The Contra Costa Bee is an on-line medium led by Bill Gram-Reefer, editor and publisher, whose politics are hard to define, a mishmash of libertarian, Republican, anti-Republican and religious right. When he ran for Contra Costa County Supervisor in 2008, he described his political philosophy:
My Political Philosophy is generally in the tradition and community of thought and worldwide scholarship and action centered around the Religious and Structural Pluralism first articulated by Abraham Kuyper in his Stone Lectures delivered at Princeton at the turn of the Century. This tradition has been further developed and demonstrated in a U.S. context via policy work coming out of Christian thought leader organizations including but not limited to the Center for Public Justice (http://cpjustice.org), based in Annapolis, MD.
Wendy Lack, a writer for Gram-Reefer’s blog, Contra Costa Bee, wrote on February 24, “Community Choice Electricity in Contra Costa County a bad choice.” She then followed up with the only comment posted to her own article:
The City of Richmond joined the Marin Clean Energy JPA in 2012. This is one in a long line of reckless decisions that are leading to the city’s bankruptcy.
Today’s Contra Costa Times reports Richmond is considering placing five — count ’em, 5 — new tax measures on the November 2016 ballot: http://bayareane.ws/1TT9v1B.
Other cities will benefit from careful consideration of the risks associated with joining energy aggregation JPAs. Following Richmond’s example isn’t recommended.
I don’t know if anyone actually reads the Bee, but in case they do, I want to set the record straight. What is going on here is that three cities in Contra Costa, Richmond, El Cerrito and San Pablo, have already joined MCE and have reaped huge benefits, including saving millions of dollars and taking a gigantic dent out of greenhouse gases. Other cities in Contra Costa, and the County itself, are considering whether to join MCE or start their own Contra Costa CCA (Consumer Choice Aggregation).
It will probably ruin Wendy’s day when I tell her that Richmond is not close to bankruptcy and that Richmond electricity ratepayers subscribed to MCE saved $4 million since 2013, while those who remained subscribed to PG&E saved nothing.
I want to address Wendy’s comments about CCAs and MCE in particular.
Real Benefits vs. Hypothetical Risks
When it comes to energy, consumers in Contra Costa County would be wise to ask themselves the following basic questions:
- Are competitive markets preferable to monopolies?
- Are more options better than fewer (i.e., for renewable resource content, efficiency programs, project development, and public participation)?
- Are local control and democratic governance values shared by most members of the rate-paying public?
- Is the status quo worth preserving (i.e, is this the best we can do in terms of rate competitiveness, pollution reduction, and local job creation)?
- Why have some Contra Costa cities become communities of energy choice, while others remain locked in a state of ‘choicelessness’?
If you answered ‘Yes’ to the first three questions, ‘No’ to #4, and scratched your head at #5, your responses are probably identical to the vast majority of people who pay an energy bill.
Energy policy can be complex, but community choice energy (CCE) is not complicated: local cities and counties join together to create independent public agencies that compete with private, investor-owned utilities (like PG&E) to offer consumers a wider variety of energy service options. These options can include energy supplied by more renewable resources; competitive (i.e., lower) electricity rates; innovative efficiency programs; and streamlined development opportunities for local energy entrepreneurs.
Which leads to one more question: Why is a Contra Costa newspaper publishing editorials about hypothetical failures in the local energy economy, when there are demonstrable successes to report in Richmond, San Pablo, El Cerrito and elsewhere?
In her February 24 op-ed (“Community Choice Electricity in Contra Costa County a Bad Choice”), Ms. Wendy Lack perseverates over the “big risk” CCE programs supposedly represent to cities and counties. Her analysis, however, is ahistorical; it substitutes hollow hyperbole for hard facts. Indeed, the editorial reads as if it were published six years ago—before MCE, Sonoma Clean Power, and numerous other communities had proven CCE could deliver impressive public benefits—rather than at a time when CCE is quickly gaining popularity throughout California and the United States.
Ms. Lack’s editorial is so rife with inaccuracies it is difficult to know where to begin. One consistent theme, however, is that local governments have no place in the energy businesses. This is a strange position to take in a State where approximately one-fifth of all electricity consumers are served by a municipal utility (i.e., a utility run by a local government agency). These include the Sacramento Municipal Utility District, Palo Alto Utilities, Alameda Municipal Power, Los Angeles Department of Water and Power, San Francisco Public Utility Commission, and many others. Municipal utilities like SMUD have been in the power business for more than a century; and they have generally offered consumers lower rates (approximately 20% lower, on average) than their private counterparts, while also providing a less carbon-intensive energy supply.
Current CCEs, like MCE and Sonoma Clean Power, have continued the tradition of providing electricity customers superior products (i.e., more renewable energy) at lower rates. I know this because my own community (the City of Richmond) has experienced these benefits first-hand. In 2014-2015, MCE customers collectively saved about $15 million. As the single largest city within MCE’s service area (not to mention the most powerful vote on its Board of Directors), Richmond’s electricity consumers collectively saved about $2.4 million. This includes savings to residences, businesses, local non-profits, public schools, houses of worship, et. al. The City itself has saved about $100,000 annually on its own electric accounts since enrolling with MCE in 2013.
Similar savings have been reported by other communities within MCE’s service area—which is why those that initially opted out due to cost concerns have been steadily opting back into the program.
One of the reasons MCE and other CCEs can offer such competitive rates is precisely because they are public entities. Unlike PG&E, MCE does not have shareholders to whom it must pay a profit. Rather than turning ratepayer dollars into shareholder dividends, MCE can reinvest its net revenues in keeping rates low, building local projects, and launching innovative programs customized to its community members. Conversely, most PG&E shareholders probably do not live within the City of Richmond, nor do they necessarily have a stake in how our community addresses its many dynamic challenges.
Meanwhile, cities and counties that are members of a CCE are insulated from any financial liabilities borne by the agency. Contrary to Ms. Lack’s characterization, CCE’s do not rely on tax dollars; they rely on ratepayer dollars, just like PG&E. Moreover, the Joint Powers Authority agreements cities sign when they join MCE creates a firewall between the liabilities and revenues of the public agency, and those of its member-communities.
Similarly, when it comes to the renewable energy content offered by CCEs, the evidence is clear: Public agencies, like MCE and SCP, provide consumers access to substantially more renewable energy. MCE customers purchase 56% renewable energy by default; while those who wish to purchase 100% renewable energy may “opt-UP” and do so through one of two other MCE service options (Deep Green and Local Sol). Critics of community choice programs routinely characterize Renewable Energy Certificates (RECs) as a form of “greenwashing,” but this too is contradicted by historical fact. RECs are ubiquitous in the energy economy and have been for years; they only became controversial when CCEs began using them. PG&E and virtually all other energy utilities use RECs, and their usage has been validated by numerous regulatory agencies, including the Environmental Protection Agency. Even if you opt out of MCE, you won’t likely be avoiding RECs anytime soon.
Moreover, as of this year, unbundled RECs (the type which Ms. Lack is most likely referencing) account for only 3% of MCE’s total energy supply. Meanwhile, one of the largest solar arrays in Northern California is scheduled for construction in Richmond this year—thanks to MCE and its partners in the City. About a dozen other local projects are in various stages of development in the Bay Area, none of which would have been built without the wholesale purchasing power of a local public agency, like MCE. Given these facts, the myopic obsession of trying to discredit a widely-used accounting mechanism for renewable energy (i.e., RECs) reveals the issues are more about petty politics than sound public policy.
Lastly, with community choice energy, every customer has the opportunity to decide which option is best for him or her. To paraphrase Cesar Chavez, customers of MCE can ‘vote with their dollars,’ and choose how they want the money they spend on energy to be invested. To date, thousands of MCE customers have opted out of the program; thousands have also opted-UP to purchase 100% renewable energy; and consumers throughout California will continue to exercise the new energy options CCEs are creating for them. These options—like the people who have been exercising them—are not hypothetical. They are real. Which is a lot more than one can say about the assertions made in Ms. Lack’s editorial.
Tom Butt, Mayor, City of Richmond
Vice-chair, MCE Governing Board
Community Choice Electricity in Contra Costa County a bad choice
February 24, 2016 by Wendy Lack 1 Comment
Sometimes government pursues bad ideas.[i] Usually the ideas start out bad and then it gets worse. That’s the case with Contra Costa’s interest in “Community Choice” electricity.
Contra Costa County is broke. No, to be accurate, it’s actually beyond broke: The County spends more than it takes in, and it owes more than it’s worth.
Now Contra Costa wants to take another big risk with a lot of money – money it doesn’t have but will borrow from future generations. Contra Costa County wants to get into the energy business because everyone knows high-risk business ventures are the best cure for money problems.
Cheerily-named “Community Choice” electricity programs are new to California, with three currently operational: Marin Clean Energy (2010), Sonoma Clean Power (2014) and Lancaster Choice Energy (2015). San Francisco’s Clean Power SF is expected to launch its program later in this year.
Here’s how it works. Local government agencies form a new, semi-invisible government agency to purchase and sell electricity. The local utility company, such as PG&E, provides transmission, distribution, and customer billing services for a fee paid by the new agency’s customers. All people who live and do business in the area become customers of the new agency unless they ask to “opt out.”
The new agency must compete with the local utility company for customers. Government can make everyone their customer for a moment, but then they have to keep them. So what’s their pitch? Is the energy they’re selling greener than, say, PG&E? Is it cheaper? Is it managed by superior experts in the energy industry?
That’s a big nope . . . three nopes, to be precise.
Community Choice energy isn’t necessarily greener.
Most electricity is made from fossil fuels because it’s cheap, reliable and efficient. Wind and solar power are intermittent, so fossil fuels are needed to ensure 24/7 power. In fact, generating more wind and solar energy actually increases demand for fossil fuels.
Advocates of “CCA” (community choice aggregation) programs say their energy is greener, but that’s not always the case. CCAs often buy renewable energy credits to “greenwash” fossil fuel energy. They buy “renewable energy credits” and, like water into wine, this abracadabra makes fossil fuel energy greeny clean. This lowers costs so CCAs can compete on price with utility companies. But the dirty little secret is some CCA energy is green-in-name-only.
So if “Community Choice” energy isn’t as green as we’re led to believe, certainly it must be cheaper. But, alas, CCAs can’t promise cheaper rates.
Marin Clean Energy (MCE) has been operational since 2010. Initially, rates for MCE’s cheapest electricity option were slightly less than PG&E. Today MCE offers three options, all of which cost more, on average, than PG&E. MCE estimates its customers pay a monthly average of $4 to $32 more than PG&E, with the “cleanest” energy options the most expensive.
Simplistic CCA Propaganda fooled voters as Sonoma Clean Power now has non-cancelable power purchase commitments of $505.3 million for energy and power purchase agreements thru 2026. This equates to more than $56 million for each of SCP’s 9 member agencies.
Sonoma Clean Power (SCP), established in 2014, offers customers two options. Currently its basic option costs about $7/month less than PG&E, while its all-renewable option costs about $11/month more than PG&E.
So if it’s not greener and it’s not cheaper, then perhaps the people running these agencies are more knowledgeable. Maybe they’re more innovative and competent than investor-owned utility companies like PG&E, so they deserve our trust to make our energy future bright.
That sales pitch falls flat because it turns out they’re actually less knowledgeable about the energy business than their non-government competitors.
Investor-owned utility companies like PG&E have decades of experience in procuring low-cost, reliable electricity. Their governing board members have industry experience.
By comparison, “Community Choice” agencies are relatively inexperienced and their governing boards have no industry background to inform decisions.
While Community Choice is new, government-run electric utilities are not. The Association of Bay Area Governments (ABAG) suspended its Electrical Aggregation Program in 2001, characterizing the short-lived, multi-agency program a “risky venture” due to market and regulatory uncertainty.
Less than two years ago, the City of Hercules sold its Hercules Municipal Utility following what was dubbed “a decade-long, multimillion-dollar misadventure.” Overstated growth projections, unrealized profits, and heavy debt contributed to the electricity utility’s failure, leading to its sale to PG&E in 2014 amid a firestorm of public outrage.
The Northern California Power Agency (NCPA) is a Joint Powers Agency established in 1968 to sell power from its geothermal and hydroelectric facilities. Its 15 member agencies include the Port of Oakland, BART, the cities of Alameda, Palo Alto and Santa Clara, in addition to agencies in northern California. NCPA’s finances are strained due to heavy debt service requirements for more than $835 million in long-term debt.
Local elected officials serving on CCA governing boards are good at getting elected and running their cities; they’re not good at competing in high-risk industries over the long term. Experience proves they’re decidedly bad at it.
At the end of the day, Community Choice Agencies offer nothing to consumers. They simply cannot compete, long-term, with local utility companies. Facts don’t deter special interest groups that worship at the altar of Climate Change, profit from government contracts and urge government expansion with tireless zeal. Good sense demands that public officials resist the temptation to jump on this bandwagon.
Energy is a long-term business. Procurement contracts are non-cancellable and can span 30-40 years into the future. Cities that join CCAs are on the hook for large, long-term financial obligations. When things turn south (as they surely will), member agencies are stuck because they cannot afford to exit the program.
For example, as of March 31, 2015 Marin Clean Energy had outstanding non-cancelable power purchase commitments of approximately $886.5 million for energy and related services through October 31, 2041. This equates to more than $52 million for each of MCE’s 17 members, which include the Contra Costa cities of El Cerrito, Richmond, and San Pablo.
Community Choice Agency power is not not cheaper and is not greener, but only another government failure waiting to happen.
As of June 30, 2015, Sonoma Clean Power had non-cancelable power purchase related commitments of approximately $505.3 million for energy that has not yet been provided under power purchase agreements that continue to December 31, 2026. This equates to more than $56 million for each of SCP’s 9 member agencies.
Once a county or city government gets into the energy business they can’t get out, short of losing their shirts and abandoning the enterprise altogether, as happened in Hercules. CCAs are destined to become just another government money pit that will increase the burden of government debt our children and grandchildren must pay for such obligations as Contra Costa County’s $1.7 billion in unfunded pension and retiree healthcare promises.
Why add more debt for the sake of go-along-to-get-along political correctness?
Today we’re surrounded by local agencies unable to deliver on service commitments due to scandalously bad decisions – such as BART forgetting to save for the inevitable replacement of its train cars.
State law allows cities and counties to generate, purchase and sell electricity – but that doesn’t mean they should. Cities and counties already have enough to do. The energy business is volatile, competitive and best left to private firms whose investors choose to take risks with their money.
Whatever decisions government makes, you and I go along for the ride. But . . . we have the keys! And the government can’t drive drunk without our consent.
You and I aren’t stupid. We’re also not irresponsible. So when local officials approach us with slurred, sweet talk saying, “C’mon on, baby, let’s go for a ride. Relax, I’m fine. Don’t worry so much. Let’s get out of here” – We need to grasp those car keys tighter and tell them to go home and sleep it off. We’ll talk when they’re sober, clear-headed and ready to face reality.
Read more about Community Choice here.
[i] The Law of Bad Ideas: Bad ideas don’t go away until they have been tried and failed multiple times, and generally not even then.
– Corollary One: Left alone, bad ideas get worse over time.
– Corollary Two: The overwhelming desire to implement bad ideas leads to compromises guaranteed to make things worse.
– Corollary Three: Those in positions of political power not only have the worst ideas, they also have the means to see those ideas are implemented.
– Corollary Four: The worse the idea, the more likely it is to be embraced by academia and political opportunists.
– Corollary Five: No politically acceptable idea is so bad it cannot be made worse.
Source: Mike Shedlock, http://bit.ly/1JMSmfo