President Michael R. Peevey
Commissioner Loretta M. Lynch
Commissioner Carl W. Wood
Geoffrey F. Brown
Susan P. Kennedy
Re: Docket # R.01-10-024, Order Instituting Rulemaking to Establish Policies and Cost Recovery Mechanisms for Generation Procurement and Renewable Resource Development
According to the schedule established in Decision No.
Local Power is a service list participant in your current
proceeding on long-term procurement plans recently filed in outline form by the
state’s three monopolies, R:
This is the first time that Local Power has submitted comments in this proceeding. Our credentials and purpose are as follows:
A. Inventors of Community Choice. Local Power staff authored the California Community Choice of Energy law of 2002, Chapter 838, after co-authoring, also, the nation’s original Community Choice bill, Massachusetts Senate bill 447 on January 4, 1995 (preserved intact in the subsequent 1997 energy industry Restructuring law in 1997 with local control also of a pro rata share of ratepayer-financed energy efficiency funds enabled for a similar non-bypassable surcharge-based state subsidy program), advised in the drafting of Community Choice laws in Ohio (1999) and New Jersey (2003), and drafted California’s new Community Choice law for Assembly Speaker Pro Tem Fred Keeley (finally declined to sponsor, 2000) and then Assembly Member Carole Migden (AB48x, AB9xx of 2001, AB117 2002), which was passed by the legislature and signed by the Governor on September 24 as Chapter 838 of 2002. Local Power has also assisted, observed and published articles about aggregation efforts that has been undertaken in recent years as part of its American Local Power Project, a national 501c3 project to educate public officials about Community Choice.
B. Inventors of “Community Power.” Local Power is not only uniquely qualified to speak for the interests of Community Choice Aggregators in California; it has also developed models and passed a major San Francisco city charter amendment to allow the use of municipal revenue bonds to finance renewable energy, conservation and energy efficiency. As author of San Francisco’s 2001 Proposition H, Local Power has broken new ground for Community Choice with a plan announced by Supervisor Tom Ammiano in May, 2001 to use aggregation and revenue bonds to finance construction of a solar photovoltaic power system into San Francisco’s rooftops that is five times larger than the Sacramento Municipal Utility District’s, currently the largest, in conjunction with revenues from San Francisco’s Community Choice contract..
C. Network Design Innovators. The San Francisco Solar Power Facility (local.org) proposal would be 50 Megawatts, built as a single system rather than an incremental patchwork of individual installations, and be built as an integrated network with large facilities providing a variety of services to San Francisco neighborhoods, business areas and public facilities, ranging from providing the whole city with peak power to powering schools and bomb shelters in a grid failure. Taking revenues from Community Choice aggregations as the basis of municipal revenue bonds to finance the project, the Community Power facility would deliver this dual benefit to consumers and the environment. Informed by staff experience in designing and regional and national telephone networks for Lucent, Motorola, Western Wireless and others for more than ten years, Local Power staff have adapted the rapid buildout and risk-assumption methods of rooftop network operators and in January, 2002 presented the solar industry with a model for the 50 Megawatt network, predicting it should take only three years to install (SMUD took seven years to install 10 Megawatts).
Local Power’s purpose in R:
In addition to local control, a key innovation at hand in
this new law is the simple removal of a massive century-old conflict of
interest in putting the wires monopolies into a position of purchasing or building
electricity capacity. Entrusting a throughput-based business with procurement
and demand side management has never worked well; even “incentivizing” monopolies
to implement energy efficiency resulted in notoriously mismanaged programs for
years, reconfirming the overwhelming fact that slowing down a monopoly’s meters
works against its shareholders interests; and that energy efficiency funds make
for good monopoly marketing. With this inherent historical conflict of interest
eliminated by Community Choice’s opt-out contracting authority, a great
opportunity has been created. With many
A. Summary. Our greatest
concern in response to the outline plans submitted February 3 and 4 is that while
Pacific Gas and Electric (“PG&E”) and Sempra do not mention Community
Choice or aggregation, but rather choose to wholly ignore Community Choice as
an issue, Edison places the monopolies in a competitive
relationship with their own customers by claiming equal access to competitive
supply, implying that their customers will have to compete with the monopoly to
purchase power from the competitive suppliers. Knowing that this is a very physically
limited pool of supply, such a demand-side competition will severely and adversely
impede communities in
This is clearly inappropriate. The monopoly’s role as
provider of last resort should not be allowed to interfere with Community
Choice aggregators (Chapter 838 requires the monopoly to cooperate fully with
Community Choice aggregators), and it is incumbent on the Commission to ensure
that a new form of consumer captivity is not allowed in
The key to making solar cost-effective is using rate design to finance systems and design systems to physically benefit a community’s local load profile, bestowing benefits rather than imposing costs on the monopoly’s grid, and sharing the system benefits with all ratepayers. With Community Choice comes the ability to distribute the costs and benefits of a Community Choice aggregator’s portfolio across the rate design, using a blended rate to provide competitive aggregate prices with better rate security, less fuel price volatility, and a higher employment o green power sources to deliver long-term consumer benefits. Critical to the revenue performance of such mitigations will be the design of such systems, the cooperative integration of such networks into a monopoly’s distribution system, and a concerted negotiation between City and monopoly to build whatever solar power and other green power facilities that cities like San Francisco seek through Community Choice and revenue bond authorities such as Proposition H.
B. PG&E (PGE Corp.)
Most striking about PG&E’s Outline is that, unlike SCE, it
does not mention Community Choice but rather refers only to Self Generation, Municipalization
and Direct Access. Community Choice is a particular law that has just been
approved of by the legislature and governor that has a particularly large
impact on PG&E, in particular that
PG&E places a restoration to creditworthiness as among the objectives of its outline plan. It is not clear why this would be in the public interest, however.
The goals of “Establishing Resource Adequecy Requirements” should be focused on reducing the burden of the monopoly’s obligation to serve, demand responsiveness being among the principal benefits of Community Choice and Community Power.
Finally, the goal of “Promot(ing) Regulatory Stability” is acceptable only if it does not mean the stability of a monopoly.
C. SCE (
We are pleased that SCE has proven so open about its
intention of competing with its own customers should those customers seek to find
an alternative power provider by implementing the new Community Choice of
Energy Law, Chapter 838 of 2002: or as
A “durable but flexible long term plan” as proposed by
This is a simple decision, perhaps the simplest ever to face
the Commission: try to go “back to regulation” or forward to Community Choice.
The Commission should move proactively to limit the wires monopoly’s role in re-entering
procurement and carve out a major space for this new hybrid of public power and
competition. It is clear that as a monopoly
The idea that the utility wires monopoly would have equal access to competitive suppliers of unregulated power plant capacity with Community Choice aggregators is to directly place wires monopolies into competition not only with unregulated competitive suppliers but also with their own customers should those customers seek to purchase competitive energy services under Chapter 838 and thus seek to negotiate long-term power supply agreements with the same companies now being solicited by these wires monopolies.
As the Commission is aware, because deregulation involved selling off half the electrical capacity in the state to unregulated companies, deregulation is not reversible in any meaningful way without a public takeover of the entire system. Otherwise re-regulation will be a net loss to ratepayers and the public rather than a recovery. The only recovery from California’s energy crisis is to get serious (really for the first time) about forcing competition on this industry, with the local control, revenue security and integrated resource planning that Community Choice provides. If bailed out, ringfenced and bankrupted wires monopolies are allowed to block their own customers from reaching alternative competitive suppliers by locking up the suppliers in long term contracts, the public will have been betrayed.
Similarly, the public urgently needs control over
procurement of electricity for a multiplicity of public policy goals that are
now being shouldered by many
With revenues from aggregation contracts under local
control, a generic municipal revenue bond authority such as
Local Power’s plans would apply technologies to shave peak loads such as solar photovoltaics, solar thermal, heat recovery, as well as HVAC and lighting retrofits, load management and the like. Truly, under Community Choice the energy industry may have a technology renaissance that will take up where the information technology revolution left off. This is the public benefit of Community Choice, in contrast to which a bumbling restoration of a bailed out, ring-fenced, and bankrupt monopoly is simply not a very good idea, at all.
The Hint. Edison has also mentioned its interest in both “demand and supply side options” and indicates its ability to provide reliable, cost-efficient and environmentally sound electricity service somehow hangs on having “equal resource adequacy requirements for all load serving entities” meaning they as wires monopoly should be allowed to have equal footing with their customers in seeking competitive supply of electricity, which they have already been paid by ratepayers to abandon. Unless the monopolies are prepared to give the $ billions back from their unregulated holding company, there is no basis for a claim to equal access to competitive supply with their own customers which they are supposed to serve as wires companies and default suppliers, not blocked from finding competitive suppliers – which Chapter 838 authorizes them to do - as competitors. Clearly this would be a direct violation of state policy.
The fact that
Sempra also declines to mention aggregation or the Community Choice law in its long term procurement plan outline. All Comments for PG&E would therefore also apply.
We look forward to working with the Commission in this matter.