Marin Clean Energy’s plan is to deliver 50 percent renewable energy—without raising rates.
Pity the poor energy consumer. We open the bill each month knowing there’s little we can do about the steadily rising rates— 43 percent since 2000—or the fact that our energy mostly comes from a faraway
combination of CO2-generating natural gas plants; environment-busting, large hydroelectric plants; and an aging nuclear power plant. PG&E’s renewable energy portfolio is currently only 14 percent, and the utility is facing a state-mandated goal of 20 percent by 2010.
For Marin County, that doesn’t sit well. The county has set its own goal of 50 percent renewable energy by 2017. Moreover, local businesses are concerned about fluctuating—but mostly rising—fossil fuel prices. If only Marinites could take “power” over their energy destiny.
It turns out they can, thanks to a 2002 law sponsored by then-Assemblymember Carole Migden. AB 117 allows “community choice aggregation” (CCA), which enables communities to buy power directly from energy suppliers and deliver it through the existing PG&E power grid. And Marin Clean Energy (MCE), a group of Marin County officials and business leaders, hopes to do just that.
Community choice aggregation—how it works
In 2003, the Marin Municipal Water District (MMWD), the North Marin Water District and the county board of supervisors funded the first feasibility analysis of the CCA policy; County supervisor Charles McGlashan sat on the board of the MMWD at the time. In 2004, McGlashan teamed up with Supervisor Harold Brown and other Marin County leaders to explore the possibility of establishing a CCA in Marin County.
“Local governments would join together in a joint power authority and purchase power for the people that live in their communities,” explains Dawn Weisz, a principle planner with the County of Marin and project manager for the MCE program, “Over time, we’d be owning the underlying assets that generate power, and because those assets would be renewable energy sources, we could keep costs from fluctuating as they do now with the costs of gas and other fossil fuels. This is a much more conservative approach that would stabilize costs for the customers.”
What does Marin Clean Energy hope to accomplish? The potential benefits are to provide electricity to customers at a lower and more stable cost; local control over energy resources; greater use of renewable energy; and, down the road, business opportunities for local green energy suppliers.
Weisz stresses that a CCA isn’t a municipal utility, unlike the Sacramento Municipal Utility District, which owns its electricity infrastructure. Such districts gained attention during the 2001 California energy crisis because they maintained lower rates and reliable service while PG&E was delivering brownouts and skyrocketing rates.
With a CCA such as Marin Clean Energy, electricity would still arrive on power lines owned and maintained by PG&E. Customers would be billed through PG&E, and, if the wind blows a power line down, PG&E would still come out and fix it. The only thing PG&E wouldn’t provide is the electricity itself. (It will, however still be the provider for natural gas.)
MCE will offer two choices to customers. The “light green” option of 50 percent green energy (which would be priced comparably to what customers are currently paying PG&E) or the “deep green” option—100 percent green energy—which would charge an additional 8 to 10 percent premium. Low-income residents, such as those in the CARE (California Alternate Rates for Energy) program, would automatically be enrolled as light green customers and receive discounts just as they do with PG&E. Customers (that is, all PG&E consumers who live within a community that joins the CCA) will also be able to opt out of the program entirely and stick with PG&E. If they do this within two months of the program’s startup, there will be no fee to opt out.
Community choice
Several other states approved community choice aggregation before California did. A look at some of the resulting CCAs suggests that community choice can be cost effective.
For example, customers of the Cape Light Compact, a Massachusetts CCA, saved between $3.50 and $7 a month. Massachusetts enacted “Community Choice Rule” in 1997.
In Ohio, the second state to enact CCA legislation, more than 600,000 customers took part in community choice aggregation. The city of Parma’s CCA, enacted in 2000, saves households $60 to $75 per year on average. Possibly the largest CCA in America, the Northeast Ohio Public Energy Council, generated savings to customers ranging from 1 percent to 15 percent, for a total of $10 million over the life of its 2001 to 2006 contract.
California’s first CCA, the San Joaquin Valley Power Authority, is expected to go online this fall. The consortium of valley towns has negotiated an eight-year contract with Citigroup Energy that stipulates rates 5 percent below PG&E rates. Rates may rise no more than 2 percent a year. Closer to home, San Francisco’s Community Choice Implementation Plan was passed by the Board of Supervisors in June 2007 and is getting ready to issue requests for proposals in the coming months. Bonds have already been approved for creating 360 megawatts of power locally (107 of those are from conservation and efficiency.) According to Paul Fenn, co-author of the implementation plan, San Franciscans could be participating in San Francisco community choice aggregation in as little as nine months, with local renewable power going online in about four years.
For San Joaquin Valley customers, the issues are rate stability and reliability of supply. “They aren’t a bunch of tree-huggers down there,” says McGlashan. “These guys are ranchers and business people who want to [join a CCA] to save money and have more reliable power than the utilities can deliver, so they’re going to do it for themselves.” The SJVPA plans to build its own gas-fired utility in the region to eventually generate more energy locally.
But for Marin County, the motives are decidedly green. Community choice lets the power authority contract directly with suppliers to buy far more renewable energy than PG&E is offering. Moreover, under a CCA, the county will have an incentive—and the funds, if all goes well—to begin producing renewable energy locally.
Perhaps the strongest initial support for a CCA came from the largest power user in Marin County—the Marin Municipal Water District (MMWD). Back in 2003, when McGlashan was on the MMWD board of directors, he felt strongly that MMWD’s energy needs should be met with renewable resources, preferably locally controlled ones.
Paul Helliker, MMWD general manager, agrees. “We have a greenhouse emissions reduction target, which matches the county’s, and the biggest source of greenhouse gas emissions from our operation is electricity,” he says. “We don’t have the ability to go out and buy renewable power directly; all we can do is install renewable facilities at our locations, some of which aren’t suitable for renewable power.”
MMWD is planning to install solar panels on three of its facilities, but it won’t be enough to meet all of its energy needs.
The county joined with MMWD and the North Marin Water District to bankroll a draft feasibility study by Navigant Consulting, which has also conducted CCA feasibility studies for a host of other Bay Area cities. The final study was released in 2005.
Initially, says Weisz, “power would come from outside Marin.” But where would all that renewable energy come from? After all, PG&E still doesn’t supply customers with more than 14 percent renewable energy. According to MCE research, there’s enough renewable energy available to meet the CCA’s projected short-term needs.
What if energy prices go up in the near future? The business plan requires MCE to contract with a third party supplier, such as Citigroup Energy, for a guaranteed rate during the first four years, so MCE won’t shoulder the risk of unexpectedly higher energy costs. Within that time period, MCE would use revenues generated to build and contract for local renewable resources such as solar, wind and biomass. Incentives would also be developed for residents who wish to add solar rooftops or wind turbines.
Envisioning the future
McGlashan, an environmental consultant and long-time proponent of sustainability, is excited about local power’s potential benefits for business.
“The most exciting aspect of this proposal is that we could potentially create green jobs and local economic benefits by doing this,” he says. The $150-million-a-year revenue from the rate payers for electricity can be bonded, using the tax-exempt financing power of government, and invested in local, renewable power generation.
“So, for example, we can build local windmills and methane digesters for our dairy farmers. We can put solar panels on top of buildings and parking lots—all using the tax exempt financing costs that government enjoys.
“For the first time ever, local governments could be in the business of co-investing with the private sector in building these renewable power assets. As you can imagine, if we do some of that work in Marin and Sonoma counties, there’s a great local economic benefit to our community members. That’s why I’m so intrigued about this. We could create a lot more jobs in our area.”
Winning over businesses to a government program is, of course, a challenge. But McGlashan has enlisted an impressive level of local business interest in the MCE business plan. MCE’s Stakeholder Committee includes Autodesk, Fireman’s Fund, the Buck Institute, Straus Family Creamery, Northgate Village Mall, SPG Solar and many others. Being green is an important marketing strategy for today’s businesses.
Autodesk can boast that it’s already paying extra for renewable energy credits to offset greenhouse gas emissions from the PG&E mix. Fireman’s Fund has a directive from its German parent company, Allianz SE, to reduce greenhouse gas emissions by 25 percent by the year 2012. According to Fireman’s Fund spokesman Dean Selna, “Fireman’s Fund is a [government] Energy Star-certified green business, so this is something we take very seriously.” If the MCE plan pencils out, he adds, “we’d definitely consider participating in the CCA; it’s the right thing to do for our environment.”
Kathy Severson, CEO of the Mill Valley Chamber of Commerce, is considering endorsing the project. “She’s done enough homework on this to understand it now,” says McGlashan. “She was here at our kickoff presentation to launch the education phase we’re in.”
Severson and the Chamber are still undecided regarding final support for the CCA, but are studying both sides of the issue closely. “Over the past two years, the Mill Valley Chamber of Commerce has taken a leadership position in supporting and promoting green business locally and throughout the county,” she says. “Marin Clean Energy is possibly one of the most significant steps each city can take in the effort to reduce carbon emissions and stop global warming. Our Chamber supports the concept of using renewable energy resources, and we’ll work with the city government and business leaders to provide Mill Valley businesses and residents with opportunities to make informed choices on important issues, such as Marin Clean Energy. This is a complex issue. We’re doing our due diligence to put Mill Valley in the forefront of ecologically conscious decision making and action.”
Can a CCA outperform PG&E?
Normally, people who want renewable energy have to pay extra for it. But Marin Clean Energy is betting it can provide 50 percent renewable energy by 2017 or sooner without raising rates. How?
For one thing, local renewable resources would have lower financing costs because of tax-free revenue bonds. A February peer review of the MCE business plan by JBS Energy, notes: “PG&E’s cost of capital is between 12 and 13 percent including equity, debt and income taxes. The CCA’s cost of capital is assumed (reasonably) by Navigant to be in the range of 5.5 percent for debt.”
McGlashan says PG&E’s rates reflect a huge amount of corporate overhead and shareholder obligations, and they have to pay corporate sector taxes. Government doesn’t have to do any of this. MCE, with no income taxes and no shareholders to pay, could actually pay energy suppliers more than PG&E does and still equal or undercut PG&E’s rates. And, he says, consultants have found that energy suppliers are eager to sign on: “A lot of venture-backed producers are waiting for more CCAs to show up in the marketplace.”
PG&E adamantly disagrees, claiming rate expectations provided by Navigant are unrealistic. Further, says David Rubin, director of service analysis, pricing and payment products for PG&E, “We don’t mark up energy we buy from energy providers.”
Rubin also expressed concern over the fact that customers must opt out of the CCA, rather than being given the choice to opt in, the way PG&E’s “ClimateSmart” program works. “Under the opt-out framework that applies to CCAs in California, there’s a very real risk the customers may simply not be aware of what’s happening, based on the fact that they may not read the notices that come out, or the message they receive may not accurately reflect actual costs.”
MCE’s plan is to send four notices to customers telling them they can opt out—two before the switch and two during the two months after it begins. After two months, customers who want to opt out must pay a small fee.
PG&E also argues that its current power mix is 50 percent non-greenhouse-gas producing, thanks to renewable, nuclear and large hydroelectric power components. But environmental problems plague both power sources. For instance, California has banned new nuclear power plants until the problem of nuclear waste disposal is resolved. Maintenance costs make nuclear energy very expensive. And large hydropower plants may become unreliable, as global warming is projected to lead to more drought in the Western states.
Next steps
MCE’s business plan is now in the education and initial decision-making phase. To be most effective, the CCA would have to enlist two of the three largest contingents: San Rafael, Novato and Marin County. “Between now and November, each of these city councils will be deciding whether or not to join the MCE joint powers authority (JPA), which would be formed in December,” says Weisz.
City councils and the public will attend educational meetings about community choice aggregation and MCE’s role, and cities will make final decisions in the fall. If enough communities sign up, the JPA would issue a request for proposal to the market to find an energy service provider that could supply energy on MCE’s terms.
“Now, it could be that no one would show an interest,” says Weisz. “And if so, we’d all walk away and it would be over. If we do get responses—and we expect that we will, because we’re getting a lot of calls and interest already—we’d negotiate a contract with the providers we feel most comfortable working with.” The provider would handle the nuts and bolts of the energy supply management, leaving MCE to staff a small administrative arm.
What’s ahead?
Picture a Marin County neighborhood with solar collectors on every roof, some producing enough power to sell back to the community. On a West Marin hillside overlooking the sea, houses sport what appear to be 7-foot-tall giant revolving strands of DNA—rooftop wind turbines designed to function quietly in an urban setting. Down at the mall, huge parking lots are shaded by overhead solar collectors.
By purchasing solar power materials in bulk, MCE could offer them at favorable prices to Marin County buyers. MCE could rent the roofs and parking lots of large stores to install more solar collectors. Local electricians, solar installers, inspectors and energy efficiency auditors would be needed. All this local energy generation would yield electricity at a predictable rate—one that’s not subject to natural gas price fluctuations, energy system gaming or even inflation. Ultimately, Marin County could become a mecca for innovators in green technology.
“We can do this in a way that’s great for business,” concludes McGlashan, “if we work smart.” n
For more information and links to reports, news items and a video about Marin Clean Energy, visit www.marincleanenergy.info
