News
Law Office Management
May 2, 2010
A Hundred Years of Controversy
The relationship between the City and County of San Francisco and the Pacific Gas and Electric Company reads like a dime-store novel. The drama begins in 1913 when Congress passed a Progressive Era piece of legislation known as the Raker Act (28 Stat. 242 (1913)). That law permitted San Francisco to dam a valley in Yosemite National Park to capture badly needed water and hydroelectric power following the 1906 earthquake and fire. The statute's goal was noble: to enable the city to obtain water and electricity at cost. Presumably, the city itself would construct and maintain the necessary delivery system. Thus the grant came with a substantial restriction: Section 6 of the Raker Act prohibits the city from selling or transferring its rights to any private person or corporation. In 1914 San Francisco began building the Hetch Hetchy project, which included the O'Shaughnessy Dam on the Tuolumne River, a hydroelectric powerhouse, transmission lines, and an underground pipeline across the state. The project didn't deliver electricity to San Francisco until 1925; water finally arrived in 1934. But there was a problem. PG&E, an investor-owned utility incorporated in 1905, controlled the wires that supplied electricity to the city. In 1925, after building transmission lines from Yosemite Valley to the East Bay city of Newark, San Francisco ran out of money for the project. PG&E happened to have an electrical substation in the vicinity, so the parties entered a marriage of convenience. For a fee, San Francisco plugged its Hetch Hetchy wires into the PG&E network that carried electricity under San Francisco Bay to the city. Ten years later, however, Harold Ickes, FDR's Secretary of the Interior, declared that the city's contract with PG&E was illegal. Summarizing a decade of departmental concerns, Ickes ruled that the contract was not a temporary measure (as the parties had argued) nor was it an "agency" or "consignment" arrangement. It was, Ickes said, a sale of Hetch Hetchy power to PG&E for resale - and therefore a violation of the Raker Act. (See Sale of Electric Energy from Hetch Hetchy Power Site, California, 55 Interior Dec. 321, 1935 WL 2337.) But San Francisco and PG&E balked, and eventually the federal government filed suit to end the arrangement. U.S. District Judge Michael Roche found that the PG&E contract indeed violated section 6 of the statute, and he ordered the city to unwind the deal (United States v. City and County of San Francisco, 23 F.Supp. 40 (N.D. Cal. 1938)). A year later the Ninth Circuit reversed (106 F.2d 569 (9th Cir. 1939)), but the U.S. Supreme Court agreed to hear the city's appeal. Robert Jackson, the Attorney General (and later an associate Supreme Court justice), argued the winning case for the federal government (United States v. City and County of San Francisco, 310 U.S. 116 (1940)). Justice Hugo Black cut to the core in a forceful opinion, writing, "[t]he City is availing itself of valuable rights and privileges ... yet persists in violating the very conditions upon which those benefits were granted." (310 U.S. at 30.) Ickes immediately pushed the city to comply with the Act, threatening to revoke the grant and take over the dam if San Francisco did nothing. But the city stalled, and sent delegations to lobby Congress to change the law. Ickes agreed to back off if the city would pass a bond measure to buy out PG&E. But shortly before election day in November 1941, the utility announced that it had lowered its rates. The bond issue went down in flames. Ickes continued to press for compliance, but weeks later Japan attacked Pearl Harbor and the contract issue was promptly forgotten. By 1945 San Francisco had amended its contract to merely use PG&E's transmission lines, paying a "wheeling fee." The revised pact also prohibited the reselling of power by the cities of Modesto and Turlock, which also bought power under the Raker Act. Technically, then, the city had not ceded dominion over electric power to a third party, so Ickes grudgingly approved the amendment. The controversy continued to fester nonetheless. In the 1950s evidence was presented to Congress that Modesto and Turlock were, in fact, reselling power from Hetch Hetchy - but Congress took no action. A decade later, community activists demanded that federal authorities enforce the Raker Act. Rebuffed, they took their case to the San Francisco Bay Guardian, a newly launched muckraking weekly. The paper seized on the issue and kept the Raker Act story going for decades. In 1972, a private citizen sued the City under the Raker Act, but the courts held that he had no standing (Starbuck v. City and County of San Francisco, 556 F.2d 450 (9th Cir. 1977)). Finally, in 1988, President Reagan's Interior Secretary formally approved the PG&E contract once again, noting that it differed materially from the 1925 agreement that the Supreme Court had declared illegal. (See Compliance with Raker Act by City and County of San Francisco, 96 Interior Dec. 302, 1988 WL 410393.) Critics still argue that the intent of the Raker Act was for the City itself to deliver water and electric power to residents at cost, not contract out delivery to a private, for-profit company. But San Francisco voters have repeatedly rejected bond measures to build a municipally owned distribution system. It's also not certain whether Hetch Hetchy power alone would be sufficient to meet the needs of city residents - currently Hetch Hetchy supplies power to the city only for municipal uses; the electricity PG&E provides to San Francisco residents comes from other sources. Still, the Raker Act remains on the books, as does Justice Black's opinion. And the stormy relationship between San Francisco and PG&E has entered its second century.
#293699
Kari Santos
Daily Journal Staff Writer
For reprint rights or to order a copy of your photo:
Email
jeremy@reprintpros.com
for prices.
Direct dial: 949-702-5390
Send a letter to the editor:
Email: letters@dailyjournal.com