Sonoma Clean Power
Sonoma County Alliance White Paper on Sonoma Clean Power July 31, 2014
The Board of the Sonoma County Alliance has prepared this information paper to educate its members about Sonoma Clean Power which has been approved and joined by The County of Sonoma and six of nine Sonoma County Cities. (Healdsburg has its own private power company so will not join Sonoma Clean Power. Petaluma and Rohnert Park have yet to join.)
The following information was gathered from various websites and public information sources.
What is Sonoma Clean Power?
Sonoma Clean Power is a community choice aggregation (CCA) program developed through the Sonoma County Water Agency (SCWA). CCA programs allow cities and counties to form a service area to purchase and deliver electricity to their residents.
Marin County formed the only other fully operational CCA in California, Marin Clean Energy. The program is operated by the Marin Energy Authority, a joint powers authority comprised of the County of Marin and several cities.
Customers within a CCA service area have the choice to opt out of the CCA and continue to receive power from the utility (e.g., PG&E). Those who do not opt out will have their power supplied by the CCA. The utility continues to bill CCA customers for power transmission and other services (e.g., meter reading, billing, etc.). Only the electricity generation portion of electricity service is provided by the CCA entity.
- Reduce greenhouse gas emissions related to use of power in Sonoma County
- Be cost competitive
- Stimulate and sustain the local economy by developing local jobs in renewable energy
- Develop long-term rate stability and energy reliability for Sonoma County residents through local control
- Provide at least 50% renewable energy portfolio from outset
- Develop at least 30 megawatts (MW) of local renewable energy by 2020
- Develop at least 120 MW of local renewable energy by 2030
- Evaluate energy storage adequate for optimizing intermittent source generation projects
- Provide cost-effective administration services
- Provide a feed-in tariff to customers who produce more renewable energy than they use
- Provide local energy efficiency programs
- Increased renewable energy use – A CCA can choose to develop and deliver increased levels of renewable power.
- Local economic benefits – Utility revenues could remain local rather than be sent to a distant utility and shareholders.
- Local control – The governing board of a CCA would be comprised of local elected officials.
- Substantial greenhouse gas reduction – By providing increased levels of renewable energy a CCA program can result in significant reduction of greenhouse gas emissions for the service area.
- No risk to general fund budget – A CCA program is typically funded exclusively by power rates paid by program participants. There is no risk to city or county general funds.
- Implementing energy conservation and efficiency programs – Revenues collected by a CCA through power rates can be used to implement conservation and efficiency programs beyond those currently funded by the existing utility.
- Implementing carbon sequestration projects – A CCA program could work with the Agricultural Preservation and Open Space District on carbon sequestration projects.
- Costs of development and implementation – The cost of developing a complex entity could be significant.
- Ongoing financial risk – If too many customers opt out of the program there would not be enough customers to cover operational expenses.
- Utility opposition – The existing utility could mount a significant legal and political opposition campaign.
- The Board of Directors is made up of local elected representatives from the County of Sonoma and each of the participating Cities.
- Business Operations Committee is comprised of five volunteers, appointed by the SCP Board, who have expertise in the areas of management, administration, finance, public contracts, infrastructure development, renewable power generation, power sales and marketing, or energy conservation. The committee is charged with reviewing SCP’s internal operations, large business contracts and capital projects.
- Rate Payer Advisory Committee consists solely of volunteers and is comprised of three (3) commercial or industrial customers and four (4) residential customers. This committee is charged with representing ratepayers when reviewing SCP’s annual budget and rates before making recommendations to the Board of Directors.
- Management and staff include CEO Geoff Syphers, Kelly Foley, General Counsel, and Kate Kelly, Director of Public Affairs & Marketing. Total staff is less than ten with additional Key Consultants.
The Sonoma Co Alliance Board of Directors has not taken a position on Sonoma Clean Power and continues to have the following concerns:
- Balanced input and professional oversight of the JPA must be ensured.
Sonoma Clean Power Authority is a joint powers authority that has a public board, public oversight and transparency. It is also set up to operate more like a business than monopoly utilities for the simple reason that it is in a competitive market. SCP will focus on winning the maximum number of customers by providing the highest value services. SCP is governed by a Board of Directors with members appointed by the County and the cities choosing to join. The Board is advised and reviewed by a Ratepayer Advisory Committee and Business Operations Committee. The Board of Directors for Sonoma Clean Power will evolve as cities join.
- The on-going financial risk to the JPA could be understated:
- Long-term power purchase commitments will be made to secure future power supply. If too many residents opt-out of the CCA, income will not be adequate to fund these purchase contracts.
The initial power contract is designed to be flexible, so that SCP can add spot market purchases to adjust to changing conditions. Energy can be purchased or sold as needed into the statewide energy markets administered by the California Independent System Operator. SCP’s primary power supplier will be required to directly pass through the costs or benefits from these transactions with no mark-up. SCP can also adjust the purchased volumes specified in contract, but the adjustments will likely be at a different price, so there may be a gain or loss on the adjustment. SCP will set aside a modest portion of its expected resource requirements to be met with short term energy purchases so that there is sufficient flexibility to address different customer participation levels, while stabilizing costs for the majority of the SCP supply portfolio.
In the event of major or total financial failure, there is no cost to customers or participating cities beyond the loss of the benefits they are receiving from Sonoma Clean Power. Service simply returns to PG&E and the ways things are today. As a condition to beginning service, Sonoma Clean Power must post a CPUC-required bond to cover the costs of transferring customers back to PG&E if the program terminates.
The financial risks of failure are borne primarily by the energy supplier and the private bank lender. 25 percent of the start-up money will carry a county guaranty to the private bank, limited to $2.5 million.
- Staffing costs for the JPA will be significant. It must hire the right people who understand the complex nature of power purchase agreements. This will not be inexpensive.
It is recognized that it is imperative to hire extremely qualified and talented staff to manage this enterprise, and they will not be inexpensive. These costs are included in the financial projections.
- According to the Feasibility Study, the long-term economic success of the CCA is based on local alternative energy installations. Will economics encourage these projects?
We expect that the local renewable energy developed to provide SCP with power will be of two types: small distributed energy (e.g. rooftop solar and small wind) and large utility-scale projects such as solar, biogas generation, geothermal, etc. Below is a list of incentives which would assist both of these types of capacity development.
The federal solar tax credit is scheduled to sunset at the end of 2016, and this impact has already been factored into the planning for Sonoma Clean Power. A Feed-In-Tariff program will be planned in detail later in 2013, but likely will include a strict limit on the total capacity allowed into the program in each round and price differences for baseload sources such as geothermal relative to variable sources such as wind and solar photovoltaic. A combination of strategies will be used to ensure that any feed-in tariff (FIT) to support renewable energy production will remain financially viable. A stronger Net Energy Metering program is also in program plans which will incentivize small solar installations. In addition, SCP will actively explore other ways to increase private investment in renewable energy, including a Community Solar program.
- Will the public accept neighborhood projects and turn out to support them in front of PRMD or the Planning Departments rather than protest, stop, or increase cost through legal challenge?
We are confident that a significant amount of renewable power can be incentivized through programs that will not have environmental impacts. For example, the FIT and Net Metering programs described above will be designed to encourage the development of such projects on existing rooftops and “in-fill” otherwise-unproductive land. Any larger facilities would be sited to reduce environmental impacts to the maximum extent possible, and would be subject to the normal permitting and environmental-review process of the jurisdiction in which they are located. We realize that we must plan, design, and construct all of our programs and projects to avoid the types of protests referenced above, and are confident that we can.
- Are the stated specific goals realistic and attainable? How will they be measured in the future? What are the consequences of not meeting these goals?
The stated goals for Sonoma Clean Power are specific but not quantified. It is expected that the Authority’s Board may further define measurable goals.
- Creation of another government agency through a JPA adds to the growing bureaucracy in our nation.
Yes, Sonoma Clean Power will be a government agency. What exists today is a very expensive private entity that takes approximately $180 million in energy revenues out of Sonoma County every year, operating in a marketplace with no competition. By forming SCP, Sonoma County will be able to redirect the net income from energy sales back into Sonoma County, while allowing any customers who do not want to participate to opt out and stay with PG&E. None of the costs to operate SCP will come from taxpayers. SCP will not require a large number of employees. The Marin Energy Authority, which operates a CCA program in Marin County, has about 12 employees and SCP will begin operations with a smaller number.
- The concept of mandatory energy efficiency upgrades has not been well received to date in the community and may be ill advised in the current fragile economic climate.
It is not stated anywhere in Sonoma Clean Power plans and documents, nor is it expected, that energy efficiency upgrades would be required or mandatory under any circumstances. This is a misconception.
Additional information can be obtained at the following websites:
www.scwa.ca.gov/cca/ – Water Agency’s website includes links to newsletter, market surveys and feasibility study
http://sonoma-county.granicus.com/GeneratedAgendaViewer.php?view_id=2&clip_id=207 – See item 30 and links for presentation to Sonoma County Board of Supervisors