The Breaking of a Power Monopoly: Community Choice?
Thursday, 20 March 2014 09:27 By Dina Rasor, Truthout | Solutions
Pacific Gas & Electric has had a monopoly on the energy needs of the northern two-thirds of California since 1905. But a new state government entity called Community Choice Aggregation promises to turn over most conventional wisdom of who has the power.
Pacific Gas & Electric (PG&E), as an energy utility, has had a monopoly on the energy needs of the northern two-thirds of California since 1905. As an investor-owned power company, it has amassed great wealth, assets and political power over the years. However, there is a new state government entity, called Community Choice Aggregation (CCA), that promises to turn over most conventional political wisdom of who has the power. 
The first attempt to break PG&E’s monopoly came in 1996, when Republican Gov. Pete Wilson pushed through a bill that loosened up the lucrative California energy market to the “Wild West” of a free market with few price regulations in the price of electricity sold to the state’s utilities. But it did not remove the restriction and cap on prices of what PG&E could charge to their retail customers for electricity. In 2000, drought and other problems put a strain on the California energy market. The notorious Enron Corporation artificially made the shortage worse by illegally shutting down their energy pipelines from Texas to California and manipulated markets to create an artificial power shortage in California. Enron began selling energy to a strapped PG&E at inflated prices but PG&E, by regulation, still had a regulatory cap restricting it from passing most of these energy costs to its customers. From April to December, energy rates increased an astounding 800 percent. Because PG&E was not able to require its customers to pay for most of this outrageous increase, its cash flow was drained quickly. PG&E was headed toward bankruptcy. The next year saw a series of infamous rolling blackouts, and the state had to step in and buy expensive power on the spot market because PG&E did not have the cash. The public did get stuck with paying for the state’s losses through taxes and the cost of PG&E’s bankruptcy that increased PG&E’s overhead and cost of doing business through higher electric bills. Billions of dollars were lost, with some estimates being as high as $45 billion.
After this ongoing trauma was inflicted on the state, PG&E emerged from bankruptcy with its monopoly intact. Many California communities were growing interested in renewable energy, but PG&E had gotten its rate of renewable energy only to less than 20 percent. In 2002, still smarting from the damage of the artificial market crisis, environmental and consumer groups looked for another way to try to infiltrate part of the PG&E’s power empire. This time, California legislators tried another route. They passed a law creating CCA. Communities now have the right to pool the citizens’ and businesses’ energy use in their cities or counties to purchase power for their aggregate unit. Communities such as cities and counties can also group together to form a larger CCA. CCAs are governmental agencies that generate income, similar to water districts.
How could these communities have their own power agencies compete with a powerful PG&E? To understand it, you need to think about PG&E having two monopolies. One is the ability to buy or make and sell electricity - that is, to sell electrons. The other is the infrastructure needed to deliver those electrons, through power towers and power lines, to your door. It would be ludicrous to think that a CCA could duplicate the infrastructure to deliver the electricity to your house or business. CCAs are just buying and/or generating the electrons. So PG&E still has a monopoly in delivering the electricity but the CCAs now have the ability to use PG&E’s power lines to compete and deliver electricity that has a higher percentage of renewable energy and perhaps even at a cheaper rate.
Many cities and counties, such as San Francisco, Marin County, Sonoma County and Berkeley, began to look and see if they could form their own CCAs, generate and buy the power and have a much higher percentage come from renewable sources. Marin County’s CCA, called Marin Clean Energy (MCE), ended up being the first one out the door. It was formed in 2008 and it started service in May 2010.
The Empire Strikes Back
My first reaction to the prospect of breaking up the energy monopoly of PG&E was that this investor-owned power giant born in 1905 would not passively sit back and allow these tree-hugging municipalities and counties to pick off some of its lucrative territory. My instincts were right.  
On the June 2010 state ballot, a month after MCE had launched its service, PG&E financed the placement and support of California's Proposition 16. California has an extensive system of allowing the public, by turning in petitions, or the Legislature to put propositions on the ballot each time there is a statewide election. The public and special-interest groups are allowed to donate money for or against these propositions, and there has been enormous money in this propositions election process. This proposition would require any state municipality or county to get a supermajority of two-thirds vote from the citizens, rather than a majority from a town council or county supervisors before they could spend funds or efforts to form a CCA. As anyone knows, demanding a supermajority usually kills any initiative in our closely divided country. 
The supporters of Prop 16 couched their argument as a taxpayers’ rights issue, but it was abundantly clear that PG&E wanted to drown the CCA babies in the bathtub before they had a chance to walk. PG&E spent an astonishing $46 million on the proposition against the less than $100,000 raised by the opponents. The CCAs, by law, were not allowed to get involved in the election because they are government entities, so it was just up to environmental groups to mount a web campaign to defeat this proposition to save any chance of trying the CCA concept. 
PG&E ended up with mud on its face when Prop 16 was defeated 53 percent to 47 percent, especially when electric rate payers realized that it had used $46 million of its assets to try to defeat the CCA little guys. It was an amazing win for the CCAs.
With the specter of the supermajority vote banished, MCE launched its service. According to the law, every power customer is automatically enrolled in MCE, but customers have the right to opt out and continue to buy electricity from PG&E and its 20 percent renewable energy. But MCE went one step farther: Fifty percent of MCE’s basic service, called Light Green, comes from renewable sources. Customers also can “opt up” for an MCE program called Deep Green, where 100 percent of the energy is renewable.  
You might think that this Deep Green program would be costly and that 100 percent renewable energy could not compete with the likes of a giant like PG&E. Yet, according to MCE, rates that are coming out in the next few months from PG&E and MCE show that the Light Green program actually is slightly cheaper than the PG&E rates and the Deep Green adds only $5 a month to the average electric bill. And when you add in the typical commercial electric bill, both the Light Green and Deep Green rates are lower than PG&E. Because these smaller government CCAs don’t have the lobby and advertising budgets of PG&E and the bloat of a large utility company that has not had competition for more than 100 years, they can beat or meet PG&E prices with much higher renewable percentages. This defies the conventional wisdom: A governmental entity is more competitive than an investor-owned utility, and renewable energy is able to compete against traditional and more polluting energy sources. Government outcompeting investors? It’s a world gone mad for the status quo.
Because MCE wants to generate its own power as well as buy power, it also has taken some of its generated income and plowed it back into local projects that will generate power for it. Its biggest example is at the San Rafael Airport, where it helped a private airport turn itself into a solar power source for MCE by putting solar panels on the buildings. There are other local projects that generate electricity and provide local jobs. MCE claims that as it matures, it wants to keep expanding its own renewable energy generation. It is interesting to note that the Deep Green program, with 100 percent renewable, is 100 percent wind energy bought from wind farms in Oregon and Washington. The solar percentage for Light Green is also only 1 percent versus PG&E’s 2 percent, so MCE has the incentive to grow this part of its business on the rooftops of customers.
You would think that the billing for MCE’s income, while still charging the customer for the use of PG&E’s delivery infrastructure, could become very complicated, but it is all listed on one bill. MCE’s power is just a line item on a typical PG&E bill. I live in El Cerrito, and my town has not yet joined MCE. So I am still a PG&E customer. The MCE bill looks just like the bill I pay PG&E, only with an MCE line item. 
MCE does have its detractors in the environmental community. To start service and have enough electricity to sell, MCE also contracted with Shell Energy North America; they have a contract until 2017. Sandy Leon Vest of the nonprofit Solartimes.org is one of MCE’s opponents, for this reason. She insists MCE and San Francisco CCA, which also has contracted with Shell, are allowing this large oil-based energy company to distort the purity of going completely renewable and MCE is subsidizing the beast. 
It is a chicken-or-egg dilemma for the environmental purist. MCE would not be able to supply enough electricity without the Shell bridge contract so it can get to the point where it buys from more environmentally sound energy companies as these companies grow and MCE generates more of its own renewable power. Other environmental groups such as the Sierra Club and some chapters of the Green Party still embrace the goals of MCE and see the Shell contract as a bridge to get MCE started toward a more renewable future. The environmental movement will have to work out whether it wants the CCAs to begin operations now or wait until there are more clean producers of electricity. 
MCE’s initial success has begun to snowball. Although Richmond, California, is a large city not in Marin County, the city and MCE decided to join to expand the customer base to 125,000 customers. In July 2013, Richmond joined MCE and has a seat on the MCE board. This is an interesting partnership with two localities that have very different populations. A closer look shows that the decisions of these two communities also defy conventional wisdom and stereotypes. (I have written about Richmond and its culture in another column on Sandy Hook.)
Marin County is one of the wealthiest counties in the San Francisco Bay Area, and Richmond is one of the most disadvantaged cities. The US Census shows that Marin is 86 percent white, is 55 percent college-educated, has a median household income of $91,000 and has a general poverty rate of 7.5 percent. Richmond is 31 percent white, is a majority minority city, is 26 percent college-educated, has a median household income of $55,000 and has an 18 percent general poverty rate. Yet, according to MCE, 25 percent of Marin County has opted out to go back to PG&E, compared with 16 percent of Richmond residents and businesses that have done the same. Also, Richmond has the most people willing to opt up to Deep Green. 
A dominant stereotype is that well-off, well-educated people are the ones that take pollution and renewable energy most seriously and are the ones willing to pay more for a cleaner world. Once again this CCA experiment produces results that don’t fit the common wisdom of what and who will make the changes against a powerful monopoly and will invest in a renewable-energy world. I suspect that the citizens of Richmond, who live in the air and shadow of a large and accident-prone Chevron oil refinery, see up close what traditional fossil fuel energy can do to the environment and their health. A 2012 refinery fire at the plant sent up to 15,000 people streaming to local hospitals. 
Other cities adjacent to Richmond, including my own El Cerrito, are exploring and seeking to join MCE. These towns are too small ever to consider their own CCA and look to support renewable energy by joining MCE. MCE spokesperson Jamie Tuckey and community affairs coordinator Alex DiGiorgio stress that MCE is not looking to build an empire by adding many more under its umbrella. The MCE board of directors wants to add only small cities within 30 miles of the county. It is interested in keeping MCE local but does advise and does do studies for other CCAs, such as the one that will launch in May for Sonoma County. 
So are MCE and the CCA movement in California the solution to cleaner energy and competition for an intractable power monopoly? Time will tell, as more cities and counties decide to take the plunge. MCE has ambitious goals to generate more of its own power, yet PG&E still, in 2010 and 2011, has been caught spending $4 million to encourage their customers to opt out and sending barred letters to MCE customers. PG&E will have a hard time stopping the tide if the dozens of counties and cities across California continue to explore and create CCAs. It is a potentially effective solution with possible unforeseen consequences, but the launching of this new government option has had surprising and unpredictably hopeful effects in the march toward renewable energy and a competitive energy economy. 
Next week I will explore how CCAs are succeeding in the other five states were they are being created. 
Six States Have Tried Community Controlled Power: What Works?
Monday, 31 March 2014 13:19 By Dina Rasor, Truthout |
Last week I wrote about how a new California state entity, called Community Choice Aggregation (CCA), has begun to produce cracks in the monopoly of the century-old Pacific Gas & Electric utility, while giving its customers a choice of using more renewable energy. As communities around the state create more CCAs, consumers will be paying less money for more environmentally friendly forms of electricity. Five other states - Massachusetts, Illinois, Ohio, Rhode Island and New Jersey - have also passed legislation allowing for CCAs. Which ones have been the most successful?
The success of each state's CCAs depends on several factors. One is how the electric status quo in the state was changed or deregulated to allow the formation of CCAs and another is what the state wanted to accomplish with this new type of state body.
Most of the reform and deregulation of the old electric utilities occurred during the late 1990s and early 2000s. The actual electric product was separated from the transportation of the electricity and the delivery infrastructure that brings it to the customer's door.  That allowed CCAs to be formed by local cities and counties to buy electricity from one or more sources to lower the price, encourage and enact more energy conservation and, if motivated, to move to cleaner forms of energy. Sometimes the CCAs put their emphasis on providing this new electric choice and sometimes state laws limited their options.
Various states have been working toward figuring out the best model to implement the CCA concept and to learn about the pitfalls and limitations of some of the CCA legislation. A nonprofit organization called Local Energy Aggregation Network (LEAN)  acts as a clearinghouse for what is being done around the country, what works and what has not worked. Shawn Marshall, who helped set up the main California CCA, Marin Clean Energy (MCE), was so pleased at the potential of CCAs to lower rates and move more to renewable energy sources, she founded LEAN in early 2011 to provide information and advice to all the states experimenting with this new entity. Marshall said LEAN is a membership organization that provides help for cities and municipalities working on CCAs and that, as a 501(c)3 organization, about 50 percent of its funding comes from membership dues and 50 percent from grants and donations. LEAN has a state-by-state listing of what it sees as successes and failures in implementing CCAs, and states that it "is committed to the accelerated expansion and competitive success of CCAs."
Massachusetts was the first state to experiment with CCAs in 1997. The first CCA, Cape Light Compact, was an aggregation of communities clustered around Cape Cod and Martha's Vineyard. I spoke at length with Compact administrator Maggie Downey, and she said that sometimes it isn't the best being first with the CCA concept. She said she thinks that the rest of the country could learn from its limitations, especially the limitations of Massachusetts' laws. Unlike in California where the MCE is allowed to buy electricity wholesale from multiple choices, Cape Light is restricted to buying its electricity retail from only one vendor. This made it harder to try to compete with the existing utility structure, but it also forced Cape Light to be more creative in its approach. Cape Light began a vigorous energy efficiency campaign because every kilowatt that was saved by conservation made the overall cost of electricity lower for its clients. Cape Light also created a separate energy cooperative called Cape & Vineyard Electric Cooperative (CVEC) to buy electricity wholesale, sign long-term contracts and work on renewable energy generation - all things that Cape Light was not allowed by state law to do. On its web site, Cape Light explains how it works with this separate co-op:
CVEC was formed in 2007 from a strategic planning process commissioned and undertaken by the Compact because the Compact and its members wanted to stabilize future electric rates for all its members and ratepayers through municipally owned renewable energy generation, and wholesale power supply contracts. At the time CVEC was formed, neither the Compact nor its member towns/counties were allowed under state law to develop and own electric generation projects and enter into long-term power purchase agreements. Electric cooperatives such as CVEC, on the other hand, were empowered by statute to do so.
The Compact and CVEC are separate public entities, though the Compact is a member of CVEC and holds a seat on CVEC's Board of Directors.
Despite having to work with the less than optimal legal situation, Cape Light has been able to make progress. According to Downey, since 2000, Cape Light has been able to beat the utility prices 65 percent of the time. This is important since Cape Light customers, like those in California, can choose to opt out of Cape Light and go back to their original utility. The CVEC is now working to create more renewable energy projects in its area. Other towns, such as Lowell, Massachusetts, are using the Cape Light template to create more CCAs in the state.  So in Massachusetts, the CCA experience is working. Cape Light's hybrid structure is accomplishing what California is doing, and Downey said she feels that Cape Light is finally getting to a level playing field in providing electricity to its customers.
Since 2000, Cape Light has been able to beat the utility prices 65 percent of the time.
Illinois has been embracing the CCA concept with breathtaking speed. According to LEAN, there has been an 18-month market shift of adding 3 million new customers to CCAs and now the state has 80 percent of its residential market. This happened despite the sometimes limiting requirement in Illinois that each municipality have a voter referendum, instead of approval by local elected officials as California and some other CCA states require. Chicago turned out to be the 800-pound gorilla in this mix when it voted to form its own CCA in November 2012. Chicago has now contracted with Integrys Energy Services to meet the CCA's needs. This 27-month contract has no energy produced from coal or nuclear power.
This gives Integrys a monopoly contract, but it is short-term, and Chicago is working with Integrys on producing a downtown solar energy project. However, after dropping the city's electric rate dramatically the first year,  Integrys is now announcing up to an 18 percent increase in its electricity prices. Integrys claims it will still beat the utility, Commonwealth Edison Company (ComEd), when Com Ed raises its rates in June. But this new development shows the growing pains with the CCA concept, especially since the city of Chicago - unlike the model in California - is buying on the retail market and from a sole source.
Ohio was another early starter on the CCA concept by authorizing its creation in 1999; but the goals for creating a CCA were primarily to save money for electric customers without a large push towards renewable energy.  The largest aggregator in the state, called Northeast Ohio Energy Council (NOPEC), has saved around $175 million for its customers since 2001. But Ohio is one of the largest coal-consumption states, so, according to LEAN's Marshall, it was slow to embrace the renewable energy part of CCAs. The city of Cincinnati, in late 2011, started its own aggregation program. Like Chicago, Cincinnati has to deal with buying electricity retail from one supplier. Like Massachusetts' Cape Light CCA, Cincinnati is working to bring in more renewable energy. The city negotiated with First Energy Solutions (FES) and is working through renewable energy credits toward having a 100 percent renewable energy contract. FES is also the main contractor for NOPEC, thus making it a major competitor to other utilities in the state.
Unlike California, where CCAs can have a mix of contracts with various companies, buy electricity on the wholesale market and retain control of the day-to-day management of their customers' needs, Ohio now has a contractor, FES, to the two largest CCAs, which sets up a monopoly for as long as the contract lasts.
As in all human endeavors where money and power are up for grabs, there will be problems with fraud, mismanagement and corruption. FES was caught by Public Utilities Commission of Ohio paying too much for renewable energy credits and now has to refund its Ohio customers $43 million.  NOPEC and the city of Cincinnati now have exclusive, multiyear contracts with FES. If they were able to buy wholesale with multiple sources and keep control of the daily operations, they would not be captured by this company's malfeasance.
New Jersey and Rhode Island also have passed CCA legislation and, according to LEAN's Marshall, their potential CCA programs are just now getting a foothold. New York, Utah and Maine are seriously looking at CCA legislation.
But there is a group that wants to stop this march towards CCAs as an alternative to traditional utilities and traditional fuels. Citizens Against Municipal Aggregation (CAMA) is a national group that says it is against cities handing their choice and power away to aggregation companies such as FES in Ohio and Integrys in Chicago. CAMA is worried that consumer choice is being manipulated to take the utility monopoly and give it to an aggregation company as a monopoly (albeit, for only the length of the contract).
CAMA is for as much deregulation as possible and, based on its web site's explanation of municipal aggregation, it seems mostly concerned with the retail market and the restrictions in some states about using only one energy company. It is not clear from its web site, which has no contact phone numbers, that CAMA would be as concerned with the California MCE model, which keeps control within the government entity to buy wholesale from multiple energy companies and manage the renewable energy mix and renewable energy projects.
But in its talking points, CAMA goes beyond being concerned over the Chicago style of CCAs (known in the East Coast and Midwest as municipal aggregation). They show that CAMA also wants complete deregulation for for-profit energy companies and against government, even local government work in communities to promote green energy projects. Here are two talking points that seem to show an agenda beyond a concern for local governments getting stuck in monopolistic contracts:
• BIG BROTHER IS WATCHING: In aggregated communities the consumer's personal energy usage will now be accessible by government agencies. Through smart meters and aggregation, they are now able to track energy usage, both on an individual and municipal level thereby monitoring what you're doing, making inroads into your daily life and setting the stage for further government intervention.
• SHOULD (LOCAL) GOVERNMENT BE ABLE TO ENTER THE MARKETPLACE IN A DEREGULATED STATE? - While our government is one of the best in the world, let us not forget that our individual voices made us what we are. We are still fighting all over the world for personal freedom, and the right to choose. Let us not be too eager to give up our choice and hand over more control to our (local) governments. Energy independence in America is being fueled by deregulation. Should local governments be involved in manipulating the FREE MARKET? Anytime BIG GOVERNMENT begins making choices unintended consequences arise. Government should be the referee not the player.  [Emphasis not added]
CAMA says it is a nonprofit and operates only on donations, but does not detail the sources of those donations. Since it does not say that you can take a tax deduction for donations, it is probably a 501(c)4 organization, which does not have to name donors, unlike a tax-deductible 501(c)3 organization.
Unless the CCA community is dedicated to the highest level of renewable energy possible, has a strong conservation effort, and invests in the local community to produce more renewable energy to be used by the CCA, the long-term view for getting control of our energy costs while building clean energy might not materialize.
Based on my research, I believe that the best CCAs are the ones that have, as in California, the right to buy retail energy with multiple contracts and are able to take some of their profits and invest them into local energy production that they, in turn, buy for their customers. Cities and other communities that have to give away the right to control their energy function and mix to a sole company can be stuck for years without the option of replacing a company that is not performing.
Also, when the main reason for establishing a CCA is to lower energy costs with a low commitment to renewable energy, there could be scenarios where you could lower costs using mainly or only fossil fuels, and you could encourage a situation where consumers have the incentive to use cheaper dirty electricity. Unless the CCA community is dedicated to the highest level of renewable energy possible, has a strong conservation effort, and invests in the local community to produce more renewable energy to be used by the CCA, the long-term view for getting control of our energy costs while building clean energy might not materialize. Each one of the successful CCAs claims to have that in its goals, but the background rules and set-up of California CCAs seems to encourage all the incentives for the long-term view of getting away from for-profit energy with its proclivity for dirty fossil fuels.