) and urged the BCDC to “issue an immediate cease and desist order” to prevent the start of service. Herrera also made the salient point that “the later the environmental review process begins, the more bureaucratic and financial momentum there is behind a proposed project, thus providing a strong incentive to ignore environmental concerns that could be dealt with more easily at an early stage of the project.”
On Sept. 7, BCDC commissioners met in closed session at the end of a four-hour meeting and voted to stand by Travis’s argument.
David Owen, a former Peskin aide who’s also a BCDC commissioner, was one of two abstentions to the otherwise unanimous vote. “It was really frustrating, because it seemed like Hornblower did everything in their power to avoid a permit review,” Owen told us. “Now what? We have a CEQA lawsuit and then the Board of Supervisors shuts down the Alcatraz ferry service? They’ve managed to start up service without acquiring a single permit. Kudos to them for strategy.”
Citizens to Save the Waterfront then dropped its lawsuit, feeling it was weakened by the BCDC decision.
“Essentially, now there’s a turf war between Bush’s park service and the Port of San Francisco,” Golinger said. “BCDC tried to avoid getting involved, but the precedent it sets is horrible. A corporation can come in and skirt any planning process.”
UNION TOWN POLITICS
After scoring the Alcatraz bid, Hornblower sought an exemption to the Service Contract Act of 1965 that would have required MacRae to pay equal to or more than what current crew make. But the Department of Labor ruled Sept. 21 against Hornblower. So veteran Blue and Gold crew have added safety to their concerns.
“I’ve made tens of thousands of landings on Alcatraz Island, and now they have captains who have never been there,” Capt. Andy Miller said. For 17 years, Miller has navigated the busy shipping lanes and the constant summer fog against the tugging tide and the sudden slams of inclement weather to bring tourists, park service staff, and supplies to the island.
“No one’s ever gotten hurt. It’s a very tricky place to land a boat. It takes skill and experience that you can’t just hire off the street,” he said.
Miller said he applied for a job with Hornblower but was not interviewed. So far, no captains and only three ticket agents and a deckhand have been hired from Blue and Gold’s former fleet.
“We have a ready workforce,” Master, Mate, and Pilot union spokesperson Veronica Sanchez said. “They’re going to have to be paid the same wages as union workers at Blue and Gold. They don’t want to be a union shop. Why don’t you want to be a union shop on a union waterfront like San Francisco?”
One reason could be concern that it might bump up costs for Hornblower’s other tour operations. “They want us to agree that if we sign up our workers for Alcatraz, that we won’t organize the dining yachts,” Sanchez said. In 1998, the union attempted to organize Hornblower’s dinner cruise operations in San Francisco but didn’t prevail in a supervised election.
MacRae said he’s not opposed to the unions and he’s encouraged the Blue and Gold staff to apply for jobs. “The unionization is the choice of the workers,” he said. “We try to let the employees make the choices. Last time I checked, that’s who the unions represent.”
“We want to make sure we have the best crew,” he said. “Many of the products and guest services we provide aren’t what Blue and Gold do now.” He added that some current employees from the dining cruises have also been shifted to the Alcatraz route.
“I’ve been here 21 years, and we’ve been replaced by busboys and waiters,” said deckhand Robert Estrada, standing with fellow workers outside the gate of the new Alcatraz ferry service.
Estrada said Hornblower’s reliance on part-time, low-wage workers has earned the company the nickname “the Wal-Mart of the Water.” The company’s rapid expansion, from a two-boat Berkeley-based charter to a multinational fleet with government contracts is a similar characteristic.
Blue and Gold spokesperson Alicia Vargas assured us that the remaining ferry services to Alameda, Angel Island, Oakland, Sausalito, Tiburon, and Vallejo will be solvent, but some of the veteran crew who haven’t been laid off yet are worried this is the beginning of the end.
“The public needs to be warned. If funds don’t come from Alcatraz, Blue and Gold could fold,” said David Heran, an International Boatmen’s Union member and deckhand since 1974 who applied to Hornblower but wasn’t hired. “I’m not ready to retire yet, and this wasn’t the way I was expecting it to happen.” SFBG