Sacramento Municipal Utility Districts' Economic Development Program

REASON FOR INVESTIGATION

The Grand Jury was concerned about the impact of economic development on local government and the taxpayer.

BACKGROUND

The Sacramento Municipal Utility District (SMUD) has an elected Board of Directors that has set policies to promote economic development that benefits ratepayers. The general policy states that the District will "promote and support economic growth, economic diversity, job retention and creation, a healthy business climate and improved quality of life for the benefit of its customer-owners consistent with the District's responsibilities to prudently plan for future energy needs." SMUD has offered incentives to companies that have decided to locate or retain operations in the county. Businesses contribute over half the revenues and cover a large portion of SMUD's fixed cost. SMUD offers incentive rates with discounts ranging from 6.5 percent to 18 percent off the standard rates. They have priced the rates so that the revenue generated is sufficient to cover the cost of the additional electrical load. SMUD maintains that in all cases the incentive rates and negotiated rates are consistent with statutory authority and Board policy, and that they are carefully set to assure that other customers do not subsidize the additional cost of serving a given customer. They also obtain commitments from those benefiting from the incentive to buy power from SMUD for a fixed period thus assuring a long term revenue stream.

PROCEDURES FOLLOWED

The Grand Jury conducted interviews with SMUD officials, local business interests, and reviewed official documents, press reports and information available on the Internet.

FINDINGS

1. SMUD's economic incentive program is selective and offered on a case-by-case basis.
2. SMUD has included conditions in its contracts to insure that businesses that accept these discounts are committed to meet their part of the agreement.
3. SMUD has used discount rates, loans, infrastructure and technical assistance as part of its Economic Development Program.

CONCLUSIONS

1. SMUD has designed its policies to cover at least the cost of providing additional electrical energy.
2. There is no shifting of costs to other ratepayers.
3. The policy recognizes that there are many ways to improve the business environment.

RECOMMENDATIONS

The Grand Jury recommends that SMUD continue its economic development program.

RESPONSE REQUIRED

None