We've been delivering power to customers in our region since 1946, but our history goes back much further than that.
In 1923, citizens voted to create SMUD as a community-owned, not-for-profit electric service. Years of engineering studies, political battles and legal wrangling delayed SMUD's purchase of PG&E's local electrical system.
In March 1946, the California Supreme Court denied PG&E's final petition to halt the sale and nine months later, SMUD finally began operations. Since then, we have helped power the region's explosive growth, met the challenges of the energy crisis and become a nationwide leader in green energy and conservation.
The years after voters created SMUD in 1923 were filled with engineering studies, political battles, elections and court filings. In March 1946, the California Supreme Court refused PG&E's final petition to thwart the sale and PG&E finally sold its distribution system at the price fixed by the Railroad Commission.
The sales contract was signed in April. In the next eight months, we built an organization of more than 400 linemen, engineers, electricians, managers and office workers to take over operation of Sacramento's electric system.
Our new employees faced daunting challenges. The electric distribution system that had taken so long to acquire was old, some of it dating back to 1895. It was a jumble of competing systems that had been merged into PG&E.
"The lines were in awful shape," said the late Hugo (Doc) Knapp, who retired in 1977 as assistant chief dispatcher.
About 3,000 customers were waiting for electric service and we added more to the waiting list each day. A nationwide shortage of skilled linemen meant that many of our new employees needed training. Only a few of the newly hired employees had any electrical expertise. Postwar shortages of cars, trucks and copper used in power lines made things even tougher.
Working in rented rooms on K Street and in sweltering tin Quonset huts on 59th Street, employees rose to the challenge. On Dec. 31, 1946, with little fanfare and no dimming of the lights, SMUD began supplying electricity to Sacramento -- fulfilling the voter mandate of two decades earlier.
While we hit the ground running in 1946, the pace only quickened in the 1950s, when Sacramento saw a burst of growth.
During our first 15 years of service, the number of customers grew from 65,000 to 170,000. Electrical use more than tripled. The Cold War fueled expansion of Sacramento's military bases, bringing thousands of newcomers to freshly built suburbs.
As the economy flourished in the 1950s and jobs became plentiful, Sacramento's booming population boosted demand for electricity. People bought electric ranges, central heating, electric washers, dryers and dishwashers and a range of small appliances -- waffle irons, coffee-makers, electric blankets and bathroom space heaters.
Mostly, Sacramentans embraced air conditioning. In 1959, sales of room air conditioners jumped 92 percent over 1958. For the first time ever, electricity use in Sacramento peaked in the summer rather than the winter.
The Sacramento family farm also changed dramatically. Instead of relying on open irrigation ditches, farmers bought seasonal irrigation pumping and sprinkler systems, which freed them from the whims of nature. Our Farm Sales group introduced farmers and ranchers to electrified dairy barns, infrared brooding, refrigeration and other electrical farm helpers.
Even in the earliest years when everything from trucks, to copper wire to line crews were in short supply -- our employees steadily engineered and built a flexible, well-integrated system. By the end of SMUD's first full decade, our system was able to supply electricity at any time to any home or business in the Sacramento area.
To help bolster our power supply, management negotiated a low-cost contract for federal hydroelectric power from the Central Valley Project. In 1958, to help make Sacramento "energy independent," we began construction on our own system of hydroelectric power plants on the upper American River.
The hard work and smart moves of 1950s paid off. By 1961, we had lowered our rates three times and our customers enjoyed some of the lowest rates and most reliable service in the country.
By the mid-1960s, agriculture was no longer the Sacramento Valley's biggest business. New "space age" companies such as electronics and defense companies were moving in, changing the face of the city.
The Port of Sacramento began handling ocean-going vessels, a major regional airport took shape in the rice fields west of town, and a peach orchard near the American River was transformed into Sacramento State College. Housing subdivisions and apartment buildings sprang up everywhere as SMUD's customer population surged to 625,000 by 1964.
Our Upper American River Project began providing electricity to the lowlands. We kept pace with the continued population growth by expanding our distribution system of poles and wires. By the mid-1960s,95 percent of the system had been rebuilt or newly constructed.
To improve customer service, we developed a one-stop customer inquiry and transaction center. A modern headquarters building was built at 62nd and S streets.
When they looked ahead at the end of the 1960s, our Board members saw continued growth for the region. To meet the surging demand for power, they approved the construction of a nuclear power plant – to be built on 2,100 acres in southeastern Sacramento County.
The site was named Rancho Seco -- Spanish for "dry ranch."
In the 1970s, Sacramentans were no different from people all across the country. They saw electricity as a boundless resource and expected to have lavish supplies at their disposal.
That view ended abruptly in the 1970s.
The Arab oil embargo triggered an acute energy crisis in the United States. The government asked Americans to cut energy consumption by 10 percent. Homeowners and businesses accustomed to using electricity freely were asked to change their habits overnight.
It was a time of crisis for electric utilities. Since utilities on the West Coast were linked by large transmission lines, shortages affected 13 states, including California. In Northern California, a drought that began in 1976 left the floor of SMUD’s largest reservoir dry and cracked. Our hydroelectric power output was cut in half.
We responded to the pressures by expanding power generation sources, and the Board of Directors approved a comprehensive energy-conservation program to teach consumers how to use energy wisely.
This program offered free attic-insulation inspections for homeowners, and low-interest financing for increased insulation and energy conservation equipment such as heat pumps. We co-sponsored Sacramento's first Energy Expo, a conservation-oriented home show. The conservation effort expanded to schools and community groups.
Our customers caught the spirit. In 1979, for the first time, electricity usage dropped during the hottest summer periods in Sacramento.
As fossil fuel-fired generating companies raised their rates 30 to 90 percent in response to rising fuel costs, we also were forced to raise its rates.
By 1974, Rancho Seco was up and running. At first, the plant experienced delays, cost overruns and outages. But by 1977, Rancho Seco seemed to be living up to its original promise. During the first seven months of the year, it produced more energy than any other nuclear plant in the world.
In 1979, the nuclear industry was rocked by an accident at the Three Mile Island plant in Pennsylvania. The Nuclear Regulatory Commission required additional security and upgrades that meant years of additional work at Rancho Seco. Rate increases became necessary to fund the changes.
The energy turmoil of the late 1970s continued into the 1980s. It wasn't an easy time to plan for Sacramento's future operations.
How much electricity would we need to provide, and how quickly?
So we turned to our customer-owners for input. In 1983, relying on months of public input and analysis, we developed an energy supply plan for the community. It called for low-cost power purchases from federal agencies, construction of a geothermal steam generation plant in Sonoma County, expanded American River hydroelectric facilities and solar generation at Rancho Seco.
Residential and commercial customers embraced our call for energy efficiency. They turned to us for expert help in everything from redesigning lighting and heating and air conditioning systems to weather-stripping windows and replacing incandescent lamps with energy-efficient compact fluorescent bulbs (CFLs).
Responding to customer concern about rising rates, the our Board set up a system to ease the effect of market price shifts in power costs. Staff worked to switch the utility's base of energy independence away from Rancho Seco. Instead, they focused on buying, selling and trading of power throughout the western United States.
These steps helped SMUD keep its average rates about 17 percent lower than those in surrounding communities. In 1984, Folsom residents voted to join SMUD.
But problems continued to plague Rancho Seco. The plant experienced an outage that lasted 27 months. SMUD undertook extensive upgrades to improve the plant's reliability, but output continued to be disappointing.
On June 6, 1989, 53.4 percent of the voters called for SMUD to close the nuclear plant, and the next day SMUD took Rancho Seco offline.
Measures we took in the 1970s and '80s began to pay off in the '90s. The opening of the Energy Management Center allowed us to make its own minute-by-minute decisions on buying power and managing energy resources.
To replace nuclear power, the Board moved away from the concept of a large central plant toward diverse power sources, such as cogeneration plants, wind power, low-cost purchased power from the Pacific Northwest and Canada, and research and development of advanced technologies like solar, fuel cells, gas turbines and biomass.
We tried to cut costs in almost every area. Our employee headcount declined to 2,000 from a high of almost 2,400 – primarily through attrition. We used technology to improve customer service without adding more employees, trimmed resources that didn’t benefit customers, and invested in field inspections and preventive maintenance to further improve reliability.
By the mid-‘90s, SMUD was on solid footing. The major investment rating agencies had upgraded our bond ratings to A and A-minus. Our rates remained stable throughout the decade and our reliability figures were among the best in the nation. We also built three cogeneration plants, expanded generation capacity at existing power plants in the Upper American River Project and beefed up our transmission and distribution systems.
And we tightened our focus on customers, investing in surveys and focus groups to better understand their needs and wants. Major customers were assigned to an account manager, the sole point of contact for all their concerns. In 1999, our customer base jumped past 500,000 and peak electricity usage reached 2,759 megawatts for the first time ever.
But as the decade drew to a close, state officials proposed a new and untested idea; Energy deregulation.
Thanks to months of planning and preparation, the dreaded Y2K bug didn't affect our systems. But just in case, several hundred SMUD employees were on hand New Year's Eve to keep everything running smoothly.
The real crisis was one that no one expected: State-mandated deregulation of the electric utility industry, and the resulting power shortages, soaring wholesale energy costs and rotating outages.
Following deregulation, market chaos gripped much of the West. Artificially tight power supplies and congested transmission systems sent electricity prices through the roof. In short order, California's biggest investor-owned utilities were on the brink of bankruptcy and Californians were experiencing their first blackouts since the end of World War II.
We found ourselves tied as never before to statewide difficulties in maintaining reliable electricity supplies, and in 2000 we were forced to institute rotating outages on seven days. By the following year, we were setting up a system to insulate us from requirements to shut down power to customers in all but extreme cases of statewide grid instability.
The terrorist attacks in New York in 2001 caused heightened security at SMUD's facilities and offices. Some employees went off to war, and SMUD extended help to their families.
By mid-decade. we had paid off the last of the Rancho Seco plant investment and were dismantling the reactor building equipment and spent fuel pool and started construction on a new 500-megawatt gas-fired plant on Rancho Seco property. We replaced hundreds of thousands of feet of underground cable to further improve reliability, and applied for a 50-year license renewal on our 688-MW hydroelectric generation facilities.
Even as we coped with deregulation and other difficult issues, we forged ahead with a major green-energy efforts such as our wind-power project in Solano County, Smart Homes, Greenergy, SolarShares, plug-in hybrid vehicles and a host of other initiatives.
We're well on our way to building a smart grid to help us operate more efficiently and give you better choices in the way you use energy.
This decade promises to be a dynamic time in the electric industry, and we're committed to helping you realize the promise of exciting new technologies while continuing to bring you reliable and affordable service.