Public Power “Lite” Looking Very Green

A Renewable Portfolio Standard of 15% couldn’t survive in the most recent federal energy bill that became law. But 28 states have renewable standards, most of them more stringent than the proposed federal mandate. California’s is the most ambitious, requiring 20% by 2010, and the Governor has proposed 33% by 2020.

And now dozens of California local governments are talking 50% and even 100%. What might make those figures possible is Community Choice Aggregation (CCA), a new form of public power authorized by California state law. Local governments can choose to find their own sources of energy, which would be distributed to their customers by the existing investor-owned utilities. CCAs are operating in northeastern Ohio and Cape Cod, mostly for local rate control, but in California it is clear that renewable energy is a driving force.

The Bay Area is at the epicenter of this movement, but other cities from West Hollywood to Arcata are looking into it. Evidently 2008 will be the make or break year for San Francisco, Marin County, Berkeley, Oakland and Emeryville, the local governments that have sunk money and political capital into feasibility studies and created community outreach programs in support of CCAs for the past several years. In the state’s agriculture center, the San Joaquin Valley Power Authority expects to begin operation within a few months, removing 115,000 generation customers from Pacific Gas and Electric Co. (PG&E) and Southern California Edison (SCE). The billing and distribution stay with the utilities.

That this is serious business is indicated by the increasingly aggressive opposition of PG&E, which originally had supported the 2002 enabling state legislation (AB117). The San Francisco-based utility was so successful in warning off members of the San Joaquin CCA (the city of Fresno bailed out taking 45% of the prospective customers) that they are facing an investigation by the state Public Utilities Commission. The San Joaquin authority filed a complaint against PG&E charging it had violated state law, which requires the utilities to support, not hinder these local efforts. San Francisco and Marin County, which have noticed similar PG&E activities on their turf, are watching the investigation closely. If the PUC rules in favor of the San Joaquin CCA later this year, PG&E might be left with little fire power.

Also taking the movement seriously are big energy traders, such as Citigroup Energy, and consultants such as Navigant, who are working with some of these proposed CCAs to provide energy procurement, financial and management services. The credibility of these players is key to getting elected officials to go along. Whichever third party providers contract with Marin will be fully responsible for supplying enough energy to meet the county’s needs and its renewable energy goals: 56% by 2010 and 80% to 100% by 2013 and after.

Navigant has told Marin County that there will be little or no difference between the rates of PG&E and the proposed CCA “light green” rates, but a 1.9 cent per kwh premium for “deep green,” or 100% renewable. After that rates will begin to decline as natural gas prices rise and renewable prices fall. (San Joaquin says it will offer lower rates from day one.) The draft business plan prepared by the consultant was based on a resource base divided roughly equally among wind, solar, geothermal and biomass. About 13 megawatts (MW) of distributed photovoltaic (PV), proportionate to the state-wide Solar Initiative, would be in place by 2019. In the out years, ocean technologies could be a factor, as the CCA begins to float revenue bonds and invest in its own generation projects by 2014.

Marin’s 100% clean energy goal emerged somewhat spontaneously out of a recent meeting of the county’s energy task force, made up of elected officials from the county and its 11 cities. Asked to adopt a 51% goal, they decided unanimously to go for all renewable, based on documented strong support for county residents. The elected officials were emboldened by a freshly completed survey of county residents that showed 87% of them supporting the county’s venture into renewable energy, and 58% favoring all renewable energy even if it meant a 10% or more increase in their PG&E bills. When the CCA begins operations in 2009, Marin customers will be automatically enrolled in the 100% “deep green” option, although they can opt for the light green 51%, which will cost about the same as PG&E. After 2014 when Marin begins tax-exempt financing (perhaps with partners) of its own projects, rates should be less than PG&E’s and should continue to get better as natural gas prices rise.

Charles McGlashan, president of Marin’s Board of Supervisors, is a bit of a cheerleader for the CCA. He envisions as much as half of Marin’s 240 MW load coming from distributed sources, PV arrays on big roofs and methane-fueled generators on dairy farms in the rural areas.

“With the bonding power of a large public agency, we could buy a huge number of solar panels, hire our local installers, and give a kick to our local economy,” McGlashan said. “We might offer to rent the arrays to property owners, or lease roof space from them. This removes the burden of a big upfront cost from the property owner, but he or she still benefits.”

PG&E chief executive officer Peter Darbee told the San Francisco Chronicle, ” …we’ve said customer choice is good, and CCA we will support, and we have.” Darbee, however, criticizes the one feature that is probably most needed to get a CCA off the ground: opt out. If a local government votes to join, all of its residents are enrolled. Those wishing to stay with PG&E energy sources will have to proactively opt out. This will be free within the first two months, but there will be a modest charge after that.

PG&E would prefer referendums in all the cities. Despite Darbee’s assurances, it has become clear the utility doesn’t like the Marin CCA any better than the one in the San Joaquin Valley. According to McGlashan, “They’ve started an unfortunate disinformation campaign.” Energy reliability could be a hot button anywhere in California because of memories of the 2001-02 rolling blackouts that followed deregulation of power generation. But the mention of power outages might raise the same question about PG&E in some minds, freshened recently by massive days-long storm blackouts throughout the utility’s territory.

“We’re probably most vulnerable to the argument: What do a bunch of elected officials know about running an electric utility. But we won’t be running a utility,” said McGlashan. “Energy procurement and operations will be done by professionals who may know as much or more about it than PG&E. We customers will see the same bills and call the same number for outages that we do now.”

Moreover, many in this very green county have criticized PG&E for lagging on renewable energy. The utility expects to have the RPS-required 20% online behind schedule. And the utility’s plans for new gas-fired power plants could, McGlashan argues, expose the county to supply disruption or sharp increases in gas rates, which are passed through directly to ratepayers. A controversial LNG terminal in Oregon will be the source of much of the fuel.

PG&E’s representatives who are contacting local governments did not return calls. But a 16-page letter to Supervisor McGlashan dismisses just about all of the claims of the CCA: rates won’t be lower but higher; there isn’t enough renewable energy available to meet Marin’s goals; it’s a risky proposition; greenhouse gas reductions will be greater with PG&E energy. (Marin’s consultants dispute all of these points.)

In response, Marin’s consultants cited the county’s independent panel of experts that concluded that sufficient renewable resources are available. They found a potential for half of the county’s load within its boundaries and more in neighboring counties. “Market response to renewable solicitations suggests that resources are available. A case in point: over 1,400 MW of resources were offered to the CCA program in the San Joaquin Valley Program in response to an RFP for up to 400 MW issued in April 2007…PG&E’s own renewable solicitations appear to attract strong response from renewable developers. According to the CPUC, the renewable market’s response to the 2007 utility solicitations far outstrip every previous RPS solicitation with ‘a huge response from solar and wind developers.'” The San Joaquin Valley Power Authority plans to develop in phases one of the world’s largest PV farms, up to 80 MW.

Tim Rosenfeld, a consultant who directs the county’s energy management team, said CCAs could expand and streamline the market for renewables. “They don’t come under state PUC oversight; so they can negotiate with a producer without regulatory delay. With smaller loads, they can consider projects that would be too small or unsuitable for a big investor-owned utility. And producers in California aren’t necessarily thrilled to contract with the big utilities because they were the last to get paid during the energy crises. Having options like the voluntary market and CCAs gives many of them a preferable choice.”

The CCA movement is a remnant of the state’s millennium deregulation effort that misfired spectacularly. The idea was to break the big utilities’ generation monopoly so that the marketplace could bring on cheaper and cleaner power. There’s an irony to the idea that local governments, with their tax-free financing and not for profit aims, could salvage the dream.

No wonder PG&E chooses its words carefully. It is in a difficult position. The contradictions are piling up. It is aggressively advertising itself as the nation’s greenest utility, while it can’t meet its state-mandated goal for renewables. It clearly wants to get back into the generation business, stressing gas-fired generation. It and its brother IOUs have historically fought public power savagely, but now they are confronted with a version of it that legally they are bound to support.

A PG&E spokesman says all they want to do is give the locals the facts. But the California PUC appears poised to fact-check their words and monitor their actions. Meanwhile, not far away in Yolo County, memories are still fresh from last year’s losing effort to leave PG&E for SMUD, the Sacramento regional public power utility noted for its anti-nuclear pro-green policies. Then, PG&E liked the concept of community choice aggregation, suggesting it to Yolo County as an alternative to the annexation: public power lite, if you will.

It’s not easy being green.

Mark Braly was energy advisor to the mayor of Los Angeles during the 70s energy shock, author of the city’s prize-winning energy plan, and president of a State of California non-profit corporation which made loans to renewable energy businesses. Now retired, he is a City of Davis, California, planning commissioner working on the city’s zero-carbon program.

 

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