Hey Matier & Ross -- PG&E is no security blanket

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Who'll cling to PG&E after a 19 percent rake hike?

Today’s San Francisco Chronicle piece by Phillip Matier and Andrew Ross brought to mind a Pacific Gas & Electric Co.-sponsored Web site that was set up to undermine the city’s fledgling Community Choice Aggregation (CCA) program.

That’s because one of the key points in the story was that San Francisco’s CCA could result in higher customer bills. According to the Chronicle:

"A 2007 city controller's report concluded that a typical residential utility bill under this type of plan could go up by 24 percent if only half the purchased energy is green. The cost would almost certainly go even higher if the city went totally green, the report said."

This city controller’s report is referenced on the PG&E-funded Web site, too, and this supposed 24 percent increase was splashed prominently across colorful outsized postcards that the PG&E-sponsored “Common Sense Coalition” sent to businesses and residences throughout the city last December. However, San Francisco’s Local Agency Formation Commission (LAFCo), a city commission responsible for setting CCA in motion, maintains that the claim is misleading.

Why?

The controller’s was drafted in 2007, making it an outdated and unreliable source for an economic-impact projection at this time, according to LAFCo Senior Program Officer Jason Fried.

“PG&E is trying to confuse people now … because they know that in a month or two more, we’ll have a contract” with actual figures to go by, Fried told the Guardian. The city is still in negotiations with Power Choice LLC, the firm selected to handle power purchases, and so it has yet to determine a long-term pricing plan. Fried also pointed out that the 24-percent increase noted in the controller’s report only pertains to electricity generation charges, and not the entire customer bill.

While the report did caution against a potential increase in prices, it also made it clear that the figures were preliminary. Here’s an excerpt:

"San Francisco’s CCA process has not yet advanced to the stage where any definitive economic impact statement can be made. A detailed economic impact assessment will not be possible until the RFP process is complete, a structured long-term rate plan has been submitted, and an opt-out penalty has been set. [NOTE: As of February 2010, the RFP process is complete, but the other two steps haven’t been definitively nailed down yet.]

The proposed implementation of CCA could lead to greater competition in the City’s electricity markets, lower rates for consumers, and a greater reliance on local sources of renewable energy and conservation. Such an outcome would benefit the San Francisco economy and the global environment."

Since this PG&E-sponsored propaganda campaign got underway, a figure unearthed from this three-year-old report is popping up everywhere, including in the Chronicle.

More importantly, the focus on a potential rate increase under CCA ignores an important question: Is the status quo any better?

Even if CCA did drive up prices, it seems that sticking with PG&E as the region’s sole electricity provider might not be any cheaper in the long run. For example, the following appeared a Feb. 19 article in the Wall Street Journal:

"In December, [PG&E] asked state regulators for permission to raise customer rates 19% or $1 billion in 2011, with additional rate hikes of about $550 million from 2012-13. … The outlook for the increases is unclear, as consumer advocates have vowed to fight them, citing PG&E's already higher-than-average utility rates, California's relatively high 12.4% unemployment rate and the state's ailing economy."

There are other factors to think about, too, like the dynamic environment we live in and how the cost of a finite energy resource will fluctuate in the long run. The Chronicle piece quotes Severin Borenstein, co-director of the Energy Institute at UC Berkeley's Haas School of Business, as saying San Francisco’s CCA is “fraught with danger.” This statement seems to ignore what environmentalists have been saying for years, which is that the status quo itself is a treacherous path to go down.

A key difference between San Francisco’s CCA and PG&E’s energy mix is that CCA would rely more heavily on green energy sources, with a goal of offering 51 percent of its energy from renewable resources by 2017 with the plan to transition eventually to 100 percent renewable power. Meanwhile, PG&E is making snail-like progress toward a 33 percent renewable-energy standard by 2020 that is mandated by state law.

In the long run, many experts tell us that energy derived from fossil fuels will be more susceptible to price volatility than wind and solar -- especially with added environmental pressures that scientists predict will result from climate change. A future characterized by less rainfall threatens to drive up energy prices, according to the Union of Concerned Scientists, because California gets about 20 percent of its electricity from hydropower, and could be forced to purchase from an outside provider in years of extreme drought. Hotter summers are also expected, which could lead to a higher demand for electricity when everyone is running air conditioners.

Energy analyst Laura Wisland of the California office of the Union of Concerned Scientists put it this way: “We can’t afford not to take advantage of the renewable-energy resources in our own backyard. We will save money, because we will become less dependent on fuels that have more volatile prices.

“We know that we have an exhaustible supply of fossil fuels,” Wisland added. “We know that we have an inexhaustible supply of wind and sun. In the long term, we see renewable energy as investing in … more price certainty and cleaner air -- and that can benefit all Californians.”

Comments

Providing electricity is not the only cost that should be considered when debating about clean energy; what PG&E, its political sycophants and far too many journalists fail to mention are the public-health and environmental costs -- in tangible, not just fiscal, terms -- stemming from the status quo. Add those in and clean energy becomes all the more attractive.

Posted by Richard Knee on Feb. 22, 2010 @ 4:52 pm

Even the material make up of lets say PV panels have an enviromental impact.

Posted by Jerry Jarvis on Feb. 22, 2010 @ 5:08 pm

I have been doing research on installing PV panels on my home and what I have found is that there is about a 12 year turn around before it starts to pay for it's self. Life expectancy of the PV panels are about 25 years. By that time any replacement panels should cost less. But in the mean time it will cost me about 9 dollars per kwh. At this time I can see PG&E's point in view that it will cost rate payers more when solar is used. Since municipals can be profitable energy producers.

Posted by Jerry Jarvis on Feb. 22, 2010 @ 4:59 pm

I found your post on PGE's news section on Google Finance. (The original Chronicle article did not make it to the news listing.) Thank you for making this important clarification public. Given that Matier and Ross have made their careers on the news that doesn't get generally get reported, I love knowing there is an alternative to their alternative. Keep up the good work SFBG!

Posted by Guest suz on Feb. 22, 2010 @ 6:44 pm

Why is CCA the necessary first step to decreasing carbon impact? Why aren't more modest options being explored first? Berkeley FIRST solar http://www.ci.berkeley.ca.us/ContentDisplay.aspx?id=26580 Or similar programs for retrofitting homes? Tax breaks for energy efficient construction?

I don't understand the need for CCA especially without a vote. At this point, it's likely electricity will come from Shell Oil (see Marin http://www.marinij.com/marinnews/ci_14339086). Not really a desirable alternative. CCA may make sense at some point, but why rush when the City is already having trouble funding basic services?

Posted by Eli on Feb. 22, 2010 @ 9:23 pm

Richard above makes the right point, I'll make it more clearly and strongly. Is money the most important thing in life? Of course not! Any fool can see that the natural environment is infinitely more important than money. If our governments, at all levels, were doing their jobs, installing solar panels and wind generators on all buildings would be mandatory and would be subsidized by the government for anyone who actually needs it. Local generation like that is by far the most environmentally friendly way to get electricity. If it costs more, so what? The immense environmental and ecological damage caused by burning fossil fuels and by nukes costs so much more in terms of destruction of our natural environment that this should be a no-brainer.

Jerry's point is correct per se, but what it means is that we all need to eliminate needless use of electricity and conserve as much as possible. What it does NOT mean is that solar panels cause anywhere near the harms caused by fossil fuels and nuclear energy. The correct comparison is the damage caused by constructing coal, gas, and nuclear plants, then having to continuously supply them with fuels -- which includes the harms of mining, drilling, refining, and transportation (think oil spills) -- compared to the construction of solar panels. Again, no-brainer.

Posted by Jeff Hoffman on Feb. 23, 2010 @ 8:53 am

Another crucially important point about the 2007 Controller's report is that it incorrectly used an utterly false hypothetical Community Choice model that would be supplied only by wind power. But San Francisco's CleanPowerSF will have a huge amount of efficiency and conservation projects built into it, providing very rapid cost savings to the full program which will likely bring rates down, not up.

The Controller's report in fact mentioned in more than one place that San Francisco's program was planned to be served by a mix of solar, wind and efficiency/conservation. And then, for no apparent reason, the report based possible future price projections on a model that was served solely by new wind power production.

It was partly because of this obvious flaw in the report, that even the fiscal conservatives on SF Board of Supervisors simply ignored the Controller's report and voted unanimously with all of their fellow supervisors to start the program...

Posted by Eric Brooks on Feb. 23, 2010 @ 11:29 am

The Community Choice law exists in 7 states and the states of Massachusetts and Ohio have had CCA programs implemented for years and found that not only does it carry the benefit of cleaner energy, but it costs less because the municipalities don't need to pay shareholders. Marin has indeed contract with Shell, a company PG&E has contracted with for years, only to get the program jumpstarted. The plan is to use the revenue that would normally go to shareholders and use it to fund Energy Efficiency programs in the communities and invest in local power generation. This is a solid plan with a great track record and I applaud any municipality willing to brave a fight with the litigation giant that is PG&E. I also recommend that ratepayer of PG&E ask them to back off on litigation trying to stop CCAs. PG&Es actions are being questioned because part of the Community Choice Law dictates that the existing energy provider is NOT to obstruct a CCA from forming. But since no one has sued them to stop, (who has the balls to sue PG&E?) they continue to obstruct and lie and act the bully in local proceedings. Don't fall for the hype!!

Posted by Guest on Feb. 24, 2010 @ 4:38 pm

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