The Battle over Hetch Hetchy: America's Most Controversial Dam and the Birth of Modern Environmentalism

by Robert W. Righter

  At home the problem escalated when Mayor James Rolph announced that he favored municipal ownership: "I do not believe the wholesaling of power to a corporation would be legal, as I read the Raker Act"10 The city supervisors agreed. The San Francisco Examiner, controlled by the flamboyant William Randolph Hearst, backed up the mayor and the supervisors, chastising the city engineer. "We like your engineering, `Chief' O'Shaughnessy, costly as it is. But when it comes to matters of public policy," crowed the paper, "we think that the people's elected representatives, and such able and civic-minded citizens as Senator [James] Phelan and his Advisory Committee, are the proper persons to judge." 11 At a meeting of the Commonwealth Club, O'Shaughnessy faced harsh criticism from Phelan, who after all, had spearheaded the city's drive for control of the Hetch Hetchy Valley. "The framers of the Raker Act had one thing in mind," emphasized the former senator, that "no invisible empire, no trust should ever seize from the people of San Francisco this great resource of Hetch Hetchy.You may have it, congress said, but you may not give it away." And William Kent argued that Congress would have never put up such a fight if it "did not believe that the 200,000 horsepower of electricity would forever emancipate San Francisco from the collar of the hydroelectric trust." Kent recalled that "Mr. O'Shaughnessy was with us in that fight and was ardent for straight municipal ownership and distribution. I don't know what's happened since."12

  Mayor Rolph's Advisory Committee, headed by Phelan, faced four choices: (i) construction of a distribution system apart from PG&E, (2) purchase of the PG&E system, (3) sale of power at wholesale rates to PG&E, or (¢) distribution of power through PG&E facilities and lines. Option i seemed both wasteful and expensive. Option 2 would take time, requiring an appraisal and the passage of a bond. Option 3 violated the Raker Act, section 6. Option 4 was the most sensible, and the committee recommended it. However, both PG&E, headed by Wigginton Creed, and Great Western, a smaller electric company under Mortimer Fleishhacker, were quite determined to prevent the city from getting into the power distribution business. They refused to negotiate.13

  The private power loophole in the Raker Act became obvious. The act did not mandate the purchase of the Spring Valley Water Company and the Pacific Gas and Electric Company infrastructures. Since it was not imperative that the city purchase the infrastructure, both sides began a dance of acquisition. Rather than enter into serious negotiation, the newspapers and the people of San Francisco preferred to lambaste the private companies, contesting their value-refusing to go to arbitration-and in general making it difficult to pass the necessary bonds.

  Given the situation, Mayor Rolph and the city supervisors edged toward defiance of the federal government. The company agreed to purchase all Hetch Hetchy power, but it refused to serve as the city's distributor. PG&E executives knew they held the upper hand. They would not budge, and after a 14-hour supervisor's meeting in March of 1925, Rolph and 11 supervisors accepted the PG&E power purchase terms.14 Few knowledgeable persons thought that such a sale was legal, but they all believed it was necessary. Simply put, the city had no way to distribute Hetch Hetchy power except to sell it, wheeling it into Pacific Gas and Electric Company lines. If nothing could be worked out, Hetch Hetchy power would have to be "dumped," unused and useless. After all, electric power, unlike natural gas, petroleum, or coal, cannot be stored. It is a situation of use it or lose it.

  On July 1, 1925, San Francisco Board of Public Works memberT A. Rear don and PG&E's vice president, FA Leach, signed the agreement whereby the company would purchase the entire Hetch Hereby power output for approximately $2 million per year. The compact emphasized that this was a shortterm partnership to precede San Francisco's arranging to purchase and operate its own distribution system. The contract could be terminated by either party with one day's written notice. The city negotiators surely anticipated an agreement of short duration, but they also hoped that the conditions would convince Secretary of the Interior Hubert Work that the city meant business and would soon purchase the PG&E infrastructure. In a sense, the agreement was tailored to impress the interior secretary, for he had the power to cancel the pact if "in his opinion the agreement violates any provisions of the laws of the United States in general, or the RakerAct in particular."15

  FIGURE 24. The original Moccasin Creek Power House is on the left side of the photograph.The powerhouse generated a significant amount of electricity, but sale of the power to Pacific Gas and Electric was a controversial issue that ended up in the U.S. Supreme Court. Courtesy of the SFPUC.

  In another step to impress the Interior Department, Mayor James Rolph headed a delegation that went to Washington and personally presented the contract to the secretary. Covering his bases, he also sent a long telegram to President Calvin Coolidge which emphasized that under the agreement $5,479 would come to the city each and every day, whereas at present the power was "Being Wasted And Waste Will Continue Indefinitely If Contract Not Be Executed." He urged the president to take up the matter with Interior Secretary Work. Also, both Rolph and O'Shaughnessy appealed to Commerce Secretary Herbert Hoover to intercede on behalf of the city. However, some leaders were disgusted by what they believed was a subterfuge. Gifford Pinchot andWilliam Kent urged SecretaryWork to schedule open hearings in San Francisco. They both devoutly believed that the will of Congress would be undermined if this deception went unchallenged. Kent was particularly annoyed, wiring the secretary that when the city accepted the terms of the Raker Act it "Entered Into Moral As Well As Legal Obligations Which It Should Be Forced To Carry Out In The Near Future."16

  Arriving in Washington in the summer of 1925, Mayor Rolph and his San Francisco delegation hoped for a quick approval from Secretary Work. The Californians found the Department of the Interior in disarray, or at least unable to take a position. The Washington Daily News condensed the frustrating process and even added a dash of humor:

  When SF came to Washington with their plan to sell to PG&E, "in violation of the federal grant," the matter fell into the jurisdiction of Assistant Secretary of the Interior [John H.] Edwards.

  Edwards was besieged with arguments and protests on each side, and decided to do nothing until Secretary [Hubert] Work should return from a western trip.

  Work took a brief look at the controversy, decided his opinion should hinge on strictly legal aspects of the matter, and passed the whole thing over to Atty. Gen. Sargent.

  Sargent got his assistant going, and in the end stated to Work that "he did not care to give an opinion on the contract."

  So back came the dynamite, with the fuse still sizzling, to torment Work. And Work rounded the circle with nicety by announcing that nothing will be decided until Edwards returns from a western trip and advises him.

  All of which is a decided, if temporary, victory for the people of San Francisco. 17

  In effect, Secretary Work and his staff refused to make a decision on the legitimacy of the PG&E contract; but neither did he cancel it. Tired of such ambivalence, Mayor Rolph returned to San Francisco and settled the issue. He would not allow the indecision of the Interior Department to cost his city $5479 a day. On August 14, 1925, the delivery of Moccasin Creek plant power commenced and electricity flowed through the PG&E lines into the city. It was a defiant act, one the Los Angeles Record labeled "contempt of Congress, the President's Cabinet and the Judiciary."' 8 In retrospect the refusal of Secretary Work to uphold section 6 of the Raker Act was an error that may be charged to indecision, inertia, and bureaucratic bungling. September came and went with still no decision. Finally, in early October, Assistant Secretary Edwards announced that the city could not sell Hetch Hetchy power to others for resale. He was too late. Once the electric power flowed, it would be hard to stop.

  Still, selling Hetch Hetchy power to Pacific Gas and Electric Company was not considered a final solution, but rather a stopgap measure, a temporary agreement until the California State Railroad Commission, the predecessor to the California Public Utilities Commission, determined a val
ue for PG&E and the Great Western Power Company. The city could not ignore Edwards's decision. Neither could it ignore the verbal bashing by Congressman Lewis Cramton. The Michigan legislator aimed most of his barbs at the city's inaction in fulfilling its responsibilities in Yosemite National Park, but he also criticized the city for its violation of section 6. Cramton demanded action from Ray Lyman Wilbur, President Herbert Hoover's new secretary of the interior. Wilbur, past president of Stanford University and a person well versed on Hetch Hetchy, quickly addressed Cramton's criticism regarding Yosemite Park. About the 1925 power contract, however, he remained silent. The new secretary's sympathies lay with the private power companies. When it came to the Raker Act, he would prove to be a "loose constructionist."

  In June of 1929 the Railway Commission rendered its valuation of the San Francisco properties and infrastructure held by PG&E and Great Western. Not surprisingly, both companies appealed, believing their properties were undervalued. The commission denied their appeals, and Mayor Rolph wrote Secretary Wilbur a long letter explaining the valuation and the importance of the upcoming bond vote, which he scheduled for August 26, 1930, the same day as the California state primary election. The total bond measure would be $68,115,000, but voters would cast separate votes for purchase of PG&E at $44.5 million, Great Western Power Company at $18.9 million, and $4.5 million for new transmission lines and power house construction. In spite of Mayor Rolph's hopes, the election proved a disaster for those who favored municipal ownership. On both the PG&E and the Great Western acquisitions the votes were approximately 25,000 for, but 63,000 against. The bond issue for transmission lines and power house construction also went down to defeat. It was a remarkable rejection of municipal power.19 It seemed particularly significant since just two years earlier city voters had finally approved purchase of the Spring Valley Water Company by a four-toone majority. Some blamed the two companies for influencing the election, while others noted the deepening economic depression. Citizens who followed the city's business felt that to approve the bonds would place a dangerous debt burden on the city and exhaust its bonding capacity. Whatever the reason for defeat, those who favored municipal power knew they had lost decisively, and to win would not be easy.

  Not all city officials, to be sure, were committed to public power. Many, in fact, were quite satisfied with wholesaling Hetch Hetchy electricity. In a 1935 memorandum, Lewis F. Byington, president of the San Francisco Public Utilities Commission, noted that the partnership guaranteed $21 million in gross revenues to the city over the 1o-year period, of which $16 million had been applied to reducing the heavy debt. Byington suggested that had these monies not reduced the debt, the voters "would have failed to vote the necessary appropriations for water called for in 1928, 1932, and 1933 "211 A voting pattern was emerging: San Franciscans would approve bonds to buy and to complete the Hetch Hetchy water system, but not to purchase the power distribution system.

  In the meantime, a political change at the national level had motivated Lewis Byington's 1935 memorandum. Secretary Wilbur left office with the Hoover administration, and President Franklin Delano Roosevelt appointed Harold Ickes to head the Department of the Interior in 1933.Almost imme diately the new secretary scrutinized the Raker Act and asked that the city explain why the 1925 power agreement was not in violation of the act. In his 13-page memo Byington set out the argument of the San Francisco Public Utilities Commission, claiming that the city had "reasonably complied" with section 6. The federal government, in Byington's view, could expect no more.21 Ickes did not agree, and from 1934 until his resignation in 1945, the interior secretary proved to be a persistent, painful thorn in the city's side. In dealing with San Francisco he surely enhanced his nickname, "the old curmudgeon."

  Nothing seemed to annoy Ickes more than shallow legal arguments aimed at obscuring the facts and avoiding the law That is the way he viewed Byington's reasoning as well as the city's recalcitrance. It irked him that the city's refusal to comply with section 6 enhanced the profits of a private utility company. As a longtime advocate of public power, Ickes loved to twist the tail of any corporation that sought to increase profit at public expense. PG&E fell into that category. However, in his passion for public ownership, Ickes refused to acknowledge another power model gaining acceptance. This model was utility regulation through state commissions, a prerogative that appealed to many parties and stemmed the enthusiasm for municipal owner- ship.22 In the 192os and 1930s the California Railroad Commission regulated the rates that PG&E could charge its customers, and the commission kept profits in line. According to Byington's statistics, PG&E city rates were a little higher than those in the rural areas, but the return varied between 7 and io percent-not an outlandish profit.23

  Besides being a stickler for the letter of the law-at least when it supported his purpose-Ickes was a public power ideologue, in many ways the antithesis of his predecessor. Loquacious and pugnacious, Ickes had a certain inelasticity that frustrated San Francisco officials and made cooperation difficult. In fact Ickes did not want cooperation so much as capitulation. By June 1933 he asked acting director of the National Park Service Arthur Demaray to review what had taken place between the city and the interior secretary's office. Demaray reported that the city had done nothing, even though the 1925 power agreement was temporary and was only in "reasonable compliance with its obligations for the time being."24

  Irritated, Ickes continued his investigation into the 1925 contract, soliciting letters and briefs and even conducting an open hearing in which San Francisco and other interested parties presented their case. In August 1935 Ickes issued a 31-page brief. To no one's great surprise, the secretary concluded that if the 1925 agreement had ever been a temporary expedient, it was no longer. The city must carry out a clear and binding obligation under section 6. Never one to shy away from giving advice, Ickes suggested that the city amend its charter "to permit the issuance of revenue bonds which will require the approval of only a majority of those voting at the election."25

  Actually, the supervisors agreed that it was time for a change. Until 1935 the city listed Hetch Hetchy power bonds as general obligation bonds, requiring a two-thirds vote for approval. Now the supervisors approved a charter amendment to list the bonds as revenue producing, requiring a simple majority. Passage of the amendment would open the way for the San Francisco Public Utilities Commission, which replaced the Board of Public Works in 1932, to move closer to purchase of the PG&E infrastructure. However, PG&E, the Chamber of Commerce, the real estate interests, and all the merchant associations vigorously opposed the amendment, stressing that if it passed, the public would lose "safeguards against extravagant spending by public officials."26 Voters defeated the amendment, 72,780 to 50,804.

  This defeat stunned Secretary Ickes. He could not understand San Francisco voters, especially since he had received numerous letters congratulating him for holding San Francisco's feet to the fire. These letters insinuated that corruption and greed had captured the city.27 Whether PG&E controlled the city supervisors was problematic. The company advertised and lobbied, but there is no evidence of bribery or political chicanery. The city residents seemed equally divided between those who favored public power and those who opposed it. The majority may have supported public power, but according to one pundit, in the midst of a national depression and economic hard times, the people were reluctant to launch the city into the retail power business. Furthermore, purchase of the PG&E infrastructure would give employment to very few people. Solid reasons explained the voters' rejection of bond proposals.28

  Angelo Rossi, who became mayor when voters elevated Rolph to the governorship of California, and the supervisors now faced the task of satisfying two formidable authorities. The voters of San Francisco had made it abundantly clear that they remained unconvinced by the public power advocates. On the other hand, Harold Ickes, who in a nationally broadcast speech heaped praise on the city at the 1934 Pulgas Water Temple ceremony, grew more determined that San
Francisco would follow the letter of the Raker Act. In an attempt to mollify the secretary, San Francisco engineers, attorneys, and politicians created a number of "plans," one of which they hoped Ickes would find acceptable. Between 1936 and 1941 city officials submitted nine plans. In March 1936 Mayor Rossi and his staffjourneyed to Washington to present Ickes four of them, each with a little different twist. Journalist Arthur Caylor noted that the upcoming gathering would be "a poker game rather than a power conference" with "Honest Harold." "The local boys hold four cards in the shape of four plans for municipal distribution of Hetch Hetchy electricity, and will back them with large numbers of white chips. But they'll hang onto their blue counters to use in connection with a wild ace which remains up the sleeve." Caylor thought Ickes both suspicious and informed.29

  Caylor was quite right. In February Solicitor Nathan Margold had analyzed the four plans for his chief. None included outright purchase of the PG&E infrastructure; rather, all involved more complicated "wheeling" of power into PG&E transmission lines with proper payment. The "wild ace" plan was number 5, or what Margold called "4B." This one envisioned the delivery and sale of power to PG&E at its Newark line, then resale to the city at wholesale rates. However, Margold estimated that approximately 207,000 kilowatt-hours reverted to the company for sale at retail rates, a clear violation of the Raker Act.30

  Ickes soon sent the mayor and his staff back to San Francisco to try again. Once more the supervisors backed a charter amendment that authorized $50 million for acquisition of the PG&E. This "Plan 7," according to Solicitor Margold, constituted compliance with the Raker Act. The election vote, on March 9, 1937, was closer: 77,514 no, 65,688 yes. A near miss did not impress Ickes. On March 15 Ickes issued an ultimatum that the Board of Supervisors must take action-what action he did not say-to comply with the Raker Act or he would ask the United States attorney general to bring court action in order to cancel the 1925 agreement. Rossi responded immediately, begging the secretary to delay any legal action and asking for another conference. Ickes wired back that his patience had worn thin and he saw no need of further discussion. In a memo to Ickes, Solicitor-General Frederic Kirgis mused that "apparently the Mayor was completely bewildered and disconcerted by the knowledge of the fact that conferences and delays would no longer be the regular order of things."31