Community Choice Energy

Photo Courtesy of Oakland Local: http://oaklandlocal.com/article/city-council-hears-recommendations-energ...

On March 30th, Dave Room – Coordinator of the Local Clean Energy Alliance – presented Community Choice as a Community Development Strategy to the Oakland City Council in a special hearing on Oakland’s Energy and Climate Action Plan. The presentation was well received by the city councilors and energized the crowd.  

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By using the Community Development approach, Oakland can tailor its Community Choice Energy Program to meet community goals such as creating a local sustainable economy, which has not be able to happen with the current system of investor owned utilities.  This includes promoting green job development and greenhouse gas reductions. The city would also be in control overthe power mix and energy efficiency funds. In Oakland, a Community Development approach would work to link low-income residents to work force development opportunities, would improve low-income assistance programs, and would ensure that no new fossil fuel plants are constructed and that no environmental degradation occurs. According toan Oakland jobs analysis, by adopting Community Choice 1,400 living wage jobs could be created within 10 years, 450 of which could be installing solarpanels, EE, or other clean energy technologies. The focus would remain on local generation and demand reduction.

Background

Community Choice Energy gives Californians the opportunity to choose their electric power and source of electricity. Community Choice enables cities and counties to supply electricity to customers within their borders. However, unlike a municipal utility, like the Sacramento Municipal Utility District (SMUD), Community Choice does not own the transmission and deliverysystems. Community Choice is solely responsible for providing the energy as acommodity to the community, but does not entail having direct ownership of the electric generating resource. In 2002, AB 117 was passed and removed a significant obstacle for local governments that wanted to provide electricity to their communities.

There are many benefits of Community Choice Energy. By beingable to increase local consumption of renewable energy, a Community Choice has the power to reduce greenhouse gas emissions at a faster rate than the investor owned utilities (IOU).  Further, by adopting Community Choice Energy the opportunity for more local green jobcreation opens up. Also, studies have shown that Community Choice, through theuse of local government financing, should be able to provide electricity at a rate that is cheaper than an IOU.

There are at least two divergent philosophical approachesfor power sourcing in Community Choice Energy, the “Market” approach and an alternative “Community Development” approach. The “Market” approach is what the East Bay Cities Community Choice Energy business plan largely adheres to. Last presented to the City Council in January 2009, it is well written and explores many complex and varied issues involved with starting a Joint Power Authority for Community Choice.

However, the traditional “Market” approach has its shortcomings. This approach is structured to compete against PG&E and other power purchasers on the wholesale market for most of its renewable energy. The “Navigant” study indicates the basic feasibility of the approach, but also shows that a Community Choice program such as this, will create almost zero greenhouse gas reductions, zero potential for local sustainable economic development, and zero local green job opportunities. As such it does not realize many of the potential benefits of a Community Choice program.

Recommendation and Analysis

That is why the Local Clean Energy Alliance supports a “Community Development” approach instead. The “Community Development” approach gives local alliances and coalitions a seat at the table and allows for collaboration with the East Bay Cities to develop a Community Choice program that creates local business opportunities and local jobs, as well as greenhouse gas reductions.

Using California’s Community Choice law, Oakland (possibly along with other East BayCities such as Berkeley) would charter a Joint Powers Authority (JPA) to meet local energy goals. The JPA would contract with a licensed energy provider tonot only buy clean electricity in bulk, but equally important, to build distributed generation and implement demand reduction technologies. PG&E would continue to handle transmission, distribution, billing, metering, and customer service. Furthermore, the program would be configured to maximize opportunities for local community solar, regional wind, clean co-generation, energy efficiency, conservation, and demand response to reduce consumption.

The Community Development approach also leverages the ability of governmental entities to issue revenue bonds to finance and build renewable generation, demand response, and energy efficiency at a much lower cost than PG&E. With revenue bonds paid off by rate payer utility bills, local government entities have a cost of capital of about 5%. Investor owned utilities such as PG&E pay more than double, 12%. This huge difference in the cost of capital means that it would cost a Community Choice program much less than PG&E to build renewable energy generation. That’s why many existing public utilities have services and rates that are very competitive, if not better than the private utilities.  For example, PG&E is 27% more expensive than the SMUD, which at this time has 20% renewable energy.

A Community Development approach has the potential for addressing Oakland’s greenhouse gas reduction and economic development needs. This model focuses on local efforts to implement energy efficiency and distributed generation on a scale that matches our community’s greenhouse gas reduction goals while creating local jobs and economic growth.