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The controller’s was drafted in 2007, making it an outdated and unreliable source for an economic-impact projection at this time, according to LAFCo Senior Program Officer Jason Fried.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