Massachusetts-Ohio Delegation Files Landmark Community Choice Bill in Congress as Restricted California Cities Become State's Biggest Green Power Consumers:

San Francisco Asks California Legislature for a Community Choice Amendment

by Paul Fenn

Stand alone "Community Choice" legislation was recently introduced in Congress by Ohio Representative Sherrod Brown and six House colleagues, mostly from Massachusetts and Ohio, where Community Choice has already passed as part of state restructuring laws. The landmark federal legislation, which would enable towns, cities and counties nationwide to purchase electricity on behalf of all consumers and businesses within their jurisdictions, was filed just days before the San Francisco Board of Supervisors asked the California legislature for a Community Choice amendment to its ailing 1996 electric restructuring law. Meanwhile, green power advocates have announced that California cities - severely restricted by prohibitively expensive aggregation provisions in that law - are nevertheless the largest buyers of renewable energy in the state's ailing deregulated market, highlighting the failure of both Green Consumerism and "Consumer Choice" itself.

Consumer advocates behind the federal legislation say that by enabling whole communities to pool their energy demand in large volume contracts, Community Choice gives residents and businesses the buying power to attract competitive suppliers. "Low-income people, the elderly on fixed-incomes, small businesses, and families deserve to obtain the same market power as do large industry," said Mr. Brown, the primary sponsor of the bill and a member of the House Energy and Power Subcommittee.

Pointing to an emerging urban sustainability movement, environmental supporters say the market power afforded by Community Choice will offer American communities their first opportunity to clean up America's most polluting industry, the largest single cause of global warming.

Consumer Support

Citing dramatic market failures in states such as California, proponents of the federal bill say it is needed because almost no competition exists for residential and small business consumers in those states that have passed electricity deregulation legislation without Community Choice. "Residents and most businesses are simply too small to attract competitive power suppliers who are seeking high volume contracts with large manufacturers and corporate accounts," said Wenonah Hauter of RAGE (Ratepayers for Affordable Green Electricity), a national coalition led by Ralph Nader and David Brower that supports the federal legislation. "The fact that only one percent of Californians are participating in the market a year and a half after deregulation must give pause to proponents of the law that created it."

Proponents of California's 1996 deregulation law - and the each-man-for-himself "Consumer Choice" model copied by many other states that have since deregulated - continue to defend the market and the model, saying that deregulation will deliver competition and mainstream green power consumerism after a "transition period." But Community Choice advocates such as California economist Eugene Coyle question the very idea of "Consumer Choice" in the electric industry, predicting "virtual monopoly with price discrimination favoring very large businesses over the rest, and data mining which targets wealthy consumers and heavy electricity users while redlining poorer ones." Green power, according to Coyle, will never amount to more than a niche market created by such "data mining" under the California model. "Why not try something that will work now, and that would demonstrably have consumers and the environment better off with or without a transition period?" he asks. "What argument is there against Community Choice, other than the prerogative of default provider distribution utilities to retain monopoly control of the retail market?"

San Francisco Board of Supervisors President Tom Ammiano sponsored and carried the city's Community Choice amendment resolution in August, from its Utilities and Deregulation Committee to a 7-3 majority on the Board of Supervisors, with strong support from City Attorney Louise Renne - and despite strong opposition from PG&E. "Competition from suppliers other than PG&E and Southern California Edison has not met the Public Utilities Commission's expectations," said Ammiano, proposing the Community Choice measure so that "a city like San Francisco could enter the marketplace to obtain better rates and/or cleaner electricity for their residents and businesses." Ammiano attributed the failure of California's market to provisions in the state's deregulation law that restrict community aggregation while "defaulting" stranded consumers to automatically purchase power resold by their deregulated utility company. "The result has been that 99% of California consumers continue to receive default service today" he said.

Critics lament the nationwide replication of California's "default-opoly" provisions in most states that have since deregulated their electric industries. Without Community Choice provisions, they say, "default provider" rules in effect preserve the monopolies of deregulated utilities. "Incumbent utilities are making out like bandits by keeping their residential customers captive, because no real competition has developed for small users of electricity," said Hauter. "Community Choice is the great equalizer."

Proponents of the federal bill emphasize that consumer participation in a city's Community Choice contract is voluntary on an opt-out basis, but point out that this is moot in a market that offers consumers no real alternative to "default service" anyway. "At present, large industrial and business consumers are winning the best deals, and few choices are yet available to residential customers," said Representative Dennis Kucinich of Ohio, who has led the Congressional fight for Community Choice since filing comprehensive federal legislation in 1998 that includes both Community Choice and a Renewables Portfolio Standard. "Deregulation must bring benefits to average Americans, or why bother?"

Environmental Support

The electric industry is the largest single cause of global warming, radiation and ozone (which causes childhood asthma). The U.S. Department of Energy has reported that electric deregulation is expected to cause substantial increases in U.S. pollution levels, flying in the face of Clinton Administration commitments to reduce U.S. greenhouse gas emissions in coming decades.

Proponents of Brown's legislation emphasize potentially dramatic environmental benefits offered by Community Choice. "Community Choice gives local communities the ability to make decisions to not only lower their electric bills, but to purchase energy efficiency services or renewable energy options," said Representative Karen McCarthy of Missouri, another cosponsor of the bill and a member of the House Subcommittee on Energy and Power.

Community Choice advocates point to evidence that Americans are far more likely to support renewables and conservation as communities than as isolated consumers. In California, whose 1996 deregulation law forbids Community Choice and restricts local government purchasing to municipal facilities, green power purchases from local governments nevertheless exceed that of any other sector in the market since it was opened to competition in 1998. While California's "Green Power" market remains a minor niche market for consumers willing to pay a premium, municipalities represent more than half of all clean energy purchases made there to date. "It's encouraging that over 100 local agencies statewide have made the switch to 'green' energy - setting an example for residential and business customers" said Steven Kelly, executive director of the Renewable Energy Marketing Board (REMB). "It's gratifying to see local governments taking the lead in environmental responsibility."

While green marketing advocates like Kelly continue to claim that deregulation will create consumer demand for clean energy, California green marketers have actually sold an amount equivalent to only 2% of the power already generated by renewable energy sources built under state mandates before deregulation. Of California consumers that have switched since the market opened, only about one third actually chose green power, whereas the other two thirds were unknowingly switched to green power by their suppliers - Enron and Commonwealth - eager to collect on state green marketing subsidies written into the 1996 law. Thus, only 30,000 consumers in a state of 30,000,000 people have personally switched to a green energy source, leading many critics to call the law an "environmental disaster."

What is worse, renewables advocate Nancy Rader points out, "It's not hard to switch to green when, because of the green marketing subsidy, green is the only option that is cheaper than default utility service, and green products are the only ones being heavily advertised. Also, the renewables being marketed are low-cost existing renewables -- very few consumer dollars are actually supporting new projects or existing projects that need the support."

The City of Santa Monica led the municipal move toward green power in June 1999 by becoming the first city in the nation to purchase green power for all of its municipal needs. Then, in July, 60 of 78 local government agencies that comprise the San Diego Association of Governments (SANDAG) opted to power their city facilities with green power, also made cheaper by the state subsidy. Most recently, the Association of Bay Area Governments (ABAG), which represents 59 local governments within the San Francisco Bay Area (but none of its major cities), 6000 electric meters and 63MW of electrical capacity during periods of peak summer demand, decided that its ABAG Power member cities will purchase geothermal energy from Calpine corporation, a natural gas-fired merchant power plant developer which is marketing geothermal steam power from Sonoma County Geysers it recently purchased from Pacific Gas and Electric.

Rader points out that the same green marketing subsidy supports municipal green power purchases, which make green products artificially cheaper. And while California cities have demonstrated an interest in buying green, the state's prohibition of Community Choice limits their purchases to municipal facilities, which amount to two or three percent of power consumed - and pollution created - by the community. "A larger, citywide load would enable communities to negotiate energy products with a far greater environmental impact."

Community Choice advocates point to an elemental difference in environmental values between the California model and Community Choice. "It's harder for anyone, whether whole cities or individual consumers, to think globally and act locally when their decisions are limited by state law to a small horizon," said Rader. Susan Munves, the Conservation Coordinator for Santa Monica who spearheaded its green RFP effort, emphasizes her frustration with the state's laws regarding municipal aggregation. "Just imagine what we could do with Community Choice." Pointing out that the total electricity use of Santa Monica's government facilities is equivalent to only 5000 homes in a population of 400,000 she said that the current law "limits the city to thinking about the environmental impacts of its municipal buildings, and limits consumers to thinking about paying extra to clean up pollution from one home in a half a million homes. It's not very encouraging. With Community Choice we could bring renewables and conservation to the whole community. Rather than having a debate on whether to spend public money to clean up a narrow slice of the city's electricity pollution, we could talk about leveraging community buying power to clean up the whole pie. In the big picture, cities could dramatically expand the market for wind, solar and other renewable power sources that are now being marginalized because of deregulation."

Similarly, while ABAG Power's Green RFP includes fifteen municipalities and nine counties throughout Northern California, their aggregate purchase amounts to little more than the demand of one medium sized town. "Without Community Choice and a Renewables Portfolio Standard to set minimum levels of renewables in all power, Green RFP's and an occasional green consumer are not going to amount to much," said Rader.

Prospects for Community Choice

More than 80 communities in the Community Choice states of Massachusetts and Ohio are holding or will hold public meetings about community energy and environmental goals, and will go on to seek power suppliers to serve their entire communities. Meanwhile, federal regulators looking to deregulate must view the increasing media scrutiny of the California model with alarm. "Deregulation doesn't lower rates: Businesses still pay same for electricity, " reads the Oakland Tribune's September 1, 1999 Business section headline, reflecting growing mainstream recognition that there are serious problems in the straight "Consumer Choice" model. "As deregulation opens the door for dramatic changes in energy markets, legislation such as this is critical to ensure that the average citizen has a strong voice in advocating for clean and cheap energy," said Massachusetts Representative William Delahunt, a federal bill cosponsor whose district includes the Cape Light Compact, which led the successful fight for Community Choice in that state's 1997 deregulation law. Congressman John Tierney, another Massachusetts legislator who supports the federal legislation, emphasized that the waiting game should be put to an end. "What I like about this bill is that consumers can take matters into their own hands rather than wait for however long it may take for true competition to emerge in the electricity market."

Pointing to the passage of Community Choice provisions in both liberal Massachusetts and Republican Ohio, Hauter said that the provision appeals to pro-competition Republicans as well as to environmentalists and consumer advocates. "Community Choice means real competition for all consumers big and small, not just special deals for large corporations," she said. "Both consumer advocates and Republicans should like that." On the other hand, she said, Community Choice creates an unprecedented environmental opportunity that could put some teeth in the proliferation of urban sustainability plans among US cities, which have been fingered as both the cause of global warming and its most likely solution. "It has been demonstrated that Americans are more likely to support renewables and conservation as communities than they are as isolated consumers," she said. "By giving communities the opportunity to choose renewables and conservation on a meaningful scale, Community Choice may offer a significant opportunity for environmental activism on the otherwise dismal political landscape of electric deregulation."

Copyright (c) 1999 by the American Local Power Project.