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North Bay Business Journal

Monday, February 18, 2013, 5:30 am

Potential benefits — and risks — of local power

Yes, program could mean more renewables; but there are also significant unknowns

By Amy Bolten

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    Sonoma Clean Power is a community choice aggregation program being developed by the Sonoma County Water Agency to purchase electricity for Sonoma County customers. This program has multiple benefits and risks, is complex and not well-understood by Sonoma County residents and businesses.

    In order to help the North Bay Business Journal readers understand the various aspects of Sonoma Clean Power, the Journal is partnering with the Sonoma County Water Agency to publish a series of articles discussing the various aspects of this effort. This article, the sixth in the series, discusses the potential risks and benefits of developing a community choice aggregation program in Sonoma County.

    Potential risks

    Matching supply and demand. An over-estimation of demand could result in the purchase of too much power and having to sell excess power on the spot market at a loss. Conversely, under- estimation of demand could result in not having enough power to meet demand and having to make up the difference on the spot market.

    Market risks. If a large number of customers opt out of the program, there is the risk that there would not be enough remaining customers to cover operational expenses.

    Regulatory risks. The California Public Utilities Commission regulates the power industry in California. There is a risk that they could pass regulations that are detrimental to community choice aggregators.

    Contract risks. There is the potential for contract defaults, where an energy supplier does not follow through on their promised electricity supply.

    Worst-case scenario. High rates could cause accelerated opt-outs and Sonoma Clean Power (SCP) could be forced to sell excess contracted power at a loss. With a smaller customer rate base, the rates could rise, causing more opt-outs, until SCP has insufficient revenues to pay its debts. 

    Potential benefits

    Provides Sonoma County residents with a choice. Sonoma County customers could have a choice of power provider and therefore a choice in where their rate revenues go.

    Local control of rates and operations. Customers would have more access to the decision making process. Decisions regarding rates and local programs would be made by locally elected officials.

    Retaining rate revenue for reinvestment into local economy. While the majority of revenues collected would be used to purchase power, a portion of the revenues could be reinvested back into the community through aggressive electricity efficiency programs and local power generation facilities.

    No risk to county or city general funds. Sonoma Clean Power is structured as a joint powers authority, which is responsible for any liabilities incurred through its operations. Participating entities would not have their general funds exposed to financial risk as a result of their participating in Sonoma Clean Power.

    Increased rate stability. Sonoma Clean power has a goal of entering into long term contracts for energy supply. By fixing the cost of power over the long term SCP can lessen rate shock to customers from fluctuations in the power market. In addition, by focusing on renewable energy, SCP would not be subject to the volatile nature of the fossil fuel market.

    Lower financing costs. Public entities are able to utilize tax-exempt financing in the development of capital projects. Sonoma Clean Power would be able to take advantage of this in contracting for the construction of local renewable energy projects, lowering the cost of that energy to ratepayers,

    Feed-in tariffs for solar and renewable power. Sonoma Clean Power could offer robust incentives and provide a market for local development of renewable power.

    Energy-efficiency and demand-reduction programs. One of the stated goals and key drivers for Sonoma Clean Power is the opportunity to implement aggressive energy efficiency and electricity demand reduction programs for Sonoma County residents and businesses.

    Increased renewable energy use. Sonoma Clean Power plans to utilize a high percentage of renewable energy, starting at 33 percent renewable content upon program launch and ramping up to 50 percent by 2018.

    For more information, please visit www.sonomacountwater.org/cca or contact Amy Bolten at amy.bolten@scwa.ca.gov.

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