San Francisco has a consolidated city-county form of government.

A municipal personality split came on April 23 when the San Francisco County Board of Supervisors made moves to join the electricity buying cooperative in Marin County, MarinCleanEnergy.

The county Board of Supervisors does not need the approval of the city to join MCE. CleanPowerSF and MCE would form a joint powers authority, as provided under California law.

In reaction, on May 1 San Francisco Mayor Ed Lee moved to pull the plug on $19.5 million in funds that was to be used to establish CleanPowerSF.

To circumvent Lee’s defunding move, the county supervisors even have gone to the state Legislature to approve Assembly Bill 2159, sponsored by Assemblyman Tom Ammiano, D-San Francisco.  This bill would allow the state to usurp home rule and allow the county to join an “over-the-fence” electricity-buying cooperative, such as in adjacent Marin County. The bill is unnecessary, but would promote lower power rates to his San Francisco constituency.

Ammiano’s bill did not pass in committee but is being reconsidered.

Positive declaration

To add more confusion to the dispute, Assemblyman Steven Bradford, D-Inglewood, has proposed Assembly Bill 2145. Unions, PG&E and the Construction Trades Council back Bradford’s bill.  A number of clean energy interests oppose the bill.

Right now the law authorizing the creation of electricity buying cooperatives only provides for electricity customers to opt-out of the program, not opt in.  Otherwise, customers are automatically enrolled in the buying program.

Bradford’s bill would reverse that and require that each customer of an electricity-buying cooperative be required to give a written positive declaration that they wanted to join the cooperative.

Additionally, Bradford’s bill would require an electricity-buying co-op to disclose the percentage of annual greenhouse gases actually delivered to customers in accordance with standards of the California Air Resources Board.  Electricity buying co-ops would have to stop any false advertising of the percentage of its clean power.

For example, MarinCleanEnergy claims it has the highest percent of green power – 51 percent – of any electric utility in California.  But the actual proportion of clean energy it provides customers is 27 percent.

MCE currently procures a minimum of 50 percent renewable energy (27 percent from California Renewable Portfolio Supply-eligible sources), not from delivering actual clean power. In Figure 4 on page 13 of its 2013 Integrated Resources Plan, MCE shows that about 50 percent of its current energy mix comes from what is called “Renewable Energy Certificates.”

RECs can come from so-called “dirty” power plants that have reduced their emissions or purchased pollution allowances from the Air Resources Board.  In other words, there is no guarantee that RECs deliver clean power.

The Bradford Bill further requires that CleanPowerSF or MarinCleanEnergy co-ops cannot claim to reduce their electricity rate lower than PG&E by avoiding paying their share of bond-related costs for hydropower from the state Department of Water Resources.

As with other environmental initiatives, such as endangered species laws, seemingly good intentions only have led to fighting over the spoils of who gets the jobs and political patronage from purchasing electricity under California’s Community Choice law.

By Dave Roberts

Thousands of San Francisco residents may be sucked into a green energy plan that will raise their electricity rates 77 percent without their knowledge or consent. Beginning next spring, half of the city’s 375,000 residential ratepayers will automatically be enrolled in CleanPowerSF — unless they take action to opt out of the program. Eventually the entire city will be enrolled in the program unless they choose to opt out.

City officials are hoping at least 90,000 households will choose to remain in the program — despite the 23 percent increase (an extra $18) on the average monthly PG&E bill, which includes electricity and gas. That could be a safe bet, because many liberal, wealthy San Franciscans will embrace the opportunity to boast that their power is coming from a clean, green, renewable energy source.

But many residents (perhaps tens of thousands) who could not care less where their energy comes from and may not be able to afford a 23 percent rate hike also may be included in the program, unaware that their energy plan has changed and that they have an option to get out of it. That possibility bothers three San Francisco supervisors, who offered an amendment to the plan at Tuesday’s meeting to help ensure it only includes willing participants. Their amendment was voted down 8-3.

“It smells of coercion,” said Supervisor Mark Farrell of the opt-out provision.

He acknowledged that the state law enabling the formation of a Community Choice Aggregation program requires that it can only be an opt-out situation instead of a voluntary opt in. State legislators were concerned that if such a program were voluntary it would not get enough participants to make it viable. If San Francisco’s program does not attract at least 90,000 participants, the city would be liable for the funding shortfall with Shell Energy, possibly as much as $15 million.

But Farrell believes the city could work around that constraint.

“To me this [should be] a volunteer program or we create a mechanism where we knew the people who are being offered CCA and are being asked to increase their energy rates had at least indicated they wanted to do so,” he said. “That to me is a big deal. At the end of the day it really comes down to the consumer. I don’t think it’s the right thing to do to foist onto consumers an increase of 20 to 30 percent higher energy rates in an opt-out program. If people want to spend more money … to buy green energy from CleanPowerSF, I think that is terrific and we should allow people the ability to do that. But to coerce them into doing it in an opt-out program … is the wrong approach, and something I can’t support.”

Rollout

Farrell was backed by Supervisor Carmen Chu, who offered an amendment requiring that the initial rollout would only encompass “those customers who have indicated a desire to be included in the initial marketing of the program.” Chu also offered an amendment that would cancel the program if not enough people expressed interest to make it financially viable.

Farrell, Chu and Sean Elsbernd, the three moderates on the mostly leftist Board of Supervisors, voted for the amendments. Scott Wiener was the only other supervisor to express any interest in making sure that unaware San Franciscans aren’t sucked into the rate hike.

“I think there are very good arguments on both sides of this,” said Wiener, who wanted more information on the impact of Chu’s amendments. “I don’t want to have something passed and signed into law that will cause (San Francisco Public Utility Commission officials) to spin around chasing their tails because ultimately the program doesn’t happen because we have inserted a poison pill. We know state law requires an opt out. They are suggesting a preliminary opt in that shows support before proceeding. My question is whether we are able to do that, to have some form of an opt in that precedes the opt out.”

Plans

PUC General Manager Ed Harrington, who postponed his retirement in order to shepherd CleanPowerSF to completion, responded that plans are already in place to achieve what Chu’s amendments are seeking to do, and that her amendments could in fact gum up the works.

“We’ve done extensive surveying already in terms of polling,” said Harrington. “We are only going and looking at places where a majority of people want to do it in the first place. We are not just randomly capturing people in the city where a majority may not want us. The problem that I see is that to be able to go out and have people sign up, I should be able to tell them the price. If I don’t know how many people are going to sign up or when they’re going to sign up, I can’t lock in the price until I sign the contract with Shell. It really harms the ability to have an intelligent conversation with people when you’re saying, ‘I don’t know what it is, but do you want it?’ It’s much more straightforward to say, ‘This is what it is, here’s your chance to make a choice.’”

Wiener made a motion to postpone the decision a week to allow time to figure out a way to make sure that only willing participants are signed up for the program. The motion was voted down 7-3. Wiener then joined the majority in voting down Chu’s amendments.

14 years in the works

Supervisor David Campos spearheaded the effort to approve the program, noting that the plan dates back 14 years when current state Assemblyman Tom Ammiano, D-San Francisco, was a supervisor.

“It’s not as ambitious and aggressive a program as many people wanted,” said Campos. “But it’s a program that at the end assures success and viability. At the end of the day it’s really about providing consumers a choice. It’s about making sure that ratepayers in San Francisco have the opportunity to not only have clean energy but to have a meaningful choice, to make sure there are other players in the business of providing energy beyond the utility [PG&E] that has had a monopoly for so long.”

Harrington pointed out that San Francisco has a goal of reducing carbon emissions to 80 percent of 1990 levels by 2050. The city is currently in the process of spending $90 million for solar projects that will provide greenhouse gas reduction equivalent to fewer than 7,000 homes. CleanPowerSF will expand that to 90,000 homes for just $19.5 million, most of which won’t be spent unless the program falls short of the 90,000 signups.

“There’s nothing else anyone has even thought of that has that kind of dramatic impact in San Francisco of such a small dollar amount,” said Harrington. “It’s an incredibly efficient way of spending your money.”

But the clean energy program may not be as clean and wonderful as it’s been touted, according to an SF Weekly article. A city controller’s report pointed out that city agencies will be spending millions of dollars more for energy under CleanPowerSF, and that will likely result in reduced city services and jobs.

In addition, the program doesn’t guarantee that 100 percent of the city’s energy will be coming directly through a pipeline from a wind farm or solar array. The Shell contract allows the company to obtain energy from some of the same sources as PG&E (which is doing so at much less cost), including coal and gas. Energy could also come from burning methane from landfills, sewage treatment plants and feedlots — renewable, but not exactly clean.

CleanPowerSF is not yet a done deal. Mayor Ed Lee shares Farrell and Chu’s concern about the opt-out provision, and he may veto the legislation. On Tuesday the board had the eight votes necessary to over-ride a veto. It remains to be seen whether those eight votes will hold after the public becomes aware that they may be facing a 23 percent rate hike next year.

By Wayne Lusvardi

San Francisco must have taken a chapter out of Laer Pearce’s new book “Crazifornia.” The city’s new CleanPower SF plan garners subsidies from U.S. taxpayers for green-power purchases.

Sounds crazy, doesn’t it? But you would have to be crazy not to shift your green power purchases onto U.S. taxpayers if laws provide for it.  And what city wouldn’t want to do it if it could cover it up as part of their compliance with AB 32, the California Global Warming Solutions Act of 2006?  San Francisco is “gaming the system,” just as Enron supposedly did in the 2001 state energy crisis.  But there is a double standard when municipalities do it.

Community Choice Aggregation Plan — Socialized Choice

Major newspapers are uncritically reporting San Francisco’s pending adoption of its CleanPowerSF plan where it would buy electricity from Shell North America’s renewable power business.  The new plan is part of the city’s “community choice aggregation” system authorized in 2002 after the state’s energy crisis under Assembly Bill 117, sponsored by Assemblywoman Carole Migden, D-San Francisco.

CleanPowerSF provides an option to electricity customers to choose renewable fuel like solar and wind for their homes.  Customers could stay with Pacific Gas & Electric, which previously had a monopoly on providing power to the city.  Or they would choose to get clean, renewable power, reportedly for a higher price.  Most energy experts agree that renewable power costs much more than electricity from conventional natural gas power plants.  So why would San Francisco want to do this?

San Francisco is poised to authorize $2 million to study local power generation options. The CleanPowerSF program would end up automatically enrolling about half of the city’s 375,000 electricity customers.  Customers would be given five months to opt out at no charge. But the city calls this a “choice.”  It would cost $5 to get out of the program after the first five months.

Reportedly, customers would see their electricity bills increase about $9 per month ($108 per year) to buy higher-priced clean power.  That would end up costing customers about $40.5 million more, total, each year once all city customers are enrolled.

To lure its customers back, PG&E plans to offer its own Green Option Program that would only cost $6 per month more by instead relying on a mix of renewable power and clean-energy credits. PG&E profits won’t suffer because those who opt out will still have to pay a premium in their power rate to do so.  This is called a “power charge indifferent adjustment.”  You can always tell when government and utilities don’t want you to know what a charge is when it is described in bureaucratic gobbledygook.

A low energy user in San Francisco pays about $89.31 per month for electricity from PG&E.  So $9 more would reflect an electricity price hike of about 10 percent.

Gaming the System of Negative Pricing

But perhaps what is behind the Community Choice Aggregation plan is an old-fashioned, buy low-sell high scheme.  Using different terms, this is called “arbitraging,” “playing the price spread,” or “gaming the system.”  The Wall Street Journal article by Lamar Alexander and Mike Pompeo of Sept. 18 — “Puff, the Magic Drag on the Economy” — gives us a clue as to how this might work.

Conventional power plants only generate electricity sales when there is a demand for energy.  But solar and wind power plants can collect a federal tax credit for every kilowatt hour they produce power, whether there is a demand for it or not.

Strangely, the government green power subsidy is so generous that green power producers can pay municipal power departments to buy it.

It’s called “negative pricing.”  It allows green-power companies actually to bribe customers to take their power so they can collect a net profitable tax subsidy from U.S. taxpayers.  Voila!  Another example of Laer Pearce’s “Crazifornia,” where higher electricity prices are better and lower prices are worse.

And to make it even crazier, wind turbines mostly generate electricity at night and thus have an efficiency factor of only about 30 percent.   But wind energy producers get a tax credit as if the wind turbine was producing power 24 hours/7 days a week/365 days a year.

For a city to generate a 10 percent rate hike and justify it, a city would only have to buy about 2.5 hours of wind power at night when electricity prices are often near zero anyway. You might call wind turbines “tax farms,” not wind farms.

City Skimming of Electric Rate Revenues

Cities impose what are called “Utility User’s Taxes” on electricity, water and telephone bills. The Utility User’s Tax rate in San Francisco is 7.5 percent.  So about $3 million per year would get skimmed right off the top into city coffers.

Additionally, the city can transfer revenue surpluses from municipal electricity departments into their general funds whenever deemed necessary. So, conceivably, the whole $40.5 million in estimated additional revenues generated under the city’s CleanPowerSF plan could end up in the coffers of the city’s operating budget.

Eureka! Another Gold Rush in San Francisco. Maybe the city isn’t so crazy after all.

Functional, But is it Necessary?

Many public policy experts and journalists claim California is dysfunctional.  But San Francisco is proving its motto born in the Progressive 1960’s: “The city that knows how.”  And what it knows how to do is shift its electric power costs onto U.S. taxpayers, while double-charging its electric customers and marketing it as a renewable energy program that reduces carbon emissions.  Customers in liberal San Francisco are likely to buy this as a feel-good program that they participating in to clean up the environment and bring competition into the power market to lower prices.

All this is totally legal and functional.  You won’t hear a peep out the California Public Utility Commission about this, because they only regulate private investor-owned utilities, not unregulated municipal utilities.

Oddly, San Francisco already is supplied clean hydroelectric power from Hetch Hetchy Dam, which is run by PG&E.  But that doesn’t count as “green power” under California’s “green power” law.  Now you can see why.  It would ruin the city’s tax-farming plan.

Those who keep using “dysfunction” as a way to describe California’s “craziness” may not understand how functional such seeming irrationality may be in reality. Psychologists have a term for it for individuals: secondary gain.  Sociologists call it a “latent function,” as opposed to a “manifest function.” 

What is missing from the dysfunction explanation of government in California is the value dimension.  California can crazily adopt high-priced green energy plans or build unnecessary bullet trains.  And it can make the trains run on time and avoid electric blackouts by buying wind power at night when usage is low.

So seemingly crazy government programs and projects can be made to function properly. But function omits the value dimension: Is there a real necessity for such crazy big government?

But what if there was a cheaper, clean option all along from hydropower?  The unexplainable craziness involved with CleanPowerSF indicates that providing clean, renewable power is not its real purpose or function.

Do seemingly “crazy” Rube Goldberg cartoon-like taxing mechanisms fit with our democratic values?  Where is the check and balance mechanisms?  What happened to the Progressive notion of utility regulation?  Who will guard the public interest of the taxpayer and utility ratepayers when the fox is supplying the power for the lights in the henhouse so he can see the chickens better?

Just as your you may know some relative who acts “crazy” on the outside but who has a motive to do so, California may not be as crazy as we think it is. It may be crazy like a fox.