California’s Davis, Yolo County Take Charge of Electricity Purchases

The two local governments are joining forces to form a joint power authority, allowing them to buy electricity on the wholesale energy market.

by Edward Ortiz, The Sacramento Bee / March 23, 2016

(TNS) — Yolo County and the city of Davis are joining a growing number of communities in California in circumventing larger utilities and buying their own electricity with the hope of getting less expensive energy from greener sources.

The two local governments recently voted unanimously to move forward with a Community Choice Energy program that will let them form a joint power authority and enter into contracts to buy electricity on the wholesale energy market. The program, which begins in March 2017, will also let residents opt out and continue purchasing power through PG&E.

“One of the benefits will be that we will have much greater local control over the source of our energy,” said Davis Assistant City Manager Mike Webb. “With that comes the ability to better align our energy sources with our local policies and the expectations of our constituents.”

The experiences of neighboring joint power authorities, however, show that electricity rates often end up higher than under PG&E because of expensive “exit fees” charged by the utility.

Similar programs have already been operating in Marin and Sonoma counties as well as in the city of Lancaster. San Francisco is launching its own authority in May, while 13 counties in California are weighing starting a program. Similar programs have been running in other states under the name Community Choice Aggregation.

In Yolo County, the effort is only the latest attempt to source its own electricity. In 2006, PG&E spent $11.1 million to defeat Measure L, which would have let the publicly owned Sacramento Municipal Utility District provide electricity service to most of Yolo County. The joint power authority differs from municipal utility districts such as Sacramento’s because it doesn’t run power infrastructure and only negotiates energy prices.

The move in Yolo County and Davis is expected to cost roughly $3.5 million, to be paid through a loan taken out by the city and county.

Mitch Sears, Davis’ sustainability program manager, said larger economies of scale could secure lower rates on the energy market with savings passed on to ratepayers.

Sears said the expectation is that customers will save 8.7 percent over a 10-year period, but that isn’t certain since the price of electricity is tied to fluctuating market rates. It also remains to be seen what PG&E will charge participants for delivery and exit fees.

The energy bought by the joint powers authority would still be transmitted via PG&E’s lines, and the utility would continue to handle billing. PG&E would also continue providing natural gas to Davis and Yolo County and maintaining its electricity and natural gas distribution system.

“Ostensibly, this will be invisible to the ratepayer, other than the documentation that shows what the source of their energy is,” Webb said.

In Marin County, a similar program was established in 2010 that procures electricity for 170,000 accounts. The Marin plan includes options letting consumers receive 56 percent to 100 percent of their power from renewable sources, as well as all of their electricity from locally produced solar power – the most expensive monthly option.

By contrast, PG&E derives 29.5 percent of its electricity from renewable sources, said PG&E spokeswoman Brandi Merlo.

The most recent data from Marin show that the two most affordable options there cost more than what a ratepayer would have paid with PG&E, due to what PG&E charges to deliver that power, plus the exit fee, said Alex DiGiorgio, the Marin program’s community development manager.

PG&E recently requested, and received, the go-ahead from the PUC to double the monthly exit fee charges. Terri Prosper, spokeswoman for the state Public Utilities Commission, said the exit fee will expire after 10 years for non-renewable contracts and after expiration for renewable contracts.

The exit fee is designed to allow the utility to recoup the possible financial loss of selling that energy at a lower price to other buyers, Prosper said.

“The Legislature decided it was only fair that the customers of the (community choice energy programs) who were bundled utility customers when the utility entered into long-term commitments ... should still pay their fair share of those contract costs, and not allow costs to shift to the remaining bundled customers,” Prosper said.

©2016 The Sacramento Bee (Sacramento, Calif.), Distributed by Tribune Content Agency, LLC.

 

 

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