The Bay Area's economy has the potential to undergo a radical transformation. In fact, some communities are already creating their own public-power networks, buying renewable energy, and trying to build their own green-energy economies. But East Bay cities have been slow to embrace this new economic model, even though it would not only shift the literal sources of power for homes and businesses, but also potentially shift political power away from large energy corporations and into the hands of local governments, residents, and small businesses.
Since 2002, a little-known but potentially revolutionary law has been on the books in California. The passage of Assembly Bill 117 came in response to the energy crisis and the ensuing bankruptcy of Pacific Gas and Electric Company, which darkened much of the state and sucked billions of dollars from the economy into the coffers of Texas energy corporations. AB 117 was a strategic shift in a decades-old campaign to wrest economic power away from giant corporate utilities like PG&E and Southern California Edison and the big energy companies that supply them with electricity. AB 117 enabled a new model of energy provisioning, called Community Choice Aggregation, or CCA. Many have never heard of CCA, but few existing laws have as much potential to completely transform our economy from the bottom up.
Don't let the boring acronym fool you. In theory, CCA allows local communities to take control of their power-purchasing needs, while still using the distribution networks owned and operated by corporate utilities. The old model of obtaining community control over energy, whereby cities bought the entire system — poles, lines, transformers, and all — from the corporate utility and staffed a new public agency from scratch, had, by the 1990s, become an impossible task for numerous political and financial reasons. At the top of the list were the fiscal problems of local governments, devastated by decades of corporate tax cuts.
AB 117 eliminated the need to own the energy grid. It was a game-changing idea. Under the new rules, once a local government decides to become an aggregator (by automatically pooling the accounts of ratepayers within its jurisdiction to create a kind of energy-purchasing cooperative), or joins an existing CCA provider, it can choose what energy it will buy for its residential and commercial ratepayers. Communities can then decide to purchase renewable energy like geothermal, solar, small hydroelectric, and biogas — and no longer have to hope that the executives of their corporate utility, or state bureaucrats, will make the right choices for the environment and local economy.
Not only does CCA put decision-making power in the hands of local governments, but communities can theoretically go one step further by supporting the development of renewable energy sources either through the stimulation of private development (for where there is a demand there will arise a supplier) or by building publicly owned resources.
Most importantly, CCA also shifts the all-important financial power away from corporate utilities and the California Public Utilities Commission (which many activists characterize as suffering from "regulatory capture" by the companies it is tasked with overseeing) and places the power of the purse in the hands of local officials. With this ability comes the potential for reinvesting in conservation and efficiency programs, which according to most experts is the real opportunity for greening the grid, creating thousands of new local jobs, and lowering consumers' energy bills. If done right, many advocates say, Community Choice Aggregation would be nothing less than a revolution in power, both in the energy sense and the political sense.
But change is hard to make. Those Bay Area governments that have moved ahead with aggregation have been criticized by many activists and energy experts as pursuing CCA in name only, abandoning the three goals of cheaper bills, new jobs, and truly green energy. Worse still are the governments that have done little to nothing to explore and advance CCA, a long list that includes the East Bay's biggest energy user, Oakland.
But in spite of several years of lost opportunity, big changes may be on the horizon.
Hopes were high in the early 2000s for creating an East Bay CCA. Oakland, Berkeley, and Emeryville were part of a joint demonstration project funded by the California Energy Commission to explore aggregation. Each city committed tens of thousands of dollars to the effort and hired Navigant Consulting, an independent firm, to conduct a feasibility study and prepare an implementation plan. Fittingly, Oakland's money for the feasibility study came from a settlement reached with Williams Energy, and funds for the implementation plan from Duke Energy, two of the companies that gamed the energy crisis to gouge Oakland residents.
However, by 2008 this investment of time and hard-won money hit a wall. Navigant's studies came back with bad news for Oakland's leaders. Citing energy bills that could jump by more than 6 percent, potential city liability for CCA debts, and uncertain and possibly expensive regulations, the city administrator reported to the city council that, "although CCA appeared promising in the preliminary analyses, after a comprehensive review, the Business Plan does not support a recommendation to move forward at this time."
Oakland Councilwoman Nancy Nadel briefly put up a fight to save CCA. "Emeryville dropped their interest. Berkeley had some remaining interest," she said in an interview. "I wanted to call a joint meeting with Berkeley to educate ourselves about how well Marin was doing, and other efforts from other cities and counties doing CCA, but couldn't get the votes on the council to schedule it." According to Nadel, the Great Recession and the avalanche of problems it dumped upon Oakland quickly extinguished the council's ability to focus on CCA — an irony, given aggregation's potential to spur the local economy and build resiliency. Instead the city council was sucked into a vicious cycle of budget cuts, layoffs, and program eliminations, further dampening the region's economic outlook.
PG&E also had a hand in killing CCA in the East Bay. "The council was lobbied heavily by PG&E against CCA, and that had some success in stifling interest," Nadel said. Her efforts to revive talks and clear up misconceptions failed, as did the pleas of activists with the Local Clean Energy Alliance, a coalition of green energy and labor advocates that includes some of the most knowledgeable experts on CCA. By 2010, Community Choice Aggregation was dead in Oakland, and set back considerably in Berkeley, Emeryville, and Richmond.
Paul Fenn of Local Power Inc., a consulting group that helps local governments establish CCAs, said that the Navigant study also harmed East Bay efforts to create a regional energy aggregator. "Navigant kind of poisoned CCA in the East Bay," he said. "The key problem is that they used these pre-existing rate models, but CCA is a new structure." And by using old models, and assuming other risks faced by traditional municipal utilities, Navigant's study ended up confusing Oakland, Emeryville, and Berkeley officials, causing them to think the risks were enormous while the savings were minimal, or even negative, Fenn said.
While most East Bay cities had given up, something else was brewing that would eventually revive the potential for renewable energy to kickstart the local economy. The East Bay Municipal Utility District was busy conducting its own in-house studies to figure out how it could replace PG&E as the supplier of energy for its massive water service area. Meanwhile, officials in Richmond weren't quite ready to throw in the towel, even after their assumed partners dropped out. Eager to erase their city's image as an oil company town, Richmond officials closely tracked CCA in Marin County, where it was succeeding. At the same time, efforts in San Francisco were advancing, propelled largely by activists who confronted both PG&E's attempts to kill the nascent CleanPowerSF, and city officials who were trying to gut the CCA of its jobs-generating potential. Up in Sonoma County, another CCA was beginning to take shape.
Marin Energy Authority, California's first operational CCA, launched in 2009 despite PG&E's efforts to snuff it out with an aggressive marketing campaign. In its short existence, Marin Energy Authority has proven that CCA works, and that the fears of Oakland's City Council, and other East Bay officials were unfounded. Energy rates paid by Marin County residents are just slightly higher than what PG&E charges, and the mix of power delivered is the greenest in the state, far exceeding what is delivered by corporate utilities. Come this July, the Marin Energy Authority will be serving 95,000 customers, nearly all of Marin County.
Shawn Marshall, the founder and director of LEAN Energy US, a San Rafael-based company that helps local governments transition from corporate utilities to CCAs, calls Marin Energy Authority "an economically and environmentally robust agency." Despite the obstacles, and lack of understanding for what CCA requires of local governments, "MEA is doing a great job of demonstrating the operational viability and local benefits of CCA. It's always hard to be the first," Marshall said.
As of May 15, plans for the authority just got a lot bigger, too. In a widely anticipated decision, the Richmond City Council voted to fold the city into Marin Energy Authority, a move that will bring tens of thousands more ratepayers. "We've been at this a year," said Richmond City Manager Bill Lindsay about the effort to join the authority. Lindsay and Richmond's leaders believe that abandoning PG&E for the city's energy production and purchasing needs will not only advance its progressive climate goals, but can also serve to transform the local industrial base, and place Richmond among leaders in solar development. "We think that there is potential to have this be an economic boost for Richmond," Lindsay said. "The one thing we feel we have is our ability to sell power to MEA through the feed-in tariff. We have a lot of rooftops for solar. We think it provides good possibilities down the road." Lindsay pointed to the Port of Richmond as an ideal site for massive rooftop solar development.
The feed-in tariff, the process by which locally generated renewable energy — such as rooftop solar — is fed into a utility's electric grid, is another existing policy that could, if reasonably applied, enable the mass development of renewable energy sources. Conceptually, feed-in tariffs are perfect tools for a CCA program. However, just like CCA, the feed-in tariff has yet to live up to its promise, due mostly to the equivocation of state and local politicians who have sent confusing signals to potential developers. California's feed-in tariffs are poorly designed, according to Paul Gipe, an internationally recognized expert on the subject. At a recent energy conference in Oakland, Gipe characterized California's feed-in tariff laws as "timid" and "lacking vision."
Current state law seeks to promote the development of 480 megawatts of renewable energy sources statewide via feed-in tariffs. Within PG&E's service area, any customer may participate. Thus, anyone who builds a renewable energy generating source — like a backyard wind turbine — can sell the power generated to PG&E for a fixed price. But Gipe points out that 480 megawatts is a tiny commitment for an energy market as massive as California's, and that there's a cap on the size of a contributing power plant. The cap seriously undermines the incentive for developers because it effectively prohibits taking advantage of economies of scale. Currently, an independent energy developer using the feed-in tariff may not contribute more than 1.5 megawatts to the grid. Furthermore, PG&E's payments for electricity are relatively low compared to other buyers such as Marin Energy Authority. There is no single, simple, and fair feed-in tariff for Californians to benefit from. Instead, there is a complicated and half-hearted array of tariffs that apply in different services areas.
This fact and other limitations have caused California to fall far behind in renewable energy development. Gipe points to Europe and Japan — where thousands of megawatts have been added in just several years using broader, less restrictive feed-in tariffs — as clear leaders. Even foggy England has bested sunny California in solar, with 1,300 megawatts brought online in under two years thanks to better feed-in tariffs.
Marin Energy Authority, meanwhile, will also have to change its feed-in tariff policy to allow Richmond to use it for a local build-out of solar. Under the authority's current rules, only renewable projects built within Marin County are eligible to participate in the feed-in tariff program. "In order for Richmond to be included in our FIT territory, we will need to update our implementation plan and obtain approval from the California Public Utilities Commission," said Jamie Tuckey, a representative of the authority. "This will likely happen in August." Clearly, then, Richmond's bid to rebuild its economy with green, local energy will face piecemeal laws and confused half-measures currently limiting renewables. With an official unemployment rate of 16 percent (more than twice the national average) Richmond is in desperate need of good local jobs, such as those that could be provided by a major solar installation program spurred by a feed-in tariff.
Some are also concerned that Richmond is too eager to join Marin Energy Authority, and that the authority serves as a poor model for what aggregation can actually deliver. By joining the authority, "Richmond residents will have to pay more than they are now," said Al Weinrub, coordinator of the Local Clean Energy Alliance. "The green portfolio benefit means getting energy through Shell Energy, probably from big central power plants out in the desert, and Renewable Portfolio Standard credits, which aren't green energy at all." These sorts of renewable energy credits are certificates traded in the market that represent the creation of "green" energy somewhere. A utility can claim to be stimulating the production of renewable energy, or even purchasing renewable energy for its customers, when it obtains such credits, even if the actual electricity fed to its customers comes from a gas, nuclear, or coal plant. Furthermore, these credits do nothing to stimulate the local development of renewable energy, and may even promote development of distant mega-solar projects that will have no local economic impacts.
Weinrub said he doesn't think what Marin Energy Authority is offering Richmond is very compelling. "They get something that's called 'green energy' and they pay more." Weinrub thinks Richmond should be getting more assurances that its economic goals can be realized by joining the authority. A survey of the authority's current portfolio of energy providers shows that California's only currently operational CCA is in fact drawing the vast majority of its electricity from large biogas and wind projects in the Central Valley and farther away — meaning virtually no local jobs have been generated in Marin County. CCA advocates like Weinrub and Fenn say the main mechanisms by which a CCA can reduce consumer bills below PG&E's rates require the reinvestment of ratepayer revenues in local energy conservation and efficiency programs and local renewable sources, instead of buying energy from distant big green power plants and through credits. The latter variety of "green" power comes with a premium cost.
At a recent gathering of green-energy advocates, Fenn asked: "What's the goal?" He then answered: "The goal should be to determine what actually gets built, not just focusing on creating a CCA as if it was important in itself. Because it isn't."
Fenn is a guru for energy activists, a go-to guy on both minute technical questions, as well as the big-picture political vision. This is partly because Fenn was the main author of AB 117 and understands the radical potential of CCA like few others. His company, Local Power, Inc., also works in the trenches, and is currently helping to launch the most ambitious CCA yet: CleanPowerSF. According to Fenn, CCA only makes economic sense if the build-out of local renewable resources is adopted from the very start.
Like Marin Energy Authority, CleanPowerSF was met initially by PG&E with a full frontal assault aimed at destroying its viability. PG&E bankrolled Proposition 16 in 2010, a statewide measure that was largely about crushing CleanPowerSF and other CCAs being planned. And though Prop 16 failed to get the necessary votes to become law, it had a deleterious effect on San Francisco.
"Under the looming threat of Prop 16, an initiative that would put the kibosh on CCA, the San Francisco Public Utilities Commission hustled to get a program — any program — launched," Weinrub said. "They issued some requests for proposals to possible energy providers, and in the course of two years since then, they have negotiated a contract with Shell Energy for a 30-megawatt purchase of renewable power on the open market. ... This is not the kind of deal CCA advocates were in favor of."
CleanPowerSF is therefore set to launch under a model much like Marin Energy Authority, purchasing dubious "green" power on the market through its prime contractor, which is better known for its oil business. At the same time, PG&E is pursuing more subtle tactics to wreck CleanPowerSF, such as rolling out its own boutique 100-percent green energy option, a move widely seen as an attempt to chip away at the ratepayer base of potential CCAs. Real change is hard to make, even when all the tools are available.
Advocates of truly green and locally generated electricity haven't given up, however, and the tide appears to be turning their way. After a protracted battle to pressure San Francisco's Public Utilities Commission, activists managed to get the city to commit to some localization from the start, along with the external power purchases. "The good news is San Francisco is going ahead with localization," said Charles Shultz, of Local Power, Inc.
CleanPowerSF is developing a financial model to pay for publicly owned solar and other renewable projects. When combined with efforts to conserve energy and reduce demand so as to lower customers' bills, Shultz said that CleanPowerSF could beat PG&E's rates. Shultz and his colleague Fenn have a mantra: "Own, don't rent, your power; and build, don't buy, your power." In this spirit San Francisco's CCA is empowered with the ability to build renewables through city-issued bonds.
Up in Sonoma County, a similar tack is being taken. County supervisors have embraced the concept of Sonoma Clean Energy, a CCA that would encompass the whole county, which has an electrical load twice as big as Marin's. Activists there are currently working closely with officials to figure out how to maximize the production of local renewables by providing incentives for private developers, and also by reinvesting ratepayer funds in publicly owned projects. The county's RESCO project (Renewable Energy for Secure Communities) is one of the most sophisticated efforts anywhere to study ways of transforming the region's grid by reducing demand, improving conservation and efficiency, and promoting the dispersion of energy generation among distributed, small power sources. It may sound like a wonky study in energy, but it's actually a map for a giant green jobs program.
Sonoma County's effort might also be a model with respect to the kinds of jobs it creates. "If you train someone for a $10-an-hour job to become a 'solar installer,' that's not okay," said Lisa Maldonado, executive director of the North Bay Labor Council. "It's not a real job. You're displacing a skilled electrician." Maldonado recalls that the launch of the Marin Energy Authority was harmed by a lack of outreach to labor, partly because some environmental activists there associated the International Brotherhood of Electrical Workers with PG&E, and assumed most unions would automatically oppose CCA.
Maldonado says things have changed a lot since then. In Sonoma County, the nonprofit advocates most responsible for advancing Sonoma Clean Power approached labor unions very early on to ensure that efforts to create local green jobs would be clearly grounded in the notion of high-paying, benefits-yielding careers. Those involved in building Sonoma Clean Power say that incorporating labor is key if a CCA is to have a positive impact on the local economy. The launch of Sonoma Clean Power is expected within a year.
As for Oakland, Berkeley, and Emeryville, they have been paralyzed, unable to take advantage of the laws and regulations that currently allow for bold economic initiatives like those being pursued in San Francisco, Sonoma, and Marin with Richmond. According to some, this might all soon change though.
Berkeley took an important, if small, step in January by formally declaring its intention to create or join a CCA, and requesting the necessary electrical load data from PG&E to study the viability of various CCA business plans. "This is one of the possible tools to actually make progress on greenhouse-gas reduction, so I am glad that the council voted to move forward with this," said Councilman Kriss Worthington, who introduced the resolution.
The city resolution is also written to "demonstrate support of clean, local energy," leaving little ambiguity about Berkeley's goals of spurring its local economy. Based on this resolution, Berkeley staff held talks with Richmond in hopes of establishing a joint effort. Although that might now be called off, Berkeley has also been talking with another entity whose entrance into the world of CCA could be a game-changer for the East Bay.
Back in the early 2000s, during the rolling blackouts and spiking electricity rates that were causing havoc in California, the East Bay Municipal Utility District's staff began to investigate means by which they could, as a pre-existing public water and sewage utility, enter the electricity market, thereby stabilizing things under local public control. East Bay MUD hired a consultant and put several staff members to work exploring options. One idea was to form a vertically integrated electrical utility — old-fashioned municipalization. This option was ruled out because of prohibitive costs and risks. Another option involved building renewables on East Bay MUD property so as to reduce the utility's own electrical consumption and dependence on markets distorted by speculators and the volatility of fossil fuel prices. It went with this option, and in ten years East Bay MUD has added several biogas and solar installations. But these efforts are small in the grand scheme of things.
The third option was for East Bay MUD to take the lead as a CCA with the cooperation of nearly all East Bay cities, serving 1.4 million customers. But it also was ruled out. In a bit of legislative oversight, the then-recently signed AB 117 failed to mention existing utilities and other special districts as eligible aggregators, along with cities and counties.
This prohibition changed last year with passage of Senate Bill 790, sponsored by San Francisco legislator Mark Leno. The law was primarily designed to check PG&E's vicious efforts to kill CCAs with cynical marketing and lobbying campaigns, but it also included a little-noticed redefinition, allowing existing public utilities like East Bay MUD to become aggregators. East Bay MUD's leaders have quickly picked up where they left off, exploring the case for a CCA in the East Bay.
Although it appears to be too late to convince Richmond to pause its entry into the Marin Energy Authority, East Bay MUD's re-entry plan may mean big things for Berkeley, Oakland, and Emeryville — and Piedmont, Albany, Kensington, El Cerrito, Hayward, Orinda, Walnut Creek, Danville, San Ramon, Pleasant Hill, Lafayette, Crockett, and other towns and vast unincorporated portions of Alameda and Contra Costa counties. East Bay MUD's service area is so large that it would easily become the largest CCA in California, perhaps the nation, if enough of the cities within its territory vote to join. This whole opportunity is just an idea at this point, stress many of the officials exploring it, and exactly what it would look like is anyone's guess.
"One of the most exciting opportunities with CCA is the ability to transform our local economy with new clean-energy jobs," said Andy Katz, an East Bay MUD board member representing Albany, Berkeley, Emeryville, El Cerrito, Kensington, and north Oakland. Along these lines, Katz said San Francisco is a good model to learn from, even if they've had trouble in some areas. "It's important to study, as San Francisco's Public Utilities Commission is, the local build-out of solar energy, and also investments in energy efficiency." Katz said it's too early to assess the results of CleanPowerSF, and that specific features of San Francisco's CCA could be improved, but that the focus on creating local clean-energy jobs is the right one.
Like the officials and activists developing Sonoma Clean Power, Katz said he is interested in bringing organized labor into the fold. "I'm very interested in addressing workers' concerns," he said. "I've already discussed this with reps from the electrical workers' union who represent Alameda County."
East Bay MUD's board has directed staff to step up talks with leaders of various cities to gauge their interest in constituting a region-wide CCA. A report on the feasibility of a joint East Bay MUD-East Bay cities CCA is due in November and will be public by December, said Michael Wallis, operations director for the district. Wallis said his staff has already had meetings with Berkeley, and that a sit-down is scheduled with Emeryville's leaders. The mayors of both cities have formally declared interest in an East Bay MUD-coordinated CCA in letters to the district.
Under East Bay MUD's lead, and with cities like Berkeley and Emeryville on board, a possible regional CCA would be viable, said those who are familiar with the model's economics. But without Oakland — the region's largest industrial and residential municipality — the potential to remake the East Bay's economy is much diminished. If united, an East Bay CCA comprising the major waterfront cities, and many surrounding cities and towns in the hills, could be a tipping point, clean energy advocates say. "The level of redirected revenues, if a significant number of East Bay cities formed a CCA, would reach into the billions of dollars," predicted Shawn Marshall. "This would have tremendous regional economic value and impact over time."
Perhaps the biggest reason why Oakland's leaders let CCA fall off their agenda two years ago was fear of financial liability. These anxieties were stoked by PG&E-friendly lobbyists such as the Oakland Metropolitan Chamber of Commerce (a PG&E representative sits on the chamber's board of directors). The chamber's executive director, Joseph Haraburda, claimed in a 2008 op-ed in the Oakland Tribune that launching an Oakland CCA would require $17 million in city funding. Furthermore, Haraburda implied that Oakland would financially be on the hook, concluding that "we have too much on our plate right now — public safety concerns, budget concerns, and business concerns — to take on such a risky venture."
"One thing to be clear about," Marshall explained recently, "is that ratepayer revenues generated by a CCA do not co-mingle or support a city's general fund. CCAs in California are operated as separate agencies and, by law, the balance sheets and associated liabilities are kept separate from those of individual member cities." According to Marshall, "now is the time" for CCA in the East Bay, precisely because the local economy is hurting.
"Because the industrial load is much bigger over here" in the East Bay, said Fenn during a recent talk to local energy activists, "a CCA would be able to redirect enormous revenues." An Oakland CCA alone would have a budget as large as the city's actual budget, and a large proportion of this could be directed to local projects.
Representatives in Mayor Jean Quan's office didn't respond to requests for comment about what Oakland plans to do with respect to CCA. Councilwoman Nadel said that city staff are consumed currently with drafting and issuing a new garbage franchise contract and finalizing state environmental studies related to Oakland's Climate Action Plan, but that the council will soon revisit CCA when staff time and resources are freed up.
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