Stockton’s best move of 2022?

Stockton’s best move of 2022?

by Michael Fitzgerald in Stocktonia

Source

It’s complicated, but the decision to leave PG&E for a new power provider seems promising

Stockton’s Council unanimously voted in September to dump PG&E and get power from a new animal: a “Community Choice Aggregator” called East Bay Community Energy Authority (EBCE).

The deal with the Oakland-based public power agency, which kicks in in 2024, has three salient benefits. Your power will probably be a tad cheaper; significantly greener; and it’s not PG&E.

“There’s no liability for the city,” said Dan Wright, the council member who championed the switch. “I know that’s hard to believe. I had to convince (City Manager) Harry Black of it … There is none.”

Liability—to the General Fund—is not an issue. Yet there are risks.

Energy markets can be volatile. Utilities are subject to regulation by the California Public Utilities Commission, which doesn’t always realize the ramifications of its policy directives. And there could be an X factor. Who saw Enron coming?

The background:

A 2002 state law allows creation of Community Choice Aggregators, or CCAs, nonprofit alternatives to investor-owned PG&E and other legacy utilities.

A CCA buys power which PG&E transmits over its grid. The law says PG&E must do so at the same cost and reliability as its own service. No hanky panky, PG&E, you ol’ devil.

The law was long overdue. When Sacramento wanted to form its own power company, PG&E fought it tooth and nail for 20 years.

A municipality can form its own CCA or join a Joint Powers Authority with other municipalities. After looking at the start-up costs and liabilities of going solo, Stockton wisely joined EBCE.

What can go right

East Bay Community Energy Authority serves 19 East Bay cities, some rural areas, and the city of Tracy. The company boasts it annually saves its customers $19 million over PG&E rates.

Let’s look closer at the savings claim.

A study by an Oakland energy consultant found EBCE’s Stockton rates will match PG&E’s or be up to 3% cheaper. Stockton has almost 100,000 households. If the average Stocktonian pays $1,000 a year for electricity, a 3% discount is $30 per person per year.EBCE says it locks lower prices into long-term wind and solar contracts to hedge against price swings. (Courtesy photo)

You can present that as an overall savings of $3 million. Truth is, EBCE’s lower rates may not amount to much on a per capita basis. Which is not to scoff at any savings.

But modestly lower bills are just part of the picture, said Wright. “Even if it is slightly more expensive, the investment coming into our community will be worth it.”

As a benefit, the investment may surpass the lower rates. EBCE is nonprofit. Unlike PG&E, it pays no dividends to shareholders. It can therefore invest profits in communities. And it does.

Stockton, for instance, lags other cities in clean-energy infrastructure. EBCE plans to help bring Stockton up to speed.

“We think it’s imperative that we build the infrastructure first,” said East Bay Community Energy Authority CEO Nick Chaset, “particularly for folks who live in multi-family housing.”

For example, by sponsoring charging stations at apartments, EBCE encourages low- and moderate-income earners to switch to electric vehicles (which are expected to drop sharply in price in coming years). EVs save the average Californian $919 a year on gas, according to the US Energy Information Administration.

And they ease air pollution.

The savings goes back into the local economy.

The company also plans electric bike rebates and leases; electrifying area light- and medium-duty trucks; and building a humongous lithium ion battery the size of five to 20 containers in Stockton so energy purchased at low rates can be stored for discharge when rates spike.

EBCE has other programs to improve home efficiency and save residents’ money. Like switching homes to power-saving induction cooking, and electric heat pump water heaters. It also installs home batteries so that solar power gathered by day can be used as the sun goes down.East Bay Community Energy Authority CEO Nick Chaset. (Courtesy photo)

Other plusses:

· Installing rooftop solar and other renewable development will create jobs, the study says: “over 300 jobs in the Stockton area (adding) over $30 million to the area’s economy.”

· A CCA can leverage its tax-exempt status to obtain lower-cost capital than credit-battered PG&E and consequently can buy electricity at less cost.

· EBCE can help Stockton achieve its Climate Action Plan goals.

· A CCA’s board includes customer representatives. Stockton will have a say in policy and access to the books.

· Taking natural gas out of homes reduces asthma.

What can go wrong

A study identified five variables that could drive up CCA energy bills.

(1) Higher Renewable Supply Costs

(2) Higher Wholesale Market Prices

(3) Higher PCIA (I’ll explain)

(4) Lower PG&E Rates

(5) High Opt-Out

· The first two are self-explanatory. EBCE says it locks lower prices into long-term wind and solar contracts to hedge against price swings. It also says it employs sophisticated risk management strategies.

Modeling of energy prices over the next 10 years by S&P Global Market Intelligence shows mid-day prices will actually drop as more renewables come online. Peak hour prices will remain about the same; solar can’t meet all morning and evening demand so “gas-fired resources” are needed.

The point is CCA prices are not pojected to climb.

So far, “EBCE has always offered rates that are below PG&E rates,” said EBCE spokesman Dan Lieberman. Currently, EBCE’s Bright Choice rates are 3% below PG&E, including all fees.”

· The “PCIA,” the oddly named Power Charge Indifference Adjustment, is a fee paid to PG&E to ensure its remaining customers don’t pay more as customers defect to CCAs.

If CCAs really snowball, that fee could increase. Over time it should come down as PG&E’s pricey renewable contracts expire, the study says.

Also, the formula for determining the PCIA fee is “under discussion,” meaning subject to change, meaning lobbyists are probably dogfighting in the Capitol. Photo by Michael Fitzgerald

· Lower PG&E rates. I’m tempted to say, “That’ll be the day.” Seriously, the consultant’s study predicted that over the next 10-year period PG&E’s rates will climb by an average of 3% per year.

Their analysis omits catastrophe. As I wrote in last column, PG&E is so far behind in transmission line safety through Northern California forests that the likelihood of more catastrophic fires, staggering damage judgments, and steeper rates seems ominously high.

· High opt-out. When Stockton switches, customers can choose to remain with PG&E for a nominal fee. If enough do, the fee for CCA customers could climb. Opt-out, however, has been minimal through ECBE’s territory.

There are other potential downsides besides cost.

· One involves Stockton’s control. With 20 cities plus rural customers in the JPA, “decision making is allocated amongst the parties … This could result in the goals and priorities of the city of Stockton being altered or sidelined …” the study says.

CEO Nick Chaset said members don’t butt heads. “I would say it’s very collegial. I think there’s a real culture in the board of alignment around core goals but also of making sure we are very respectful of core goals.”

If push ever comes to shove, the JPA’s bylaws allow “weighted voting,” voting by member size. Stockton will be the second-largest city in the JPA, guaranteeing clout.

· EBCE’s portfolio of renewables might reduce Stockton’s utility tax revenue. Chaset argues any reduction will be offset by the increase in home values hence property tax from the installation of rooftop solar and other upgrades.

If you want more, you can read the city’s staff recommendation and the consultant’s report.

There is one other risk—to the leaders behind this change, should things go sideways.

“If it winds up being slightly more expensive than PG&E, there may be a political price we may have to pay,” said Wright.

The reverse is also true. If Stocktonians see lower bills, greener energy sourcing, cleaner air, jobs, and investment, then the switch to a CCA may be recognized as the city’s best decision of 2020.

And Wright starts looking good for Mayor or higher office.

Chaset sounded confident. “Nothing has gone wrong in any of our implementations to any of our customers, and we have brought on more customers than any other aggregators in PG&E’s service area,” the CEO said. “I don’t think anything can go wrong.”