Five months from now, Sonoma County intends to launch its program to become the power supplier to 220,000 local homes and businesses, displacing Pacific Gas and Electric Co. from its position of energy dominance.
At stake in the short term is up to $170 million in annual revenue.
County supervisors this week begin a series of rapid decisions to implement a program that assumes customers – who can opt out – prefer a program designed to rely more heavily on renewable energy and shrink the county’s carbon footprint.
Questions remain about the proportion of actual renewable energy supplied – and the amount generated locally – versus its purchase through energy credits. But the cost of the program to customers will be the focus for decision makers.
“It’s rates, rates, rates,” said David Rabbitt, the county Board of Supervisors chairman. “For me, it’s always the amount of the check you write to PG&E, that’s what I want to know.”
As part of their campaign, county officials last week unveiled potential customer rates they said would make their electricity prices competitive with, if not cheaper than, PG&E rates.
Monthly bills in the first year could range from $1.73 less to $1.02 more – or 1.8 percent less to 1.1 percent more – than a PG&E bill for a 2,000-square-foot single-family home, according to county projections. For a mid-sized commercial customer such as a restaurant, large convenience or retail store, the monthly bill could be $80 less to $13 more – 3.1 percent less to 0.5 percent more.
The rate comparison drew an immediate challenge from PG&E officials, who called the county’s calculation of their rates inaccurate. Program supporters voiced hope the data would lend further momentum to the effort.
On its face, the public power immediately would be 65 percent greener than PG&E’s. It would be drawn from a portfolio with a third of its sources in renewable power – wind, solar, geothermal, biomass and small hydroelectric projects – versus the roughly 20 percent renewable share that would come next year from PG&E.
But critics question that comparison.
About half of the county’s renewable supply would come from energy credits that some critics say amount to greenwashing, allowing a user to claim renewable sources while actually getting standard-sourced power from the grid.
The public power agency has been on the drawing board of advocates for years and under consideration by the county since March 2011. The rate disclosure sets the stage for decisions that would culminate with the award of a power-supply contract by September and delivery to customers starting Jan. 1.
County officials said they base their projected rates on the most promising five or six of 11 bids submitted by entities seeking to sell electricity to the so-called Sonoma Clean Power program.
Most bidders are large national and multinational energy suppliers, including the operator of The Geysers geothermal field along the Sonoma-Lake county border. The county has refused to publicly disclose the contents of the bids, contending it could undermine their negotiation with an eventual winning bidder.
The Board of Supervisors on Tuesday is set to approve work that would lead to selection of that bidder, and seek to enlist cities in the program. Municipalities are being asked to decide by June 30 whether they’ll join for next year and allow the program to serve their residents. Healdsburg is not part of the mix, because it has its own municipal utility.
The county proposes a three-year rollout to capture 80 percent of PG&E’s customers. Customers would be automatically enrolled in the new power agency, but could opt out. Billing, metering and transmission would remain with PG&E.
County representatives said creation of the power agency is not a certainty, but the proposal appears to have solid majority support on the Board of Supervisors, now the lone governing entity. And Supervisor Efren Carrillo, a strong supporter, echoed advocates’ growing confidence in public power.
“We’re not in this to fail,” Carrillo said. “I want to find a way to make it work. If it’s rates, if it’s education, if it’s the advocacy. There is a way to make it work.”
The plan is based on the proposition that the county could immediately supply a higher share of renewable power, quickly open up the electrical grid to more excess energy from community sources such as rooftop solar panels and plow money from customer bills into local projects that generate clean electricity and provide jobs.
The county projects an annual net income of about $10 million by 2017. Instead of that money going to PG&E shareholder dividends, it could support local generation, help stabilize customer rates and enable wider energy efficiency efforts, advocates say.
Supporters, including environmental, business and labor interests, see the program as transformational.
“There are so many players in this county that want to localize our energy resources,” said Ann Hancock, executive director of the Santa Rosa-based Climate Protection Campaign. She cited vendors, contractors, building and property owners. “It’s a game-changing platform,” she said.
But critics have noted that the prospects for local large-scale power generation are still uncharted and potentially costly, with risks that could expose ratepayers and taxpayers to a long-term financial burden.
The county has struggled to maintain core services, including roads and parks, and has outsourced a number of services to the private sector in recent years. So why, fiscal watchdogs ask, should it go toe-to-toe with a utility that is in its second century in the energy supply business and has more than $15 billion in annual revenue?
“Why should we have confidence the county management and supervisors can pull this off and compete with PG&E when they can’t solve our pension and roads problems?” the advocacy group New Sonoma asked in a recent questionnaire to the Board of Supervisors. One of its founders is Ken Churchill, a Santa Rosa winemaker and former solar energy firm owner who has been a vocal critic of the county on pension and power issues.
Allowed by 2002 law
The debate reflects the high stakes involved in the public power proposal. It stems from a 2002 state law that grants local governments the ability to buy or develop power for sale to homes and businesses. The programs are most prevalent in Illinois, Ohio and Massachusetts.
So far the only active program in California is in Marin County. San Francisco’s controversial effort remains on the launch pad, while at least four other local governments consider their own programs.
PG&E has battled the programs in the past, sinking $46 million into a failed 2010 ballot measure that would have limited them. Top utility officials have since pledged their cooperation, though recent steps suggest PG&E could launch a more active marketing role in areas where public power programs are surfacing.
In Marin County, PG&E has lost three-quarters of the power-generation business to the upstart county agency.
“We do support local governments that are trying to develop the community choice aggregation option,” said PG&E spokeswoman Brittany McKannay. “We also want to make sure that our customers have the information they need to decide on their energy options.”
For the county, the financial investment already is significant. By fall, the county Water Agency, which is spearheading the proposal, expects to have spent roughly $1.2 million on studies, surveys, staff time and consultants. That includes a $250,000 contract for marketing and public outreach that the Board of Supervisors is set to approve Tuesday.
The completed studies have three main findings:
A typical customer under a county program could pay on average $4 to $10 more per month over a 20-year period for power provided by the county versus power supplied by PG&E.
Three-quarters or more of the 4,344 county residents and 990 businesses polled supported a locally controlled electricity portfolio, efforts to cut greenhouse-gas emissions and having a choice in how their electricity is generated.
Nearly 60 percent of residents and two-thirds of businesses surveyed said they were either unwilling to pay much more, or anything additional, for renewable power supplied by a local provider.
The results led to further outreach to businesses, especially. It also spurred public pledges by county supervisors to make any final decision with rates foremost in mind. Supervisor Mike McGuire last year called them the “elephant in the room.”
Projections await deal
County representatives have conceded that they will not have longer-range projections beyond the first-year rate estimates until a contract is reached.
“As this moves forward, there probably will be some projections as to what future rates would be, but not at this time,” said John Dalessi, a consultant for both the Sonoma and Marin power programs.
After three years of operation, the Marin County agency’s rates, on average, are slightly higher than PG&E’s for residential customers and slightly lower for commercial users.
Since 2005, the annual average increase in power generation rates for PG&E has been 3.5 percent, utility filings show. County consultants said they were confident a public program could compete with that track record.
Fiscal watchdogs remain concerned about liabilities the county or cities could face as partners in the joint-powers agency that would oversee the program.
The agency, the Sonoma Clean Power Authority, would borrow up to $22 million over the three-year rollout: a $2.5 million line of credit for startup costs and $19.5 million in bridge financing for power purchases. County officials said they are negotiating with First Community Bank.
But what if the bank or the eventual power supplier requires taxpayers to back up the borrowing or the contract through general fund money, fiscal watchdogs have asked.
“That’s our concern, and we don’t know that answer yet,” said Dan Drummond, a Santa Rosa attorney and executive director of the Sonoma County Taxpayers’ Association.
County officials said only the $2.5 million line of credit would need a guarantee, and for that they most likely would look to the $1.76 billion county treasury, shared by most public entities in the county, including schools and service districts.
Revenue from customer bills would serve as collateral for the power-purchase bridge financing.
And the risk of the program failing would be borne by the power supplier, said Cordel Stillman, deputy chief engineer for the county Water Agency and the lead staff member on the proposal. No guarantees would be made outside of the joint-powers agency, which acts as a financial firewall, Stillman said.
“We’re confident we’re insulated from that risk,” he said. “We’re getting the rates, which look really good, with them getting the understanding that they’re taking the risk.”
100% renewable option
The county plans to ramp up the renewable share of its energy portfolio from 33 percent to 50 percent in 2017, if the rate structure allows – renewable energy is generally more expensive than conventional sources. It also would offer a voluntary 100 percent renewable portfolio at a higher monthly premium; a similar proposal by PG&E is pending before the California Public Utilities Commission.
For the first several years under the county program, about half of the renewable energy would be “delivered” or “bundled” energy – electricity purchased from a renewable source and delivered to the county’s customers. Until a final contract is signed, county officials said they won’t know where that power will come from.
The purchase of offsets, called renewable energy credits or certificates, would allow the county to claim green status for the other half of its renewable power while actually getting it off the grid from standard sources, including fossil-fuel-based suppliers.
The credits are purchased by companies and governments, through brokers, from energy producers that have unsold green power. Some critics have called the credits “empty bragging rights” that don’t spur investment in renewable energy like contracts for actual delivered power.
Advocates for local energy generation have not objected to the credits, which would be used in about the same proportion as the Marin County program.
Hancock, the Climate Protection Campaign director, called the credits a “transitional tool.” But her group and others have voiced concerns that a short-term focus on cheaper out-of-county sources leaves local generation projects in the lurch.
“I understand that the first thing they need to do is get a power supply and make that competitive,” said Marlene Soiland, a representative of Sonoma County Alliance, the business coalition, and president of Soiland Management Co., the Santa Rosa firm that oversees various development and real estate businesses in the Soiland family.
“I’d like to see the local supply be a higher priority. That’s what I’ve heard from the business community,” Soiland said.
Aside from a 20-megawatt, $100 million solar-panel system planned for 50 acres at Charles M. Schulz-Sonoma County Airport, county officials were not able to specify last week what other projects they had on the drawing board. They cited the opportunity to purchase power from household and commercial projects, known as a “distributed” or community-scale energy grid.
The higher potential costs for customers of that power and the risk of taking on too much debt in an overly ambitious startup remain a crucial financial and political concern, county officials conceded.
“We can’t just go up willy-nilly from 33 percent,” Stillman said.
But with an estimated 355 megawatts needed at full rollout, and endorsements from some business, environmental and labor interests hanging in the balance, advocates said they will continue to push for a quicker transition.
“How are we planning, in a methodical way, to increase the use of renewable local resources?” said Woody Hastings, renewable energy implementation manager for the Climate Protection Campaign. “We’ve heard some of the elected officials asking for the same thing. We don’t have the details on that.”
11 companies submit bids for Sonoma County power project
Sonoma County has received bids from 11 firms vying to be the electricity supplier for the proposed county power agency. It has refused to publicly reveal the bids, but said it has identified a “core group” of five or six.
Calpine Corp., the Houston-based operator of The Geysers geothermal field.
Shell Energy North America, which has the contract for the Marin County power agency.
Iberdrola, a multi-national electric utility company based in Spain, with operations throughout New England and New York state.
Noble Americas Energy Solutions, a large U.S. energy retailer based in San Diego.
NRG Energy, based in Houston and Princeton, N.J., one of the country’s largest power producers and retailers.
Greensparc Energy Advisors, a San Ramon- and Sacramento-based power development and management firm.
Direct Energy, an energy retailer based in Canada and the U.S., a subsidiary of the British multinational corporation Centrica.
Promet Energy Partners, a natural gas and electricity supplier based in the Midwest.
ConEdison Solutions, based in Valhalla, N.Y., a subsidiary of Consolidated Edison.
Constellation, a power and natural gas supplier and subsidiary of Exelon, the Chicago energy producer, trader and distributor.
Plumas Rural Services, a nonprofit organization in northeastern California.
Source: County of Sonoma
Sonoma County, PG&E at odds over rate calculations
The launch of Sonoma County’s public power plan has long hinged on how its rates would compete with PG&E.
The county now says it has an idea of what an average residential and commercial customer would pay per month under its program. But its analysis of how those costs would stack up against PG&E already has triggered a dispute.
PG&E officials say the county gave an inaccurate average calculation of the utility’s 2013 rates, resulting in a higher PG&E bill than what they said a typical customer might pay.
“We know what our rates are,” said Jonathan Marshall, a PG&E spokesman. “Unfortunately, they don’t understand our rate structure, apparently.”
County officials and consultants with decades in the energy business defended their figures, which are based on annual rate estimates submitted by PG&E to the California Public Utilities Commission.
“We’re comparing apples to apples according to their submissions to the CPUC,” said Cordel Stillman, deputy chief engineer with the county’s Water Agency, which is spearheading the proposal.
The difference boils down to alternate ways of computing an average customer’s bill, composed mainly of electricity generation charges and delivery charges.
The county used a base rate on the delivery side that is an average for all the different price tiers that apply based on the amount of power used.
PG&E says its rate is more accurate because it factors in energy use at each of the different tiers.
While the county says an average residential PG&E bill for 2013 is $95.17, PG&E says it is $91.60.
The difference skews the rate comparison, PG&E officials said.
However, the point may be moot because PG&E still would be responsible for electricity delivery under a county program. If those costs are $3.50 less under PG&E they would also be so under the county program, county officials noted.
“In terms of the competitive comparison, it’s irrelevant,” said John Dalessi, an energy consultant to the Sonoma and Marin county power programs and a former manager at Southern California Edison. “It (the delivery charge) is going to be the same whether Sonoma Clean Power is serving the customer or PG&E is doing it. Hopefully people understand that.”
KEY DECISIONS ON POWER
Tuesday: Board of Supervisors considers potential rates, financing plan, work to enlist cities, $250,000 marketing contract, payback plan for $1.2 million in Water Agency expenses
May-June: County staff narrows field of potential power suppliers to two to four companies
June 30: Deadline for cities to decide on participation for first year
July: Receive final offers from top power supply candidates
August: Negotiations with top candidate
September: Present final contract to Sonoma Clean Power Authority (currently the Board of Supervisors) for approval; submit it to state Public Utilities Commission
November: Begin opt-out notices to customers
January: Start of three-year rollout to homes and businesses
Source: County of Sonoma