Community choice energy coming to Silicon Valley in April

By Khalida Sarwari

Along much of the Pacific Northwest, hydroelectric dams, wind turbines, geothermal heat pumps and landfill systems work around the clock to convert natural resources to renewable energy as part of a movement toward a low-carbon, high-energy-efficiency economy.

And Silicon Valley, famous for setting trends, is hitching its wagon to the movement, hoping to pave the way for dozens of other communities in California.

Residents and businesses in a number of South Bay communities have started to receive notices in the mail informing them of their automatic enrollment in a new program that will deliver renewable energy starting in April by way of PG&E.

The objective of the program, started by a nonprofit called Silicon Valley Clean Energy, is to offer cleaner electricity to residents, businesses and municipal facilities at a cheaper rate than PG&E.

The agency offers two tiers of service.

GreenStart is the default service that gives customers 50 percent renewable energy that is 100 percent carbon-free. GreenPrime is the premium service, which provides 100 percent renewable power for a slightly higher rate than PG&E’s.

Residential customers who opt for GreenPrime would pay an average of $3 to $5 more per month than those with GreenStart, based on an electric bill of around $100.

Customers of either service can opt anytime by calling Silicon Valley Clean Energy (SVCE).

Those involved with the program say the most significant change is in the generation of energy. Whereas PG&E offers 55 percent carbon-free and 30 percent renewable energy, according to 2015 figures, SVCE promises to provide 100 percent carbon-free electricity for both services.

Howard Miller, an SVCE board director and Saratoga councilman, said the group guarantees it’ll keep rates at least 1 percent lower than PG&E’s the first two years and intends to continue offering cheaper energy into the future.

The utility company will remain responsible for most everything else—from meter-reading and billing to maintaining and repairing transmission lines and responding to outages.

According to Brandi Merlo, a spokeswoman for PG&E, customers in the competing program will be switched from a “bundled” service–which includes electric supply, transmission and distribution–and be subject to what’s called a “power charge indifference adjustment,” an exit fee assessed by PG&E to pay for energy it contracted based on anticipated demand. The rate currently is $0.02919 per kilowatt-hour, according to Merlo.

But even counting the exit fee, SVCE ‘s rates are still 1 percent lower than PG&E’s, said Pamela Leonard, a spokeswoman for the group.

SVCE is considered a community choice energy agency, which is a system adopted into law in various states, including California. The law allows cities, counties and some special districts to purchase and/or generate electricity for residents and businesses within their jurisdiction and have it delivered through PG&E’s transmission and distribution system.

Proponents of the community choice model say it encourages market growth and competition.

Merlo said that while PG&E “respects the energy choices that are available to our customers, and will continue to cooperate with local governments as they consider pursuing and/or developing a CCA program,” the utility is making strides in clean energy in other ways, from maintaining one of the largest utility-owned systems of hydroelectric facilities to servicing 250,000 solar-generating customers on the electric grid within its service area.

“As a leader in renewable (technologies), we continue to work hard to add more greenhouse mixes that’s affordable to our customers,” she said. “PG&E’s retail electric sales from eligible-renewable energy in 2015 were the highest ever at 29.5 percent, and we’re well on our way to meeting the 33 percent by 2020 deadline (state mandate) ahead of schedule.”

Formation of community choice programs in California was a long time coming, having been delayed by investor-owned utilities such as PG&E, which among other tactics sponsored Proposition 16 on the 2010 ballot to make it harder for communities to create such programs or even municipal utilities. Merlo defended the initiative, saying it was introduced by PG&E to give “voters the right to decide when public spending or public debt was involved.”

“We voiced concerns regarding the business plans associated with the earlier (community choice) efforts, as we believe that they were not sufficiently robust and represented risks to our customers,” she said.

The ballot measure was ultimately defeated by voters, a decision Merlo said was “respected” by PG&E, and the community choice program resumed traction across the Bay Area and state. Marin Clean Energy and Sonoma Clean Power paved the way for the broader Bay Area.

Elsewhere, Alameda County has begun forming its own community choice program while Contra Costa County has publicly expressed interest in following suit, according to Rod Sinks, a Cupertino councilman who serves on the SVCE board.

In Santa Clara County, the cities of San Jose, Santa Clara, Milpitas and Palo Alto have chosen not to participate. Santa Clara and Palo Alto have their own municipal utilities, which means they manage their own electricity procurement. SVCE’s directors said San Jose, being a large energy consumer, is looking to establish its own program, much like San Francisco did.

“I think we had an imperative to get together and they’re certainly big enough that they can run their own agency without little cities telling them what to do,” Sinks said.

SVCE is headed by Tom Habashi, who has worked for municipal utilities in Burbank, Palo Alto and Roseville. Elected officials from the 12 communities served sit on the agency’s board of directors. Members are Cupertino, Los Gatos, Campbell, Monte Sereno, Saratoga, Sunnyvale, unincorporated Santa Clara County, Gilroy, Los Altos, Los Altos Hills, Morgan Hill and Mountain View.

Sunnyvale, Cupertino and Mountain View initially got the ball rolling by beginning a conversation about climate change and how to combat it and, in 2015, they did a feasibility study to examine the viability of a clean energy program.

Initially there were a lot of questions, recalled Jim Griffith, a Sunnyvale councilman. “Is there enough renewable and carbon-free energy on the marketplace to do this? Could we buy them? Could we buy at a cost-effective price?”

“What we found,” he said, “was that if we were able to buy our own energy contracts and choose the source of that energy, we could considerably reduce the amount of greenhouse gases produced in the production of the energy that we consume at a price that was comparable and even below what PG&E was offering.”

Sinks said he was convinced, too. “We all found in our climate action plans moving toward community choice energy was the single biggest step we as local government can take in making a difference and one that didn’t require any habit, any change, any conservation,” he said.

Sinks, who was one of the first to get on board with Griffith’s plan, likened PG&E’s monopoly to that of the telecommunications industry in the 1970s and compared disruption of the electricity generation business to the breakup of the Bell System.

“What’s compelling to us is hey, if you can bring on effective competition where there’s no natural monopoly, consumers win—be they residents or businesses,” he said. “We recognize that power lines, wires and transformers actually are a natural monopoly—that whole distribution system would be terribly expensive and inefficient to duplicate, but sourcing of electricity is not a natural monopoly. It’s there where we’ve chosen to compete along the model of Marin and Sonoma, which have been highly successful in bringing greener energy at a cost on par with or a little less than PG&E.”

As with all regulated monopolies, Habashi said, the monopolistic entity and the regulatory agency collectively drive the price of a product up and more often than not, this has an effect on the quality of a service. “Bring competition in and the problem goes away,” he said.

According to Miller, PG&E is too “large and slow” an organization to pursue its own clean energy program. Moreover, the company doesn’t have an economic incentive to pursue such a program, given its status as an investor-owned utility with responsibilities to stakeholders, he said.

“We don’t have a giant fixed investment in old technology, old school power generation; PG&E does,” he said. “So one let’s us be more flexible on our power source, the other one let’s us be more flexible on the economics. That’s why we can be cheaper and that’s why we can be 100 percent greenhouse gas-free.”

And, this is how they plan to do it: SVCE will purchase renewable or low greenhouse gas-emitting energy—comprised of a mix of wind, solar, geothermal, hydropower, landfill gas and biomass— at competitive rates from suppliers, who will then deliver it through PG&E transmission lines. While the majority of the facilities are in the Pacific Northwest, including Washington, British Columbia and California, one hydroelectric power plant is in Idaho.

Although the facilities and power are state-certified, suppliers are not obligated to report information about their electricity sources until after the power is delivered, Habashi said.

“They’re required by law to tell us after delivery by a certain number of days…exactly which source we got and also to hand us the renewable portfolio credits, the credits that prove they have operated a renewable resource in order to generate electricity that you bought from them,” Habashi said.

The agency has set aside about $22.7 million to pull off this operation. It collected about $2.7 million in tax revenue from participating communities to secure an $18 million line of credit from banks to purchase energy contracts. Its goal is to repay the loan and line of credit, which carries a 2 to 3 percent interest rate on borrowed money, by the end of the year, Miller said. It shouldn’t be hard to do, he added, if the program generates $180 million by year’s end as anticipated.

“We’ll be completely debt-free by the end of the year,” he stated.

Revenue collected from the program will be re-invested back into the community in the form of lower rates, incentive programs and rebates, Leonard said. There’s also interest from board members in capital projects, such as investing in a solar storage facility, according to Sinks.

A state mandate requiring municipalities to lower their greenhouse gas emissions by 2030 is what propelled many officials from cities in Santa Clara County to get on board the SVCE train.

The program also serves a social benefit in that it gives residents one more way to be environmentally friendly, Monte Sereno Vice Mayor Burton Craig said.

“We’re trying to provide the ability for (residents) to purchase clean power,” he said. “This is really just us being able to offer the residents a chance to help out the Earth. The best part is they don’t have to do anything because everybody is automatically opted into it.”

Miller said the opportunity to make a “fast and dramatic change in changing the carbon footprint,” at least of his own constituents, got him to put his name down.

“With citizens in all of our collective cities doing nothing, we reduce the individual’s carbon footprint on the world by 30 percent.”

Added Miller, “this is a huge. If you believe in the whole carbon thing, doing nothing, we’re gonna cut, round figure, people’s carbon footprint by 30 percent.”

For that reason, opting in was a no-brainer, Miller said.

That sentiment was echoed by Griffith, whose city is expected to account for about 35 percent of SVCE’s total energy load. “It’s the ability for cities to control their own destiny in terms of the impact we have on the environment. That is a priority for the city of Sunnyvale, which is why we’re doing this.”

Campbell Mayor Liz Gibbons said she was hesitant about joining at first and asked herself three questions: Will it help save money? Will it be good for the city? And, will it be safe, secure and risk-free?

“This program was just so spectacular, because not only are we paying less, but we’re exceeding the requirements of any state mandate,” she said. “I’m just really very, very excited that people who care enough to control their own costs and put on their own solar systems are not making money for PG&E, they’re actually getting a return on investment.”

An added bonus, Gibbons said, is that it will help Campbell attract new businesses without impacting the city’s goal to reduce its greenhouse gas emissions. “Now, we can really be aggressive and encourage and invite a whole range of businesses that will help stabilize the economic vitality of the city,” she said. “Campbell happens to have a lot of startup companies involved in electric cars and electric charging stations. We hope the kinds of businesses we attract given our status as a clean energy city will bring more of that type of business.”

In addition to offering the service to its residents, the cities of Campbell, Cupertino, Los Gatos, Saratoga and Sunnyvale have all opted to upgrade to the GreenPrime service to power their municipal facilities. Monte Sereno may follow their lead, but it’s not an urgent priority for the city, said Craig.

The program is more or less a no-brainer for Gary Hedden, a longtime Los Altos resident  who leads a community group called GreenTown Los Altos, which promotes green living from solar panel installations and water conservation to clean energy vehicles and biking. Hedden is a solar customer, having installed solar panels on his roof back in 2012 to take advantage of a 30 percent solar investment tax credit, he said.

Last year, when he was on Los Altos’ environmental commission, Hedden and his colleagues studied local clean energy programs to see if it would be a good fit for the city of Los Altos. He was sold after hearing positive feedback from pioneers of the program.

“I support renewable energy,” he said. “I think that’s one way to reduce our greenhouse gas emissions. Also for me, (it’s important) just to set an example. I want to be on the leading edge of it.”

Hedden said he is aware that SVCE’s rates may increase in the future, but noted there are two major reasons why he prefers to take a chance on the agency anyway. First, if the rates were to get “badly out of whack,” he can opt out and return to PG&E. The second reason is that the program is locally controlled.

“If you have concerns, you can go to a board meeting or talk to representatives on the boards,” he said. “You can easily talk to somebody, where at PG&E it wasn’t so close.”

It’s the same for James Tuleya, a Sunnyvale resident who also is involved in climate action advocacy efforts through community groups such as Sunnyvale Cool, Carbon Free Silicon Valley and the Silicon Valley Climate Action Alliance. Tuleya, who had worked seven and a half years for PG&E’s energy efficiency department, said he feels more “connected” to an agency where he presumes getting ahold of a board director would be easier than someone at a company with more than 20,000 employees.

“SVCE is like a local small business, if you will,” he said. “I can influence SVCE’s decision-making as a commenter in the public, because it is a local public agency. (Even) as an employee of PG&E, there were very many levels above me and I had zero influence on (things like) that.”

For Tuleya, being a solar customer or owning electric vehicles isn’t enough. He said when he first heard about the community choice program through PG&E, he realized it was a far easier and affordable alternative to expanding his home solar system.

Tuleya has offered to be an early adopter of the SVCE GreenPrime program, which means he’ll be among the first to receive service in April.

“I like to lead by example,” he said. “I’ve been doing climate advocacy, trying to get (Sunnyvale) to address climate disruption. I also like to take my own personal action that’s consistent with that and to show others that it’s not hard and they can do it.”

The enrollment period is expected to take place over a six-month period, beginning in April. That means the first statement where residents can see changes will be mailed in May. Notices to residential and commercial customers enrolled in the initial phase started going out in January. Twenty percent of all households will be enrolled in the first phase and an additional 55 percent in the second phase this summer.

Customers have a 60-day window after they’re enrolled to opt out without incurring any fees. Afterward, it’s $5 for residential and $25 for commercial customers, according to Habashi. Those customers will be subjected to a “special rate” for six months set by PG&E and won’t be able to return to SVCE until after a year.

As of the end of January, five residents had opted out, according to Leonard. The reason most cited, she said, is that they didn’t feel comfortable being automatically enrolled. According to Gibbons, SVCE is budgeting for an 8 percent opt-out rate.

Hedden noted that he had heard concerns from fellow residents about the program and complaints about the automatic enrollment. It appears there is some confusion about the program, which those involved seem to be aware of.

They plan to hold community meetings throughout March and April to address misconceptions people might have. The meetings will be held March 6, 7 p.m. at the Saratoga Senior Center; March 13, 6 p.m. at the Cupertino Community Hall; April 22, 11 a.m. at the Cupertino Earth Day and Arbor Day celebration; and finally, April 30, at noon at the Sunnyvale Living Green Fair.

Visit svcleanenergy.org or call 844.474.SVCE (7823) for more information about Silicon Valley Clean Energy.

Link: Community choice energy coming to Silicon Valley in April