I recommend a book titled The Vision of the Anointed by Dr. Thomas Sowell. In it, Sowell writes, “The focus here will be on one particular vision—the vision prevailing among the intellectual and political elite of our time. What’s important about that vision are not only its particular assumptions and their corollaries, but also the fact that it is a prevailing vision—which means that its assumptions are so much taken for granted by so many people, including so-called ‘thinking people,’ that neither those assumptions nor their corollaries are generally confronted with demands for empirical evidence.”
Here’s a vision for you: The Sonoma County Water Agency is spending money—more than $500,000 hard money plus lots of staff time, with more consultant contracts already approved—to create “Sonoma Clean Power” (SCP), a “community choice aggregation program” for Sonoma County customers to purchase electricity. The program is modeled after Marin Clean Energy. Both programs are touted to provide local control of rates, a choice in electricity providers, increased rate stability, incentives for local development of “clean” power and, of course, jobs. It seems so simple and straightforward: Who’s against clean? Who would question local control, choice, stability, incentives, and jobs? Who needs empirical evidence that might undermine the vision?
Nevertheless, let’s look at the dark side of the vision: assumptions and risks. SCP assumes cities in Sonoma County will sign on to the program. But no city has done so yet. SCP assumes that, once the program is up and running, residents will decide not to opt out. If you don’t opt out, you’ll be automatically “in” SCP. Marin Clean Energy used a clever approach, sending opt-out information that looked mildly like junk mail. Many residents weren’t aware they’d be automatically switched to the new program unless they took action during a specific time period. Later, these residents discovered there are costs associated with opting out after the initial period. Maybe SCP assumes the same approach in Sonoma County will result in a slew of unwitting participants. SCP will undoubtedly have late-opt-out fees, and perhaps more substantial fees if the number of eventual opt-outs drives up the per-household cost of the program.
SCP assumes its electricity rates will be comparable to those of PG&E. Are there good reasons to believe this? Sonoma County will be a little player in the electricity game. PG&E is a great big player in the same game. Who has a competitive advantage? I interviewed a brilliant economist who’s an energy consultant with decades of experience throughout North America. His answer to the competitive advantage question was long and complicated, with no definite conclusion. Everyone needs to remember that the total monthly cost includes two major elements: the cost of electricity itself, and PG&E’s cost for distribution of the electricity. Joining SCP does not get rid of PG&E.
SCP assumes energy companies will build power plants, perhaps within Sonoma County, based on SCP’s promise to purchase specific amounts of electricity at specified rates over many years. What sort of guarantee can SCP offer the energy companies? Will the county or individual cities have potential liability? This isn’t a hypothetical question, based on recent experience in Marin, where the Rio Solar project was cancelled, possibly due to lenders’ concerns about the source of repayment. SCP assumes that regulations currently favorable to community choice aggregation programs will remain in effect. And SCP assumes it’ll be able to match power purchase agreements with actual demand, without needing to buy more power or sell surplus power in the spot market.
How do these assumptions compare to high-risk assumptions made at the state and county levels about the costs of providing pensions for government employees? Our legislators granted big retroactive pension enhancements in 1999 based on the assumption that continued stock market gains would almost fully pay for the enhancements. Wrong. More than 10 years ago, Sonoma County supervisors assumed that a future increase in employee pension contributions equal to 3 percent of pay would fully pay for a retroactive 50 percent increase in pension benefits. Bad assumption, especially when jacked-up pensions encouraged many people to retire and a combination of sour investment markets, soaring pension costs and a down economy sharply decreased new hires who might be paying the extra 3 percent. The result of these bad assumptions is a huge financial hole for taxpayers. For a comparison to California energy issues, think back to the incredible power crisis of 2000/2001. Think Enron and deregulation and market manipulation and absurdly expensive power purchase agreements.
Here are other questions: Do we need to continue the empire building of Sonoma County Water Agency? It’s already very big and powerful, with a budget of $75 million. I’m not sure it’s a model for “rate stability” on the cost of water. And I’m troubled by the agency’s history of consulting contracts, including the ones with former assemblyman Michael Allen that were the subject of so much scrutiny. Do we really want to establish yet another board (for the Joint Power Authority) with members who might have very high salaries and huge benefits? Will “local control” mean more political shenanigans?
Do we need Sonoma Clean Power? Much of the electricity used in Sonoma County is already clean, coming from the Geysers. PG&E should receive CPUC approval shortly for its own Green Option Program, which “will let customers support 100 percent renewable energy for a modest premium” of about $6 per month. Last, consider the risk of high electricity rates causing subscribers to opt out of SCP, leading to higher rates, more opt outs, higher rates and more opt outs. This is called “The Death Spiral” for good reason.
