The community choice aggregation (CCA) movement has built considerable momentum in California in recent years. In CCA programs, groups of local government agencies team up to take over decision-making on what sources of power to use in the local electric grid – with utilities continuing to hold responsibility for maintaining the grid. 

CCA advocates contend that not only will this lead to use of more environment-friendly types of energy, it will bring down rates for businesses and households by creating competition for utility companies that often have no rivals. Critics say decisions on what types of energy are used are already mostly dictated by state laws requiring a long-term shift to cleaner renewable energy sources. They also question whether local governments have the necessary expertise for the responsibilities they are taking on.

But since the state’s first CCA, Marin Clean Energy, was launched in Marin County in 2010, the programs have proven popular and kept expanding. Nineteen programs serving 10 million of the state’s 40 million residents have been established.

Last week, however, saw the first major bad news for CCAs in years. The Ventura County Star reported some of the local governments in California’s largest CCA – the Clean Power Alliance – were unhappy enough with the cost of power for street, highway and outdoor lighting that they had opted to return to Southern California Edison to provide that power.

The backlash is limited. The alliance includes Los Angeles County, Ventura County and 30 local cities. The cities of Ventura, Camarillo, Moorpark, Oxnard and Thousand Oaks have taken steps to limit their reliance on the alliance, and at least two other cities are considering the same step. They must give six months notice. 

Edison blamed for defections from Clean Power Alliance

Most member agencies are satisfied, with many choosing to use the 100 percent clean energy option provided by the alliance even if it carries a cost premium of 7 percent to 9 percent. 

Alliance leaders blame the defections on pricing decisions by Edison that they say were attempts to punish their CCA’s members. Edison said all its decisions had been ratified by the state Public Utilities Commission in a transparent process and challenged claims that the utility subsidized some customers at the expense of others.

But as cities are squeezed by the cost of pensions and look to save money wherever they can, the decisions made by Ventura, Camarillo, Moorpark, Oxnard and Thousand Oaks could be copied by other local governments. And while the cities are retaining use of the Ventura-L.A. CCA for most of their energy accounts, the street, highway and outdoor lighting accounts are among the biggest of all in terms of total bills, and thus most coveted by CCAs. 

Nevertheless, the news continues to be mostly bright for CCAs. In February, the San Diego City Council voted to begin negotiating on establishing a CCA with other local governments. San Diego would be the largest city in the nation with a CCA. The cities of Carlsbad, Chula Vista, Del Mar, Encinitas, La Mesa and Oceanside have expressed interest in joining the regional initiative.

Large utilities split on how to deal with CCAs

The decision was made easier by the surprising decision of the giant investor-owned San Diego Gas & Electric utility to welcome a new era in which it runs the regional grid but others choose energy sources. The utility disclosed in November that it hoped for state legislation “that would allow us to begin planning a glide path out the energy procurement space.” Edison and Pacific Gas & Electric have been far cooler to the CCA movement.

In another sign of CCAs’ acceptance as part of the California energy landscape, in May, Moody’s gave Peninsula Clean Energy an investment-grade credit rating. Peninsula serves 300,000 accounts in the Bay Area.

Only one other CCA has such a high rating from Moody’s: the Marin program that launched the movement in 2010. It has about 255,000 customers.

Proponents say government control will lead to cheaper utility rates and faster adoption of renewable energy.

This month, more than 950,000 homes and businesses in Los Angeles and Ventura will shift to a community-choice program – the Clean Power Alliance. It will be the state’s 20th and largest community-choice provider, which will then provide power to nearly 3.6 million customers in the Golden State.

Those numbers could drastically grow in coming years. Both San Diego Mayor Kevin Faulconer and Dianne Jacob, chair of the San Diego County Board of Supervisors, have endorsed community-choice programs. Many other local governments are watching how the programs work in places that have already adopted them.

SDG&E says it welcomes infrastructure-only role

To the surprise of many industry watchers, one of the state’s three giant investor-owned utilities isn’t fighting this development.

After San Diego began taking steps toward a community-choice program last year, San Diego Gas & Electric made clear its interest in getting out of energy procurement. Earlier this month, Kendall Helm, SDG&E’s vice president of energy supply, told the Los Angeles Times that the decision was straightforward.

“We don’t think we should be signing big, long-term contracts for customers that have made a conscious choice to be served by a different” provider, Helm said. “We think our primary role and our primary value is in the safe and reliable delivery of that power.”

Pacific Gas & Electric and Southern California Edison continue to defend the status quo and to work with the California Public Utilities Commission and SDG&E on “exit fees” assessed to departing customers to make sure they help pay for maintaining energy infrastructure. But PG&E, now in bankruptcy and facing possible dissolution by the CPUC because of repeated scandals, has dropped its once-aggressive opposition to the very idea of community-choice energy, including sponsoring a failed state ballot measure on the issue in 2010.

CPUC president fears programs could fail, cause havoc

But California’s most prominent regulator worries that adoption of community-choice’s programs could have huge unintended consequences.

CPUC President Michael Picker told the San Francisco Chronicle last spring that he worries about things going haywire.

“You’re going to have some failures,” Picker said. “Electric markets can be brutal. So what happens to the customers, midyear, if the company or the program goes away? Where do those customers go?”

In a May op-ed in the Sacramento Bee, Picker urged local officials pursuing community-choice to act with care.

“The last time California deregulated electricity, it did so with a plan, however flawed. Now, electricity is being deregulated de facto, through dozens of decisions and legislative actions, without a clear or coordinated plan,” he wrote. “If California policymakers are not careful, we could drift slowly back into another predicament like the energy crisis of 2001.”

Picker warns that managing California’s power grid requires expertise and will become increasingly difficult as new clean-energy mandates kick in and as new technologies come to the fore.

But these warnings so far don’t seem to resonate with the statewide business community, which so far has not taken a strong, consistent stand on community-choice.

Some local groups have, however. The San Diego Regional Chamber of Commerce, for example, questions the assumptions that community-choice will lead to cheaper utility rates and increased use of clean energy.

California’s three large investor-owned utilities are renewing efforts to allow them to make ratepayers cover the costs of wildfires that authorities blame on utilities’ mistakes or poor maintenance.

Pacific Gas & Electric officials made this clear last week when they announced they expected to have at least $2.5 billion in liabilities from the wildfires that scarred the wine country of Northern California last October. That sum is only for 12 relatively small blazes that the state blames on PG&E’s failure to maintain equipment and clear brush near power lines. Authorities are still looking at what caused the biggest blaze – the Tubbs fire – which torched more than 3,000 homes in Sonoma County and is blamed in the deaths of 22 people.

PG&E CEO-President Geisha Williams used a conference call with analysts to make the case for state legislation to protect electricity utilities from bankruptcy in an era in which huge wildfires – blamed on hotter, drier weather – are more common than ever. PG&E only has an estimated $840 million in insurance coverage to deal with the 200 and counting lawsuits from the wine country conflagrations.

Williams said “flawed” state laws made utilities responsible for fire risks that were beyond their control. But in a decision-making process that began last summer – before the wine country blazes – and ended after they were finally put out, the California Public Utilities Commission rejected a similar argument put forward by San Diego Gas & Electric. In August, CPUC staff recommended that commissioners reject an SDG&E request to pass along to ratepayers $379 million in unrecovered costs from 2007 wildfires that ravaged San Diego County. After three months of wavering, the CPUC board voted unanimously in late November to deny the request.

Williams said negative media coverage of the October fires complicated utilities’ efforts to get help from the California Legislature. But some utility watchdogs are still wary of state lawmakers, whom they see as sending out mixed signals on wildfire liabilities.

On the one hand, the state Senate voted 39-0 in May and an Assembly committee voted 15-0 last week for Senate Bill 819. It would ban the CPUC from allowing utilities to pass along to ratepayers the costs of fines or penalties as well as the cost of damages that were “caused” by a utility’s infrastructure. Only costs the CPUC deems “just and reasonable” can be shifted from shareholders to ratepayers under the legislation. PG&E and Southern California Edison expressed “concerns” about the bill without formally opposing it, according to a legislative analysis.

Benign bill pushing responsibility – or stealth bailout?

But another bill that had similarly lopsided support in the Senate is drawing a very mixed response. Senate Bill 1088 passed the Senate 34-2 in late May and survived an Assembly committee vote last week with eight lawmakers in support, two in opposition and five declining to vote.

It would require utilities “to submit a safety, reliability and resiliency plan to the California Public Utilities Commission every two years.” It would also require the state Office of Emergency Services “to adopt standards for reducing risks from a major event and requires the office to update the standards at least once every two years.”

Supporters – including PG&E, SDG&E, labor unions and some counties hit hard by last year’s blazes – depict the measure as a benign attempt to make sure utilities are prepared to handle their responsibilities.

But critics see the language requiring the state to regularly “update” how it evaluates risks posed by the biggest blazes as potentially giving legal ammunition to the utilities – specifically, to their arguments that emerging, more dangerous conditions should change what costs can be shifted on a “fair and reasonable” basis to ratepayers.

Formal opponents of SB1088 include groups which have standing to challenge utilities’ proposed rate hikes (The Utility Reform Network and the Office of Ratepayer Advocates); business interests (the California Manufacturers and Technology Association, the Western States Petroleum Association and farm groups); and green activists (most notably the California Environmental Justice Alliance).

From pioneering air-pollution control programs in Los Angeles County in

So when Senate President Pro Tem Kevin de León introduced Senate Bill 100 in January, the expectations were high. The measure committed California to generating 50 percent of electricity from renewable sources by 2026 – four years earlier than the present goal – and to 60 percent by 2030 and to 100 percent by 2045. No government remotely as large as California’s had made such a commitment.

In spring interviews with reporters at an energy conference in Orange County, the Los Angeles Democrat depicted his bill as a common-sense measure to goad investor-owned utilities into making long-term shifts in their infrastructure to prepare for an all-renewable future. He said progress had been so quick that he expected the state to meet the 50 percent renewable standard “in the early 2020s without breaking a sweat.” But he also depicted SB100 as setting up “the most ambitious program in the world.”

When it passed the California Senate on a mostly party-line vote in May, the world took notice. The New York Times set the tone: In a 2,100-word analysis headlined “Fighting Trump on Climate, California Becomes a Global Force,” it depicted the bill as a key part of California’s determination to take over the global lead in environmentalism from Washington.

But earlier this month, SB100 failed to even get a floor vote in the Assembly as lawmakers wrapped up business for the year. A Desert Sun report depicted the decision as “unexpected.”

That’s not how it looked to some insiders. Business groups spent months hammering home the argument that it was risky to commit to 100 percent renewable energy use when it was not clear that was either feasible or safe for a modern economy. In a June interview with the San Diego Union-Tribune, Gary Ackerman, executive director of the Western Power Trading Forum, depicted SB100 as “reckless” and with a huge downside. The arguments echoed those made by Pacific Gas & Electric, Edison and San Diego Gas & Electric, the state’s three giant investor-owner utilities, which quietly have established strong ties with Democratic lawmakers in poor districts buffeted by high energy costs.

IBEW adopted, modified utilities’ argument

Meanwhile, de León didn’t enjoy unified support on the Democratic front. An argument the utilities had been making – that SB100 was potentially a hugely disruptive force – was adopted and modified by some labor leaders. They worried what a 100 percent commitment to renewable energy might mean for thousands of union members. According to an NBC News report, the International Brotherhood of Electrical Workers, Local 1245, began opposing the bill in late summer because the local union alleged de León had gone back on his promise to protect union jobs.

But a third factor may also have been at play. De León has never enjoyed the broad goodwill accorded his predecessor, Darrell Steinberg, now the mayor of Sacramento. Soon after taking over as Senate leader in late 2014, de León was the target of a scathing column by then-Sacramento Bee pundit Dan Walters for mistakes, power plays and a lack of humility. He faced similar criticism from the Sacramento Bee’s editorial board.

De León has since emerged as a legislative powerhouse, at least according to the conventional wisdom that holds that the 2017 session was one of the most productive in recent history. But his clout couldn’t overcome the late-emerging opposition to SB100.

The lobbying will begin all over again for the measure in January, the Greentech website reported.

“We’re going to be back next year,” said Peter Miller, Western energy project director at the Natural Resources Defense Council, told the website. “I don’t want to underestimate the challenges to moving to a fully zero-carbon grid, but we can get there, and we will.”

Now there’s one more story that places the PUC in very unflattering light. KQED has details:

In 2011, Steven and Sharon Vego, along with their 21-year-old son, Jonathan Cole, were killed after a power line went down in their backyard in San Bernardino. …

 

[The Vegos] left behind two kids — one of whom watched from inside the family house as her father, then mother and brother, all died in January 2011.

 

Within a few months, the surviving children filed a lawsuit and asked the CPUC for its investigation report. The CPUC voted in May 2011 to allow the release of that report. It was issued Dec. 17, 2012, and found that the incident was not only Southern California Edison’s fault, but that it could have been prevented if the utility had responded to previous issues on the same electricity circuit.

 

But public records released by the CPUC show the agency didn’t give the report to the Vego family until March 19, 2014 — more than two years after the family settled its lawsuit with Southern California Edison. And the CPUC waited until five days after it had entered into a settlement agreement in which Southern California Edison admitted that it violated state regulations, that there had been similar incidents previously and agreed to a $16.5 million fine.

PUC sides with utility over ‘grieving family’

In a Feb. 16 letter to CPUC President Michael Picker, Sen. Jerry Hill, D-San Mateo, decried how the “commission — which was the only public entity to perform an investigation — effectively took the side of the utility against the grieving family in a civil matter.”

“You know everyone seems to characterize the relationship between the PUC and the utilities as cozy. Well, I think some of this, what we are finding out, shows not just a coziness but a collusion, and that’s the part that I think is most troubling. Collusion gets into what I look at as corruption, what I look at as something that could be dishonest,” Hill told KQED.

The former San Mateo mayor says this is not the only recent example of Edison dealing unfairly with victims of its defective maintenance. He cited the case of Brandon Orozco, an apprentice working for an Edison contractor who was shocked to death at an underground Edison facility in Huntington Harbour in 2013.

Hill said the Public Utilities Commission, especially given that it had formally concluded Edison was responsible for Orozco’s death, should have taken on the utility when it refused to release its internal investigation into the accident. The utility cited attorney-client privilege — even though state law “clearly states that the commission, and each commissioner, and anyone employed by the commission, can at any time inspect the account, book or documents of any public utility,” Hill told KQED.

In San Francisco, federal prosecutors are laying the groundwork for a criminal trial of Pacific Gas & Electric that will begin in March. In preliminary filings, prosecutors paint a scathing picture of PG&E negligence leading to the 2010 explosion of natural gas pipelines in San Bruno, which killed eight and wiped out a neighborhood.

How is that bad for the PUC? Because implicit in the federal allegations that 28 felonies were committed by PG&E is that the utility was not facing serious regulation before the catastrophe in San Bruno, a suburb south of San Francisco. Here is part of the San Jose Mercury News’s recent coverage:

“The government intends to offer proof that PG&E’s willful decisions not to maintain records, conduct proper pipeline assessments, and otherwise comply with federal pipeline safety regulations were part of a corporate culture of prioritizing profits over safety,” federal prosecutors wrote in papers filed on Nov. 2 with the U.S. District Court in San Francisco.

 

“The prosecutors in the trial are being very aggressive,” said Peter Henning, a professor of law with Wayne State University in Detroit. …

 

“They are trying to frame this case for a jury, and the government is attempting to frame this around a single word: greed,” Henning said.

 

PG&E faces a fine of up to $1.13 billion if convicted on the federal criminal charges.

‘Edison was driving the bus’

Meanwhile, in Southern California, politicians and consumer advocates have grown increasingly critical of the PUC-orchestrated, already-approved plan to have ratepayers cover 70 percent of the $4.7 billion cost to close the San Onofre nuclear plant and safely shutter its two reactors, whose 2011 malfunctions led to the release of small amounts of radiation.

Since the plan was approved in fall 2014, it’s been revealed that Peevey had never-disclosed meetings with Southern California Edison executives over how to apportion San Onofre closing costs, including a 2013 meeting in a Warsaw hotel room between Peevey and an Edison official. Edison owns 80 percent of San Onofre and San Diego Gas & Electric owns 20 percent.

But other questions have emerged about the PUC’s stewardship that go beyond the propriety of these undisclosed meetings.

The Los Angeles Times delved into the expert testimony that the PUC reviewed before approving the settlement and reported that one expert blamed Edison’s poor management for the problems with leaking steam generators which are used to cool the nuclear reactors and keep them safe to operate. The expert questioned the utility’s insistence on blaming Mitsubishi Heavy Industries, the branch of the Japanese conglomerate that made and installed the generators.

Arnie Gundersen, a nuclear engineer who served as an expert witness regarding the handling of San Onofre’s generators, said at a minimum both Edison and Mitsubishi are at fault.

 

“When I reviewed all the data it was clear to me that Southern California Edison was the one driving the bus,” Gundersen said.

 

“Mitsubishi wanted the contract and agreed to some very onerous terms in order to get it.”

 

Gundersen said the San Onofre case is similar to two incidents in Florida, where an agreement was reached over the closed Crystal River nuclear plant that led to billions in costs to consumers. In addition, he said, the St. Lucie nuclear plant had similar steam generator problems as San Onofre.

A KPBS report also alleged that Edison acted deceptively in its 2006 meeting with the Nuclear Regulatory Commission, never telling NRC officials of concerns about the steam generators that let Edison to complain to Mitsubishi in both 2004 and 2005. It appears the PUC was unaware that the utility’s concerns about steam generator problems dated to 2004.

‘The same people always get paid’ by PUC

A San Diego Union-Tribune analysis also raised questions about the PUC negotiations that led to the agreement assigning most of the shutdown costs to ratepayers.

The biggest beneficiary of a state program aimed at leveling the playing field between utilities and their customers is a Bay Area consumer group that privately negotiated the deal assigning customers 70 percent of the costs for the failure of the San Onofre nuclear plant.

 

The Utility Reform Network, or TURN, collects millions of dollars a year in so-called intervenor compensation – almost half of all the money handed out by the California Public Utilities Commission since 2013. …

 

TURN receives as much as 90 percent of its operating income from commission awards, so it’s highly dependent on regulators for its livelihood. Whether consciously or not, the group might allow that dependency to shape its advocacy, critics say.

 

“The public really doesn’t have anyone at the commission looking out for them,” said San Diego lawyer Michael Aguirre, who is suing to overturn the San Onofre settlement as an undue burden on utility customers. “They are being charged for advocacy that really is not being performed. The same people always get paid.”

Peevey is facing criminal investigations by both the state and federal government. His home in La Cañada Flintridge, a Los Angeles suburb, was searched by investigators in January.

The deal requires 70 percent of shutdown costs to be borne by ratepayers. It has drawn intense questions in the past year as evidence amassed of a you-scratch-my-back-I’ll-scratch-yours relationship between longtime California Public Utilities Commission President Michael Peevey and Edison, SDG&E and the state’s third investor-owned utility, Pacific Gas & Electric. Emails obtained from the PUC show Peevey frequently linking beneficial regulatory actions with the utilities taking actions he approved, including donating money to fight a 2010 initiative that would have scrapped AB32, the state’s landmark 2006 law forcing a shift to cleaner but costlier energy.

Peevey left the PUC board in December but has remained in the news ever since because of federal and state criminal investigations of his actions as the state’s top utility regulator. The most damning revelation came in February, when documents were discovered that showed the framework for the San Onofre bailout was established in an improper, never-disclosed 2013 meeting in a Warsaw, Poland, hotel room between Peevey and an Edison executive.

This meeting and other undisclosed communications between PUC officials and utility executives led Administrative Law Judge Melanie Darling last week to order a $16.7 million fine against Edison. The edict needs to be approved by the PUC — Darling works for the PUC, an example of the tidy way that regulators and utilities operate in California — but that is considered pro forma.

The fine is seen by some observers as a confirmation of the seriousness of the ethical failings on display in the Edison-PUC back-room relationship. It is certain to trigger fresh interest in the Legislature in adopting PUC reforms.

Six were approved in the most recent session, only to be vetoed three weeks ago by Gov. Jerry Brown on the grounds that they were an “unworkable” mish-mash of changes. The vetoes irked Assemblyman Anthony Rendon, the Lakewood Democrat who is slated to become speaker later this year and who has expressed extreme dismay over how the PUC has acted.

But the fine is considered irrelevant by the consumer advocates and trial lawyers who are the PUC’s loudest critics, given how much Edison will save because ratepayers will have to pay $3.3 billion of the $4.7 billion needed to safely shutter San Onofre.

Mike Aguirre, the former San Diego city attorney, suggested the administrative law judge’s recent hearings on Edison’s relationship with Peevey and the PUC were kabuki — a staged show to prop up the status quo.

“With one hand the CPUC is giving Edison $3.3 billion, with the other hand they’re taking back some extra change,” Aguirre told the Los Angeles Times. “This is all cosmetic.”