THROUGH MY EYES -- RON DAVIS

This isn’t the first time I’ve seen a business enter into a bad

contract with its eyes wide open and then whine when it’s time to pay the

piper. In this case the business is the city of Huntington Beach.

In 1996, apparently mesmerized by the prospect of saving 15% on its

electric bill, the city entered into an agreement with Southern

California Edison that called for voluntary interruptions and reductions

of electrical usage at City Hall and the Police Department in the event

of electrical shortages.

I’m not talking about interruptions in the event of blackouts -- which

may or may not affect us all -- but shortages that could lead to

blackouts. In essence, the city agreed to virtually shut off the

electricity to these two rather essential government functions, which I

think we might need in the event of a crisis, so that the people in

Fresno, Bakersfield, Victorville and other cities throughout the state

could play their stereos, light their lamps, and use their hair dryers.

Nice deal, huh? We agreed to jeopardize the essential functions of our

local government so that people throughout the state could watch “Oprah”

or “Judge Judy.”

In exchange for this savings, the city agreed that when Edison called,

the city would voluntarily reduce its 921-kilowatt usage at City Hall and

the Police Department to a measly one kilowatt. They also agreed that if

the city continued to use Edison’s power, it would pay a humongous

penalty. How humongous? The rate went from six cents a kilowatt to more

than $9 -- a 15,000% increase.

Since January there have been 12 calls for the city to interrupt

electrical service, and since December, it has incurred fines of almost

$1 million. If the city is actually required to pay these fines, guess

who actually pays? Does the word “taxpayer” ring a bell?

I’m actually being charitable about the terms of the contract. With

eyes wide shut, we entered into a contract that on paper was to be at

least a five-year deal. Worse yet, when we signed the contract in 1996,

we understood that if we wanted to cancel it, we could do so, but the

cancellation wouldn’t be effective for five years from when it was

requested. While the city claims it has tried to cancel the contract,

I’ve been given no documents to support that contention.

Electrocute me if I’m wrong here, but I suspect that the city’s

strategy was to get the benefit of the reduced rate until the cost of the

interruptions exceeded the savings, and then cancel the contract. The

problem with that strategy was that because the cancellation wouldn’t be

effective for five years, future interruptions exposed the city to fines

(for City Hall, the Police Department and city library) of $14 million,

against a savings of about $600,000 or $700,000.

With this savings, the city could have protected itself, and the

taxpayers, by buying generators that would have been available, not only

in the case of an interruption under the contract, but in the event of

any other crisis. Did we buy them? No! But we did buy art for City Hall

and the Police Department and gave money to an organization to buy

musical instruments.

There is a temptation on the part of some to see Huntington Beach as

the victim of Edison or the California Public Utilities Commission. After

all, Edison allegedly projected electrical reserves of 20% through 2005

and is the same party insisting on payment of the exorbitant fines. But,

projections are just that, projections, not promises, and are as

meaningful as projections about which horse will win the fifth race at

Hollywood Park. Further, it should have occurred to someone that Edison

was offering discounts in exchange for voluntary interruptions for a

reason -- anticipated shortages.

The notion that Edison is somehow the bad guy for insisting on the

payment of the fines is also misplaced. That was the deal we entered

into. No one held a gun to the city’s head to sign this contract, and if

we didn’t like the potential downside, then we shouldn’t have done the

deal.

Also, Edison and the utilities commission are being cast as the bad

guys because (whine in unison here) they won’t let the city out of the

deal. But why should they? The city entered into a five-year contract and

received the discount. Now when Edison asks us to fulfill our side of the

bargain, they’re the bad guys? You’ve got to be kidding!

The city would like me to look at the doctrine of relative stupidity,

pointing out that Golden West College, Boeing and the Waterfront Hilton

also entered into the same deal. I understand this rationale -- a dumb

deal on the part of others makes the deal smart for us.

While it is true that the utilities commission recently suspended the

interruptible contract (but not necessarily the accrued fines) --

arriving at the last moment like the cavalry to save us from ourselves --

there is a temptation to breathe a sigh of relief and go on with life

under the reasoning of spilled milk. But, as long as the city sees itself

as the victim rather than the party responsible for this mess, there is

no reason to change.

By change I don’t mean that heads ought to roll or that we throw the

rascals out. I mean an honest assessment of what really went wrong and

why, so that we can correct it.

In my judgment, the city fully short-circuited when it came into this

contract. And by the city, I mean the administration, the City Council

and the city attorney. (In all fairness I should point out the city

administrator and department heads who proposed this contract are no

longer with the city. Moreover, Mayor Pam Julien Houchen and Councilwomen

Connie Boardman and Debbie Cook were not on the City Council at the time,

and former Councilman Tom Harman did not participate in the decision.)

It’s time to turn the lights on at City Hall and take a hard look at

how we got into this contract almost five years ago, and why we were

operating in the dark.

* RON DAVIS is a private attorney who lives in Huntington Beach. He

can be reached by e-mail at o7 [email protected]