Will new community power beat PG&E prices?

Will new community power beat PG&E prices?

 

Sonoma Clean PowerSonoma Clean Power officials and advocates got a charge from recent news that 95 percent of county eligible ratepayers will be switched to their electricity service from Pacific Gas & Electric. The switch was automatic, although ratepayers could opt out of the switch and remain with PG&E. Only 5 percent did opt out.

According to the Santa Rosa Press Democrat:

“About 24,000 power customers … are eligible to begin receiving electricity through Sonoma Clean Power.

“More important, Sonoma Clean Power has not only been able to keep rates competitive with those of Pacific Gas and Electric Co., they, by all appearances, will come in below. Those who go with Sonoma Clean Power can expect to pay 2 to 3 percent less.”

But Sonoma County electric ratepayers may want to think a second time about automatically “opting in” to the program and supposedly saving a couple of percentage points off their bills. 

SCP is a new municipal electric utility created under the Community Choice Aggregation law in California. This allows cities to disconnect from having to buy power from PG&E and purchase their own power, or build their own new “clean” power plants.

All customers are automatically transferred to the new city-owned utility, but also have the choice to “opt out.”

For SCP customers, PG&E would continue to handle billings, maintenance and transmission and distribution of electricity.

Sonoma-Clean-Power-residential-rate-comparison-April-15-2013Justification

The justification for creating SCP is that it claims it can deliver cheaper, and especially cleaner, power to customers than PG&E.

However, PG&E supplies electricity to Sonoma County mainly from the Diablo Canyon Nuclear Power Plant and hydroelectric power plants, both of which already deliver very cheap and totally clean power. A Fukushima-type nuclear power plant failure is nearly impossible at Diablo due to its superior design.

Nuclear power from the Diablo plant is produced at a wholesale price of 1.6 cents per kilowatt-hour — an unbeatable low price.

diablo Canyon power plantAnd PG&E has been buying hydropower from Monterey County for 3.5 cents per kilowatt-hour. However, it now is facing a price increase more than doubling that, to 7.5 cents per kilowatt-hour.

The North Bay Business Journal estimated that SCP possibly could produce electricity at about the same rate as PG&E, but it would include a higher percentage of clean power. Yet that may be hard to achieve because, as noted, PG&E’s power already comes from clean hydro and nuclear power.

Pricey, clean power can be justified in California where the topography creates air basins that trap smog, such as in Los Angeles County. But Sonoma County enjoys comparatively clean air quality because the air basin around Santa Rosa is relatively small and narrow.

Neither SCP nor PG&E plans to put power plants in Sonoma County that would contribute to air pollution.

Local jobs

Sonoma County’s shift to clean power will create some local jobs because PG&E’s generation and purchasing of power is centralized outside the county. SCP would bring some of those jobs home.

Sonoma also could create jobs by its own rooftop residential solar rebate program. But that would just mean providing cheap, clean rooftop solar power to a few residents and shifting the higher costs of solar power onto those customers without solar systems.

According to Stanford University, the levelized cost of rooftop solar power is 24-cents per kilowatt-hour, excluding reverse metering costs, tax credits and any local subsidies. Reverse metering entails having to reengineer the electric grid to run two ways, both to and from its customers.

To make clean power economically feasible, its higher cost has to be socialized over a large number of electric ratepayers and taxpayers, or shifted to large commercial users, such as California’s cap-and-trade emissions program does.

Risks

But some Sonomans might say, “What do we care if clean energy is socialized, as long as we can privatize the profits and socialize the costs onto other PG&E or SCP customers, while creating local jobs?”

There are a couple of responses that show the risk:

1. A county-run municipal electricity utility is non-profit, so it cannot make profits or enjoy clean-power tax credits or tax write-offs.

2. Power plants built by PG&E can be financed by both taxable debt and equity (stocks), while SCP can avail itself only of tax-exempt bonds.

3. SCP is gambling that it can buy cheap power or build power plants that generate cheap, clean power.  If SCP builds power plants, it incurs the risk that the power cannot be sold at the cost to produce it.  Alternatively, if SCP buys power in the spot market, doing so would expose it to the risk of market price volatility.

4. Bill Roberts, an economist for the Bay Area Economic Forum, warned of unexpected costs in his 2007 study on the municipalization of local power purchases and generation. He wrote, “[I]f the incumbent utility operates any retained generation and the [Community Choice Aggregation] purchases 100% of its power supply from the competitive market, the CCA cannot avoid higher average rates than the utility unless it subsidizes rates (or somehow wins the gamble of ‘beating the market’).”

5. To beat the market, SCP must build its own power plants. SCP wants to build a new geothermal power plant nearby in The Geysers, the world’s largest geothermal energy field. But tapping new geothermal power is a very risky venture, as Gov. Jerry Brown found out with the Bottle Rock Geothermal Power Plant after he left the Governor’s office in the 1980s.  The Metropolitan Water District of Southern California ended up having to pay off $282 million in bonds to bail Brown out of a political fiasco.

SCP soon will have to bring a concrete proposal for a clean power plant before the county Board of Supervisors for review.  If it doesn’t make economic sense upon independent review, it remains to be seen how many Sonoma County residents may want to reconsider their gamble on municipal clean power, and instead “opt out” of the program.

7 comments

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  1. Norski
    Norski 9 April, 2014, 19:39

    So can someone please explain again how creating SCP will change the electric generating mix for consumers in Sonoma for the better, short of acquiring higher priced “clean” energy? Are we witnessing another version of the classic shell game here?

    Reply this comment
  2. EastBayLarry
    EastBayLarry 10 April, 2014, 06:30

    A generating plant, whether solar, coal, nuclear or whatever, pushes electrons into the grid.
    A consumer draws electrons out of the grid.
    So how does the SCP select those ‘cleaner’ electrons for their customers? Of course they can’t. When they buy power it’s whatever electrons are available, so their claims of ‘cleaner energy’ are pure hoax.

    Reply this comment
  3. Ed the Independent Contractor
    Ed the Independent Contractor 11 April, 2014, 16:13

    Sounds like a scam by the county politicians to create a bureaucracy that they can control for the additional power and potential influence the bureaucracy could provide to the politicians. The county agency will not be able to provide power at significantly lower prices than PG & E. So they are taking an enormous financial risk, to the citizens of Sonoma county, based on some pie in the sky claim of clean power. This will definitely come back to bite them in the posterior. Of course by the time this transpires the elected officials who created this mess will be out of office and will no longer be responsible for the mess and the costs that they created.

    Reply this comment
    • Andy
      Andy 1 March, 2015, 10:47

      For one, all politicians act for themselves but claim their imaginary friend (SONOMA COUNTY or some other municipal corporation) is the one with the liability BECAUSE they have no personal liability, no bond that can pay out if they screw things up, claim immunity from prosecution and tort claims (money claims) in court, etc. There is never any consequences for the slave masters ONLY for the slaves (thats the man and woman on the street). Wake up and take notice of this fact.

      Reply this comment
  4. Bill Gore
    Bill Gore 13 April, 2014, 07:59

    The american corporate business model is so completely rotten, brain dead and intertwined with corrupt elements of government at every level that we should throw in the towel and go full SOVIET.

    To refresh our memory, in the Sovietsky Soyuz, among other things, EVERY citizen had:

    1) A guaranteed job/useful thing to do during the day. Unemployment was ZERO %.
    2) Guaranteed housing, everyone. No homelessness….
    3)Totally free medical care and education for ALL… (their educational system, BTW, was quite good, very rigorous…)
    etc…
    As far as that silly freedom thing goes, since we as a society are completely unwilling to forgoe even 10 minutes of waddling through Costco to defend our freedom of speech, freedom of assembly, right to own firearms, posse commitatus, etc etc, then screw it! We deserve to be enslaved by some grey concrete bunker government….

    Reply this comment
  5. boss
    boss 20 March, 2015, 15:56

    PG an E is a crooked sob out fit my friend is disbaled on care and she has to pay 1689 jusdt to deliver this bs my gawwwd when do people every stand up to these crooks in the usa they plain right out rip people off

    Reply this comment
  6. accountingscam
    accountingscam 11 December, 2015, 16:28

    I found out I am being scammed by this “accounting trick” called SCP. Here is why: In May 2013 I installed a solar system with Net Energy Metering with PG&E. At true up in May 2014 I had a ~$300 bill for the year a $4/month PG&E connection bill and very happy with the rate of return. Then in Nov of 2014 SCP came onboard and due to this the entire thing was trued up again, reseting everything to zero and moving my true up aniversary to Nov. I was on track to yet again a $300 bill for the year. Now it is a year later in Nov 2015, yet this time I have a $928 true-up bill with PG&E and a $550 some credit with SCP. The kicker is I cannot access this credit with SCP to offset my PG&E bill! So I am stuck with a big bill just around the holidays with Christmas and everything. This credit with SCP doesn’t do anything for my cash flow! Of cource I will not get a bill for SCP for some time, since it will be eating up this credit, but still that does not help me with this real bill now. SCP will cash out in May 2016 if there is any residual credit, so in a sense I am “loaning” SCP my money for the difference over these few months. What a scam!!!.

    Reply this comment

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