According to Rumble, the mission of CCP is “to provide cleaner power at a lower cost with local control.”  They plan to do this by helping cities and counties establish Community Choice power programs similar to the existing Sonoma Clean Power, which has replaced Pacific Gas & Electric in the vast majority of the homes and businesses it has targeted.

CCP, SCP and other firms are operating under California’s Community Choice Aggregation Act, Assembly Bill 117. In 2002 the Legislature passed AB117 and it was signed into law by Gov. Gray Davis a year before he was recalled.

The law defined CCAs as, “Any city, county, or city and county whose governing board elects to combine the loads of its residents, businesses, and municipal facilities in a communitywide electricity buyers’ program.”

Sonoma Clean Power

So how is this process supposed to work in cities and counties across the state?

One model is Sonoma Clean Power. Its process of “opting in” new ratepayers is anything but transparent. If CCP and similar companies follow that model, the same questions about transparency will arise.

SCP owns or operates no power plants. It owns or maintains no power poles, power lines or maintenance equipment. But SCP now pockets most of the payments Sonoma County residents would normally make to PG&E.

On their website, SCP wrote, “We provide everyone in participating cities with the option of using environmentally friendly power, generated by renewable sources, like solar, wind and geothermal, at competitive rates.”

But what, actually, does SCP do? According to a press release on the same website,  “Electricity will continue to be delivered over PG&E’ s transmission and distribution system, and PG&E will maintain responsibility for meter reading, billing and maintenance.” In other words, PG&E will continue to do all the actual work.

But instead of generating electricity, SCP buys power from a number of sources, including Constellation, a Baltimore-based subsidiary of Chicago energy provider Exelon. SCP also has signed contracts for geothermal energy with Calpine’s local Geysers facilities and for solar power from Recurrent Energy.

Is Sonoma Clean Power actually cleaner? 

There is one fact SCP is careful not to tell Sonoma County residents. To claim they are a cleaner provider, they compare their energy portfolio – 33 percent renewable  — to PG&E’s statewide portfolio – 19 percent renewable.

But in Sonoma County, already the great majority of electricity that PG&E delivers is renewable, since it comes from Calpine, a completely green geothermal source. From the Calpine website:

“Calpine, the largest geothermal power producer in the U.S., owns and operates 15 power plants at The Geysers with a net generating capacity of about 725 megawatts of electricity — enough to power 725,000 homes…. The Geysers meets the typical power needs of Sonoma, Lake and Mendocino counties, as well a portion of the power needs of Marin and Napa counties. In fact, The Geysers satisfies nearly 60 percent of the average electricity demand in the North Coast region from the Golden Gate Bridge to the Oregon border.”

The only way SCP customers can get the same percentage of geothermal power that PG&E already delivers in Sonoma County is the SCP EverGreen Option, which costs 20 percent more than their basic service, and asks customers to make a 12-month commitment, with a $100 charge for early termination.

SCP claims people should switch providers because it offers “cleaner energy at lower cost”. But obviously a stronger force is at work here.

Opting in vs. opting out

AB117 tilts the playing field drastically in favor of CCAs and against PG&E, Southern California Edison and San Diego Gas & Electric. For SCP, for example, just 5 percent have opted out, 95 percent automatically being included in SCP.

How? The unnaturally high adoption rate of any CCA is due to the automatic opt-in provision. Instead of giving residents the ability to choose the new government entity, California law states they are conscripted as CCA customers, unless they actively opt out and stay with the regular electricity provider.

To compound the situation, SCP makes it difficult for Sonoma County residents to even know their electricity provider has been switched. In early 2014, SCP sent out notices that it automatically had become residents’ new power company. It was cleverly disguised to look like the kind of promotional piece that is easy to throw away.

Here’s how the envelope looked, as if it were just another piece of junk mail in this age of email and texting. Below it is the letter that was inside.

‘Automatically start’

Notice how the letter spends about 150 words describing how supposedly wonderful  SCP is, and how it will “automatically start.”

Only way at the bottom does the letter mention, “You may opt out of Sonoma Clean Power and continue to purchase PG&E’s standard service” — which, by implication after all that went before, costs more and is dirty energy.

The mailer says it’s necessary to have “your account information” ready to opt-out, which for most people would be too much of a bother.

It’s as if an election for governor automatically picks one person unless 51 percent of voters actually show up to the polls, provide all their “information” and choose someone else.

First Community Bank offers financing

First Community President and CEO Debbie Meekins said her bank got involved with SCP because the new agency offered communities such compelling benefits as choice, more renewable energy and local control. “With California Clean Power, we’re looking to do the same thing,” she said.

The company proposes to offer cities and counties turnkey solutions that include not only financing, but legal assistance, energy purchasing, public outreach, billing and other services.

According to the Santa Rosa Press-Democrat, the company’s other four owners and directors are:

• Developer Bill Gallaher, managing director of Oakmont Senior Living;
• Former North Coast congressman Doug Bosco, a principal investor and general counsel for Sonoma Media Investments, which owns The Press Democrat;
• Komron Shahhosseini, a county planning commissioner and a partner in Oakmont Senior Living in charge of site acquisition and development;
• Jonathan Kathrein, a law clerk for Bosco and law school student with a background in environmental and community organizing.

In addition, “Gallaher and Bosco also are directors at First Community, which has provided $10 million in financing to Sonoma Clean Power, including a key startup loan of $2.5 million.”

Bosco served as U.S. congressman from the North Bay from 1982-1990. He was part of the Rubbergate scandal of the early 1990s, when he bounced 124 checks worth over $537,985 on the bank of the U.S. House of Representatives.

CEO Rumble anticipates great demand for his new company’s offerings. “There are several communities that are really interested in this model,” he said.

With everything available on a platter, from financing to legal help, to a guaranteed, state-sponsored takeover of PG&E’s customer base, why would they not be?

Greg Karraker is chief  marketing officer of a big data company, and a follower of local politics across America. His blog is www.thelittlepicture.net

Sonoma 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.

Justification

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.

And 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.