(Editor’s note: I had originally put my thoughts on two subjects together as per my usual Monday Morning Thoughts Column, but after some reflection, decided that the topics were diverse enough that I would separate them)
When we last saw the issue of public power, the Davis City Council had voted 4-1 on a motion by Councilmember Brett Lee and seconded by Lucas Frerichs to rescind the previous authorization to spend up to $600,000 on a study of a Publicly Owned Utility (POU), and only then-Mayor Joe Krovoza opposed it.
The issue had become toxic in the days prior to the council election and a public vote on the sales tax and, even if spending around $1 million in $66,000 increments over ten years would not break the budget, the council feared it could undermine a vote.
However, the city projected potential savings of $600,000 to $1.2 million by going to a POU, where the city could have contracted with SMUD (Sacramento Municipal Utility District) or another agency to run its own utility.
This weekend, the Vanguard reported that the council has an item on CONSENT to form an Advisory Committee on Community Choice Energy (CCE). While the article drew no comments, I received several inquiries as to who made the decision to go to a CCE (formerly a Community Choice Aggregation, or CCA) and why this is being placed on consent when the original issue was so contentious.
A CCE is kind of seen as a halfway point. It allows PG&E to still own the infrastructure while the CCE, i.e. the city, would “choose where to purchase power from, and to create a mix that meets the goals of the program, providing clean energy while ensuring customers a stable and competitive price.”
But the savings would be far less, we would still rely on PG&E to generate our power and transmit it, and so, while the risk may be lower, so too will be the reward.
The CCEA (Community Choice Energy Advisory Committee) would develop an analysis of the advantages and disadvantages of joining an existing CCE or forming a new CCE.
But I think this begs the first question, the why – why only consider a CCE? My understanding is that, prior to Davis looking at a POU, the county was looking into a CCA.
The proposal to even study the POU received a tremendous amount of push back from the community, the local newspaper, and, of course, PG&E.
The city believed it could both save the city and community 20% on its electricity bills, as well allow the city enhanced flexibility in the $4.3 million in funding generated by the community for the Public Purpose program that PG&E currently uses elsewhere.
A city study found that PG&E had poor system reliability compared to other utility operators, and PG&E has a worse outage duration with more sustained outages per customer than comparable groups.
The study found that their per KWH price was high, but Davis pays more per KWH than the average PG&E customer. Each 1 cent per KWH costs Davis about $2.64 million per year.
All of which begs the question – why would we want to remain with PG&E through a CCE? If we are going to study the issue, let us have the Advisory Committee study both a POU and a CCE, and then we can weigh the positives and negatives and make a fully informed decision.
By looking only at a CCE, the decision seems to have been made before we study the issues.
—David M. Greenwald reporting
This is only partially correct.
There are 3 components to the electrical energy grid that provides power to us.
1. Generation and/or Procurement – Electricity is generated by facilities owned by the Investor-Owned Utilities (IOUs), Publicly-Owned Utilities (POUs), or independent generators. PG&E is the IOU serving most of Northern California. The electricity can be generated by renewable sources (solar, geothermal, or wind energy), hydropower, fossil-fuel (natural gas, oil, or coal), or nuclear energy.
2. Transmission – Power is carried from generators to distributors over high voltage lines generally owned by the utilities but under the operational control of the California Independent System Operator (ISO); the not-for-profit corporation that operates the grid and wholesale power markets in California.
3. Distribution and Billing – Distribution of electricity to consumers within a jurisdiction is provided by either an IOU or POU through their own network of substations, power lines, and individual meters. The IOU or POU then bills the customers for payment based on regulated and approved rates.
Community Choice Energy (CCE) is a simple mechanism by which a local government jurisdiction (e.g. a City, County, or Joint Power Authority) contracts directly with a wholesale electricity supplier to purchase electrical power. This power is then used by residential, business, non-profit, or governmental consumers in its jurisdiction. In essence, the CCE becomes the energy buying agent for consumers instead of the local IOU.
Under a CCE, though, the utilities still own and maintain the transmission lines, substations, distribution wires, and meters. They still bill all customers for all of the metered energy used and forwards to the CCE monies collected for the electrical generation portion of the electrical bill. The CCE entity then pays the energy generator for the electricity they provided.
If any customers still want to receive electricity from PG&E if a CCE is formed, they can simply “opt-out” of the CCE and still have PG&E provide their electricity to them at the utilities’ standard tariff rates.
Alan wrote:
> The electricity can be generated by renewable sources (solar,
> geothermal, or wind energy), hydropower, fossil-fuel
> (natural gas, oil, or coal
Does anyone know if we have any coal fired power plants in Northern CA?
In the mountains (where we don’t have PG&E) I know many were upset to find out that coal powered plants in Nevada were providing the power to charge their Teslas for the drive back to Davis from Tahoe.
Although the CCE concept is comparatively new in California, it has been extensively used for years in the midwest. There are now two other CCEs in California – Marin Clean Energy and Sonoma Clean Power.
Marin Clean Energy (MCE)
MCE was launched to customers on May 7, 2010, as California’s first Communit y Choice Aggregation program. MCE’s service area includes all of Marin County as well as the City of Richmond. MCE currently provide renewable energy for about 125,000 customers—approximately 75% of all electric customers in Marin and Richmond.
Light Green is MCE’s default electricity service offering, so customers automatically start with Light Green. Light Green is 50% renewable. By comparison, PG&E’s electricity is only about 22% renewable. Light Green Energy from MCE currently costs 2.4% less than PG&E’s standard residential rates and 3.0% less than PG&E’s ommercial rates
Deep Green is an optional tariff that is 100% renewable energy and costs just a penny more per kilowatt-hour than MCE’s Light Green rate —or about $5 more per month for the average home and $13 more per month for the average businesscustomer.
One other advantage of a CCE is it can be used to stimulate development of local renewable energy sources. MCE currently has or is developing 12 MW of local renewable energy sources within its jurisdiction generating jobs and recycling energy dollars back into the local community.
Sonoma Clean Power (SCP)
SCP was created and service launched in 2013. It is California’s 2nd CCE. SCP’s service area includes all of the cities in and unincorporated areas of Sonoma Co.
SCP’s default CleanStart power has 33 percent from renewable sources compared to 22 % for PG&E. It is priced 4.6% less than PG&E for residential rates and 5.3% less for commercial rates. These are projected to rise to 10% less than PG&E within a year.
SCP also offers an optional residential and commercial electrical rate, EverGreen, that is 100% renewable that is about 10% more expensive than PG&E’s comparable tariffs.
You didn’t answer David Greenwald’s question. Why just explore CCE, why not explore both POU and CCE?
my biggest concern is not necessarily whether we should go to cce or pou, but rather whether we should make the decision as a consent item where some deal may have been carved out behind the scenes. i agree with the vanguard, i would prefer to see an equal weight exploration of cce or pou.
There are no behind the scene deals. The consent item merely starts the investigation and review process and establishes a Committee to explore all of the financial and legal implications. The Committee’s meetings will all be open to the public and the final report will, of course, be posted on the City’s website for all to see before any decision is made by anybody.
There are a number of compelling reasons, though, why a City might want to initially look at a CCE instead of a POU. Firstly, the expertise to set up a CCE is easily obtainable and at a fraction of the legal and engineering costs otherwise required to set up a POU. Secondly, PG&E is precluded by the PUC from actively resisting or interferring with CCEs compared to the no-holds barred approach they can take opposing the formation of a POU. For instance, forming a new POU in Davis would entail a condemnation of PG&E assets (substations, distribution wiring, and meters) related to the provision of energy in Yolo Co. which would be fiercely resisted by PG&E in court and undoubtedly trigger years of litigation with PG&E.
Some have suggested just trying to merge with SMUD instead offorming an independent POU but joining with SMUD has already been defeated by the electorate in Yolo Co. (although supported by Davis voters) and, more importantly, it was rejected in Sacramento Co by SMUD voters themselves.
For all of these reasons, pursuing a CCE in Davis is the far easier, faster, and cheaper option towards achieving electricity rate relief and carbon neutrality in Davis as compared to independently forming a POU or merging with the SMUD POU. That said, forming a CCE to procure our own sources of energy or otherwise obtaining the functionally equivalent capabilities is a key component of forming a POU so setting up a CCE now does not in any way preclude us from pursuing a POU later in Davis. In fact, it makes the lift that much easier if that time ever comes.
“PG&E is precluded by the PUC from actively resisting or interferring with CCEs compared to the no-holds barred approach they can take opposing the formation of a POU.”
that’s a big one.
This makes it sound as if the city has already decided that a POU is out of consideration. When was that decision made? This entire process feels queasy.
my concern as well – it seems like decisions are being made without public discussion. it may be the right decision, but i’d rather have open dialogue.
As David pointed out in his article, the decision to abort investigating a POU was already made by the Council,
The consent calendar item before the Council now is only to authorize investigating a CCE. No decision has been made to move forward on a CCE or not.
Further, there will be plenty of opportunity for the public to weigh in on this process including attending CCE Committee meetings and a planned public forum
You say the article received no comments. I commented.
You said the issue became toxic. I disagree. Politicians were scared and dropped it. When a poll showed strong support for a POU in the community, they were surprised but did nothing. There is still strong support for a POU but the council is only looking at the option that will get the least push back from PGE but is not the best option for the city. Very disappointing. This is yet another example of our lack of progressive leadership. We rest on our laurels from 40 years ago. What have we done that is really progressive since Julie Partansky was in office in the late nineties?
Thanks to everyone for a thoughtful discussion on this topic. I’d like to help clarify some of the issues. Alan Pryor has provided lots of good info, so I just want to address concerns raised about the city’s decision process and the reasons to focus on CCE/CCA at this time. I followed the city’s POU initiative since the fall of 2013 until its suspension in May 2014. I am a member of the Coalition for Local Power in Davis, and an electric industry professional where my day job involves developing policies to support the integration of renewable generating resources and small-scale distributed resources. I mention my job only because it is relevant to the question of CCE/CCA versus POU.
The first point is that forming a CCE in the near future does not preclude forming a POU at a later time, and will provide Davis with a significant portion of the experience and savvy that would be needed for a POU. So CCE would not be a waste of effort or money should the city decide to pursue POU later.
Second, CCE in itself offers significant benefits that should not be dismissed. Alan covered this topic – the benefits result mainly from (1) local choice in determining the sources of our electricity (including, for example, the possibility of creating local “solar gardens” with much greater flexibility than non-CCEs would have under the CPUC’s anticipated implementation of SB 43); and (2) access to the public purpose funds to be utilized to benefit Davis.
Third, forming a CCE is significantly faster, cheaper and less contentious than forming a POU. Alan covered this topic as well; I’d just emphasize that Davis would have numerous allies in the CCE effort – Marin and Sonoma already up and running and willing to share their expertise, a handful of other California cities planning moves to CCE this year, and a possible statewide association of CCEs forming to promote their interests at the Legislature and the CPUC. In contrast, to go for POU now Davis would be going it alone.
Fourth, the main difference in forming a POU would be to take over and operate PG&E’s distribution system (wires, transformers, fault detection, etc.). What most people don’t realize is that right now the distribution business is undergoing dramatic changes due to the proliferation of all types of “distributed energy resources” (DER) – including storage devices, electric vehicle charging, smart buildings and micro-grids, not to mention rooftop solar. The existing distribution systems were designed for one-way power flows – taking power from the huge central station generators attached to the grid and delivering it to customers. Today the one-way paradigm is already breaking down because DER are putting power onto the system at thousands of locations, resulting in power flows that can go either way and frequently reverse direction. As a result, distribution systems will require new operating protocols and investment in electrical and communications infrastructure in the coming years – a topic that has mobilized armies of experts nationally and around the world to work out the details.
The point is that Davis could not simply take over the distribution system and operate it the way it’s always been operated. Rather, we would be jumping into a business that will be in upheaval for many years to come. Much better, in my opinion, would be to wait for the industry to develop new best practices and standards for high-DER distribution systems, watch for the emergence of companies who can operate these systems for POUs, and then consider whether Davis wants to become its own POU. In the meantime, Davis can enjoy significant benefits by forming a CCE.
Regarding the resolution scheduled for the February 3 council meeting, this resolution simply authorizes an investigative process, which will include outreach and public engagement, and does not commit the city to any specific action. During that process I expect we will have further discussion of the ongoing industry transformation towards decentralization with the proliferation of DER, and its implications for taking over a distribution system at this time. I fully recognize the appeal of the much bolder idea of forming a Davis POU, and eventually that might still be a desirable path. The February 3 resolution does not preclude that eventual possibility. For now, however, I do not want to forego the real and achievable near-term benefits of a CCE by committing our city to a multi-year battle to take over a system that will be obsolete by the time we get it.
Lorenzo, thank you so much for the clarification in regard to CCE vs POU, and why for the moment only the CCE option is being explored by the committee. It makes perfect sense!
The only thing I might add is the City developed a Cable TV company back in the 80’s, and we all chipped in, and had rates at least 90% less than we pay now. Then the City sold it.
Correct me if I’m wrong, but I’ll bet in the 1980’s all cable rates were close to 90% less than what we pay now.