Page One

Trying to lower consumer energy bills and increase its use of renewable energy, Berkeley, along with other Bay Area cities, is considering jumping into the energy business. 

Last week, the city’s Energy Commission voted unanimously to recommend that the City Council put aside $100,000 to cover start-up costs for a plan that would put the city, not PG&E, in charge of picking its energy suppliers. 

The goal of the feasibility study to see if the city can keep rates on par with PG&E and determine how much green energy can be added to Berkeley’s portfolio, said Neal De Snoo, the city’s energy officer. The city hopes that by diversifying its energy sources, Berkeley will release fewer greenhouse gases and be less prone to wild swings in the natural gas market, he said. 

“We think this can give us more energy independence, stable prices and non-polluting energy sources,” said Councilmember Kriss Worthington. 

Besides California, Ohio and Massachusetts have passed laws allowing cities to establish bulk energy consortiums, known as community aggregates. 

Ohio’s program, established in 2001, currently has 905,000 customers, according to The Office of the Ohio Consumers’ Counsel. 

Under California’s law, passed in 2002, PG&E would continue to distribute power through its system, and Berkeley residents would have the option of sticking with the utility as its purchaser of electricity. 

“We have always supported the idea of giving customers a choice in their energy service provider,” said Brian Swason, PG&E spokesperson. Previously, PG&E had sought to block a plan for San Francisco to follow the lead of Alameda and take control of both the utility’s purchasing and distribution network. 

Berkeley is working with Oakland, Emeryville, Pleasanton, Marin County, Richmond and Vallejo to form a consortium that could negotiate bulk rates for electrical energy and possibly take ownership of green power plants, De Snoo said. No California city has begun buying energy outside of PG&E under the law, but San Francisco and Chula Vista are also setting up separate purchasing blocks. 

Even if the other Bay Area cities backed out, De Snoo said, Berkeley could go ahead with the program, although it would face higher administrative and planning costs.  

In the event that Berkeley joined forces with neighboring cities, they would likely form a joint-governing body to oversee energy purchases and investments, De Snoo said. Because the energy load must be planned continuously, he said, Berkeley or the consortium would likely contract out those duties.  

Under the California law, PG&E would continue to bill consumers and then turn over the money to Berkeley to pay energy producers. Annually, Berkeley consumers, excluding UC which has its own energy contracts, use 530,000 megawatt hours of electricity at a cost of $46 million, De Snoo said. 

City officials said they believe Berkeley has two advantages over PG&E that would enable it to buy more expensive renewable energy while keeping rates in line with the public utility. Since PG&E charges small business a higher rate to subsidize residential customers across its system, De Snoo said, Berkeley, which has proportionally more small businesses, pays more to PG&E. Also, since Berkeley can borrow money more cheaply than PG&E, it could reap greater profit from investing in a generation plant. 

“That’s where there’s a real economic benefit,” De Snoo said. “If we just purchase power from private producers we wouldn’t have any advantage over PG&E.” 

De Snoo said the most likely energy investment for the city or consortium would be to upgrade a wind farm. A feasibility study, funded by the California Energy Commission, is slated to be ready for the City Council’s review in April, De Snoo said. 

The state energy commission is pushing the consortiums to boost renewable energy sources, like wind and solar power, to 40 percent of their total use. PG&E is required make renewables 20 percent of its portfolio by 2017. 

Energy deregulation has a bad name in California, where the state’s previously forced utilities to buy energy on the volatile daily spot market. Under the new law, cities like Berkeley would be able to enter into long-term contracts for power as utility companies have historically done. 

“In Ohio, it’s been a success, but not as big a success as some people were hoping for,” said Robert Burns, senior research specialist with the National Regulatory Research Institute at Ohio State University.  

Burns said that as a result of cites more aggressively seeking lower prices than utility companies, customers have seen a 5 percent average rate decrease. However, when added municipal administration costs are factored in, he said, the total savings was unclear. 

The program, he added, had unquestionably helped boost the use of renewable energy in a state where 85 percent of energy comes from burning coal. 

The future of reform in California rests largely on rules set forth by the State Public Utilities Commission, expected to be finalized by the end of the year. The PUC will have the final say on how much PG&E can charge for handling billing, fees paid to PG&E for exiting their energy contracts as well as on whether large-scale users will again be free to negotiate independent deals. 

PG&E’s next purchasing round is scheduled for June, De Snoo said. If Berkeley hasn’t announced its intention to exit the PG&E purchasing plan by then, he said the city will have to pay an added opt-out penalty if it leaves. 

De Snoo didn’t think a move by larger companies to buy power outside of the community blocks would affect Berkeley. However, he added, if small businesses chose to stick with PG&E, Berkeley would lose part of the financial incentive for buying its own power.