Public Power In Mendocino

by Darwin Bond-Graham, October 20, 2011

Among the flurry of bills just signed into law by Governor Jerry Brown was SB 790, a twenty page string of amendments to the Public Utilities Code designed to level the playing field between nascent public power agencies and hostile big investor owned utilities like PG&E. Shepherded through the legislature by Senator Mark Leno (D-San Francisco), SB 790 establishes a “code of conduct” and enforcement rules to prevent the sorts of nefarious tactics PG&E has used to undermine the efforts of cities and counties in California to set up public power agencies through Community Choice Aggregation. The law is a kind of bill of rights for communities seeking public power.

PG&E has a long history of attacking public power campaigns. The company has mostly succeeded in preventing any large-scale shift away from its monopoly across Northern and Central California. This means that its paradigm for energy production and distribution rules. Energy is generated in a few large gas power plants located in poorer communities (many in the Central Valley), in the company's nuclear plant at Diablo Canyon, from the company's hydroelectric dams that continue to strangle watershed ecosystems, and then only a small fraction from truly renewable sources that are less polluting.

The result is that energy generation remains decoupled from local communities and economies. The logic that rules the market is profit maximization for PG&E's shareholders, rather than ecological sustainability and community benefit. With climate change, the decline of California's river ecosystems, and a prolonged economic crisis leaving many in the state's rural communities unemployed, the stakes over energy development have become bigger than ever. PG&E's role thus far has been to thwart efforts toward creating a locally controlled, diversified stock of energy sources.

Beginning in the early 2000s with deregulation of the state energy market, however, PG&E began experiencing a cascading chain of calamities, from rolling blackouts and subsequent bankruptcy in 2001, to the pipeline disaster in San Bruno last year. Against the ropes the troubled company mostly stood by while a game changing law made its way through the state assembly. In 2002 AB 117 allowed for the creation of public power agencies through aggregation. The method is effective insofar as it circumvents many of the structural impediments to establishing public power: if a community chooses to, it can lump all its ratepayers together automatically to purchase power in bulk from whatever sources it likes. The incumbent utility (mostly PG&E across northern California) still delivers the power, and handles billing, but the revenues flow from the community to the sellers of electricity, mostly cutting out the profit-oriented monopoly utility.

By lumping ratepayers together and buying power on the market, CCAs can be a powerful tool for cities, counties, or any grouping of governments to democratically pursue a trifecta of goals that have until now been thwarted by private utilities. CCAs can seek (1) locally produced energy, which means local jobs; (2) energy from low-carbon and non-nuclear sources, and; (3) according to some who've studied the markets in depth, energy fitting these criteria can actually be gotten at cheaper rates because there is no longer an impetus to harvest profits to payout shareholders.

However we've yet to find out if AB 117 really, truly works. The only existing CCA is Marin Clean Energy, serving parts of Marin County. MCE's energy mix is much lower in CO2 than any of the big investor owned utilities, but the agency has yet to pursue a local build-out of generating capacity, and rates are about the same as PG&E's. Marin's efforts have yet to make good on the transformative environmental and economic possibilities that are possible under a CCA scheme.

Part of the reason only Marin has implemented CCA is because soon after the enabling legislation was passed in 2002, PG&E was shaking off bankruptcy, navigating the partial re-regulation of California's energy markets, and realizing that the new law threatened its monopolized stream of profits harvested from California's communities. PG&E acted quickly to sabotage CCA campaigns across the state.

After scuttling several early efforts through disinformation and non-cooperation, only Marin County's push remained viable. The utility waged war against Marin Clean Energy primarily through a marketing campaign that was designed to scare several of the county's cities from participating, and to frighten ratepayers into thinking their electrical bills would rise drastically in price. PG&E also acted with hostility and showed a lack of cooperation with Marin Clean Energy which still had to rely on the utility to deliver power and charge customers, and to access basic business-related information. Even so Marin Clean Energy successfully launched as the first CCA in the state.

SB 790 couldn't have come at a better time. Sonoma County is widely expected to establish a CCA within the next year. On Tuesday the Sonoma County Water Agency released its feasibility study for establishing a CCA program there. Senator Leno attended the Sonoma County Water Agency board meeting to give a legislative update on CCA and related issues.

With 483,000 residents Sonoma Clean Energy would instantly become the largest CCA in the state with enormous ratepayer demand for low-CO2 sources of electricity. Sonoma County has the added advantage of local governments and a local business community that embrace clean energy, and have the skilled workforces, organizational capacity, and capital to move rapidly. San Francisco is now close to launching CleanPowerSF, its own CCA which would shift about one fourth of the city's residential ratepayers to public power.

Marin Clean Energy is actively looking to expand by adding Marin County cities that initially chose not to participate (in no small part because of PG&E's tactics). The city of Larkspur just voted to join MCE. Corte Madera is expected to consider joining at its Town Council meeting on November 1. The city of Richmond is now considering joining Marin Clean Energy.

Mendocino County, it should be noted, has done nothing to involve itself in these efforts or deliberate on CCA as a viable strategy for rebuilding the county's economy. Perhaps now is the time to consider joining Sonoma County's efforts?

SB 790 requires PG&E and other for-profit utilities to cooperate with communities that are pursuing CCA. It establishes enforcement procedures to ensure the company does not obstruct democratic efforts to develop local clean energy. It's a law that recognizes the entrenched power of investor owned utilities and the active campaign they've waged against public power for decades. Unlike much of the legislation that comes out of Sacramento, the text of SB 790 is clear, even lucid on these political facts. In Section 1 (c) and (d) the law observes:

“Electrical corporations have inherent market power derived from, among other things, name recognition among customers, longstanding relationships with customers, joint control over regulated operations and competitive generation services, access to competitive customer information, and the potential to cross-subsidize competitive generation services.

“The Public Utilities Commission has found that conduct by electrical corporations to oppose community choice aggregation programs has had the effect of causing community choice aggregation programs to be abandoned.”

Ultimately, however, SB 790 is a small measure. PG&E and its peers still have immense power and wealth, and they still have every right to slather money on politicians at all levels of government, to lobby regulators, and to wage war against the public interest through California's voter initiative system, as they did in 2010 with Proposition 16 which aimed to effectively kill CCA.

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