Column: The Public Eye: Risks and Rewards of Community Energy Program By Zelda Bronstein

Tuesday February 28, 2006

“Urge Your City to Adopt Community Control Over Local Energy!” That was the headline on the Sierra Club Environmental Action Alert that recently appeared in my mailbox. The alert was part of the club’s Bay Chapter campaign for Community Choice Aggregation (why do great ideas—single-payer health insurance is another example—have such mind-numbing names?). Community Choice Aggregation (CCA), the leaflet went on to say, is “a form of energy independence that takes the electricity-purchasing decisions out of the hands of huge corporations and gives control to local government.” CCA also promises to deliver electric power that’s greener and cheaper than what we now get from PG&E.  

Liberation from PG&E? Local control of electricity? And cheap, green power besides? It sounds too good to be true. Is it? Maybe, maybe not. What’s clear is that Community Choice Aggregation presents a huge opportunity—and complexity and risk to match.  

The catalyst for CCA was the 2002 passage of California Assembly Bill 117. Assembly Bill 117 gives California cities and counties the right to purchase electricity for power users in their communities. The law provides a public process for a city or county to solicit bids from energy service providers, to set higher goals for green power, and to use revenue bonds to finance new solar, wind, hydrogen and conservation facilities through monthly electric bill payments made by residents and businesses. Hence the term “Aggregation”: local governments get market clout by aggregating local users’ demands for electricity.  

CCA differs from municipal or public power, where a public agency, be it an arm of federal, state or local government, owns wires and/or power plants and wholesales power. Community Choice cities do not own or operate power plants or wire systems and do not form power agencies. Instead, companies called Electric Service Providers compete to deliver power to the Aggregation, from stipulated sources and at rates the community requires. A typical Community Choice contract lasts five to ten years. Millions of customers in Massachusetts, Ohio, New Jersey and Rhode Island now receive their electricity under CCA laws.  

To date, several dozen local governments in California, including Berkeley’s, have expressed interest in CCA. San Francisco is poised to be the first in the state actually to implement a CCA program, with the enabling legislation calendared on the March 7 agenda of the city’s Finance Committee.  

In Berkeley, Community Choice Aggregation has been a strong interest of the city’s Energy Officer, Neal De Snoo (pronounced Snow), since 1994, when he first went to work here. But until the passage of AB 117, CCA wasn’t a realistic option, says De Snoo, because users had to sign up individually. AB 117 enables local governments to form an opt-out organization: customers are automatically included unless they explicitly choose to stick with an investor-owned utility such as PG&E. Shortly after the law passed, the city invited bids from consultants to analyze the feasibility of a Community Choice program for Berkeley. The job went to Navigant Consulting.  

In April 2005 Navigant delivered a “Base Case Feasibility Evaluation” to Berkeley, Emeryville and Oakland. The study recommended that the three municipalities implement CCA by entering into a Joint Powers Agency (JPA). That structure, said the report, would make it possible to reach a workable economy of scale, as well as providing “an appropriate financing vehicle.” Startup costs were estimated at $400,000, and generation investments at $0-128 million, depending on the supply scenario. Navigant listed the advantages of Community Choice Aggregation—among other things, cheaper electricity, stable rates, greener energy generation, lessened dependency on imported natural gas and hence greater energy security, and heightened municipal and regional economic competitiveness resulting from lower and more stable rates.  

But the Navigant study also marked the program’s considerable risks—above all, the possibility that CCA rates would turn out to be higher than comparable prices charged by PG&E, “causing customers to be dissatisfied with the program or attempt to return to PG&E service.” Ironically, “the single greatest obstacle to achieving cost savings through CCA in the next few years” is PG&E’s right to impose so-called “cost responsibility surcharges” on CCA customers, exit fees that are designed “to shield PG&E from any financial losses or cost increases that might result from customers switching to service by the Aggregator.” The cities, acting through the JPA, could impose exit fees on their own departing customers. But as the report observes, “those costs would be paid by the very constituents whose interests [Berkeley] represents.” PG&E customers also “ultimately bear the risks of PG&E’s energy procurement practices, but PG&E is not accountable to its ratepayers to the same degree as is the city.”  

In August 2005, peer reviewers concluded that while Navigant’s overall approach was valid, in numerous respects it had underestimated the risks of establishing CCA for Berkeley, Oakland and Emeryville. Navigant is supposed to provide an amended version of its report. The next step would be for the consultants to develop a business plan that, unlike the initial report, which took a generic approach, would address the specifics of an East Bay CCA. According to an item on the Berkeley City Council’s Jan. 17 agenda, a business plan will cost $104,192. The City of Berkeley has already paid Navigant $28,500 for the original and amended versions of the Base Study. The Jan. 17 item states that “the total cost of Navigant’s services [to the three participating cities, the California Energy Commission and the Department of Energy] is $580,031.”  

Noting that a contractor is already working on Phase 2 for Oakland and Berkeley, De Snoo hopes that the council will authorize the business plan at its March 7 meeting. He’s concerned that if the city lags behind, it may not be treated as an equal partner. But a March 7 approval seems unlikely, given that last Tuesday the council approved a request, submitted by Councilmembers Capitelli and Olds, for the city manager to schedule a council work session on CCA on that date. The council usually defers to a later date action on an item that is the subject of a work session. The councilmembers’ memo asked that the work session include a discussion of the Navigant report, its peer review, and “a panel of energy experts—outside of city staff, commission members and hired consultants—to offer a variety of perspectives in response to the report.”  

A council work session on Community Choice Aggregation is a good idea. CCA is a highly technical proposition. For a lay reader, just comprehending the acronyms in the 142-page Base Study—a page near the beginning of the report decodes 38 of them—is a daunting task. And before moving forward, councilmembers need to grasp far more than the acronyms.  

So do their constituents. Unlike most other major environmental initiatives undertaken in Berkeley, the push for Community Choice Aggregation has not been, shall we say, a community choice. Instead, it’s been driven by staff and professional consultants working largely behind closed doors. By contrast, the city’s many pathbreaking recycling programs grew out of vigorous grass-roots campaigns and community-based institutions, most notably, the Ecology Center, Community Conservation Centers and Urban Ore. A project as ambitious and momentous as CCA should be—indeed, already should have been—the object of intense public scrutiny and discourse. To that end, we need a lot more than a council work session, which allows no opportunities for members of the public to engage in dialogue with councilmembers or anybody else. We need a real public forum. Given the Sierra Club’s interest in Community Choice Aggregation, it would be fitting for the club’s Northern Alameda Group to sponsor such an event.  

If it does, one issue that should be high on the agenda is governance. Summarizing the benefits of a Joint Powers Agency, Navigant says: “The JPA may authorize the issuance of low cost bonds by ordinance subject to referendum but without a vote of the electors within the public entities comprising the JPA.” I suspect that many Berkeley citizens would look askance at a governmental agency that could issue bonds in their name but without their consent.  

And who should serve on the JPA? De Snoo’s reply to that question is not elected officials because that would politicize the decisionmaking. I got just the opposite answer from Paul Fenn, the author of both AB 117 and the legislation behind San Francisco’s CCA, and the founder and director of Oakland-based Local Power. (The Local Power website ( is chock-full of accessible information about CCA.) Fenn thinks that the JPA should probably consist of the cities’ mayors, because, as he put it, “When they vote, they’re going to be accountable. Otherwise, you risk a backroom deal.” (Berkeley citizens might understandably wonder if putting the city’s current mayor on a JPA wouldn’t effectively guarantee a backroom deal.) I’d like to see De Snoo and Fenn, along with informed others, discuss governance and other CCA issues at a Sierra Club forum. It should be lively.  



My Feb. 6 Public Eye column contained several errors. The size of the Seagate/Arpeggio Building planned for Center Street is 186,000 square feet, not, as I wrote, 149,000 square feet. The correct address of the proposed West Berkeley Bowl is 920 Heinz St. Finally, I referred to the renamed Vista College as both Berkeley City College and Berkeley Community College; the former is correct.