Priorities, Deregulation and the Future.

By Clay A. Jackson

1. PRIORITIES:

My top priority will be to have SMUD become cost effective in today's complex power market. This is both as a consumer and a producer of electricity.

Presently, SMUD is paying exorbitant rates for electricity every time Sacramento's temperature reaches 96 degrees or above. This is caused by the elimination of Rancho Seco's 913-965 megawatt hours of electrical capacity and SMUD's failure to replace it with equivalent production. Specifically, after Rancho Seco's enormous generating capacity was lost, over 11 years ago, it was replaced with 3 cogeneration plants which only produce only 380+/- megawatt hours. This is despite Sacramento's phenomenal growth.

Although contracts for inexpensive electrical energy were initially obtained soon after Rancho Seco was shut down, these were not permanent contracts. Now, many of the contracts have lapsed, thus making SMUD go into the open market for electricity. Because of the deregulated market, these costs can range from between 25 to 75 cents per kilowatt hour, as opposed to the 3 to 8 cents per kilowatt hour, which SMUD pays under its fixed rate contracts.

As the sole supplier of electricity in Sacramento, SMUD must look well into the future to meet its power generation and supply needs. Whether this is accomplished through renewable or green sources of energy, including the building of new hydroelectric dams, this demand must be met. SMUD must also continue to create new sources of electricity to meet the additional demands which growth has brought to Sacramento, since no amount of conservation can overcome a deficit in power production. Accordingly, SMUD must do all that it can to obtain new generation capacity, so that the needs of new industry will be met in the future.

Despite SMUD's move last year to create an electrical plan through 2004, more must be done to protect our long term energy needs. Better projections must be made to determine Sacramento's overall power needs so that SMUD can meet them in the future. SMUD must also investigate how it can become a power generator for its needs and the needs of the statewide power market, which will allow SMUD to become a seller of power, not just a purchaser. In this manner, SMUD will be able to increase its revenues while meeting the needs of its ratepayers.

2. POWER DEREGULATION:

Power deregulation is potentially the most serious problem that we face in this area. If we suffer the same fate as the people of San Diego have in the past few months, our power rates will skyrocket and we will face brown-outs, black-outs or worse. Moreover, because SMUD has been living on long term energy contracts that are now expiring, the days of fixed rate SMUD bills will soon come to an end.

For this reason, SMUD needs to promote the building of new sources of renewable energy, including the building and/or obtaining of new hydroelectric dams. SMUD Directors need to be lobbying Congress and the White House to build new hydroelectric dams in order to provide our region with the energy it needs. This should be the goal of every Director and I will do this if elected.

CONCLUSION:

Success at SMUD should be measured by the overall amount of energy and services that it can produce to meet its ratepayers' needs, not just the fact that it hasn't raised its rates for 10 years. My goal is to assure SMUD's success far into the future through proper planning of our energy needs. If SMUD is to be an active energy provider in the future, it cannot be held captive to the energy output of others. As set forth above, I will do all that I can, as a SMUD Director, to increase SMUD's ability to generate its own power and keep our energy rates low.