Aggressive bids help lower costs
SONOMA COUNTY — Offering the clearest picture yet of expected pricing from a renewable energy–focused power agency under development in Sonoma County, a new report shows that a typical business customer in the launch phase of Sonoma Clean Power could expect to pay between 3.1 percent less per month and a half-percent more than conventional utility rates.
For a business consuming 15,000 kilowatt-hours of electricity per month, that range would be equivalent to between $80 in savings off anticipated Pacific Gas & Electric Co. rates in 2014 and a $13 increase, according to data planned to be presented to the Sonoma County Board of Supervisors on Tuesday.
Residential customers likely would pay between 1.8 percent less and 1.1 percent more than PG&E rates, equivalent to a range from $1.73 in savings to a $1.02 increase.
The report follows the analysis of 11 bids by companies seeking provide electricity to Sonoma Clean Power. It is a significant benchmark for a process that began with a feasibility study in March 2011, only possible after the board voted in February to become the necessary legal entity to solicit specific pricing from wholesale power providers.
It is also a question that Sonoma County municipalities have said is central to their decision to allow the agency to serve their residents and businesses. With the exception of Healdsburg, which operates its own utility under the Northern California Power Agency, all Sonoma County municipalities and unincorporated areas have expressed tentative interest in allowing residents and businesses to take part in Sonoma Clean Power.
“We’ve been able to synthesize these bids into rate projections,” said Cordel Stillman, the water agency’s deputy chief engineer. “We’ve had some very good responses.”
Even if adopted throughout the county, residents and businesses will still have the option to continue their current service with PG&E. In either case, the utility will continue its role in providing billing, maintenance and other services outside of power procurement, a key characteristic of the so-called community choice aggregation model that is gathering interest throughout California. PG&E said it supports the idea of choice, but wants to make certain people understand they have other options as well.
“We support local governments in their choice to offer community choice aggregation,” said Brittany McKannay, PG&E’s North Bay spokeswoman. “At the same time, we want to make sure our customers know what all of their power options are.”
Planners for Sonoma Clean Power were able to determine a likely range for pricing to assist in the decision-making process, and noted specific rates will be decided as part of final contract negotiations that are expected to be completed in August, he said. Municipalities have until June 30 to join. A first round of customers could receive notice as soon as November and transition to Sonoma Clean Power as early as January 2014, according to Mr. Stillman.
Those municipalities would also join the power agency’s joint powers authority but would not absorb its liabilities, according to the water agency.
‘Big players’ interested
Planners had estimated in an early feasibility study that rates would likely be between 4 percent and 10 percent more for a typical customer, reaching levels below that of PG&E after 20 years. Yet responses from electricity providers have been highly aggressive, attributed to a strong desire by providers throughout the United States to increase their foothold in a market largely dominated by PG&E, according to Mr. Stillman.
Bids include providers that have yet to conduct any business in California and others that maintain a small customer base made possible through direct-access agreements allowed on a limited basis. Hoping to capture more of that business, some bids have included offers to help support the water agency’s $2.5 million in estimated startup costs and $7.5 million in bridge financing before the rampup of revenue from customers, according to Mr. Stillman.
“We’ve told them, ‘We’re offering you a ready-made market,’” he said. “‘What can you do for us?’”
Responders include New York-based Consolidated Edison, Houston-based Direct Energy, San Deigo-based Noble Americas Energy Solutions and multinational Shell North America.
Some are well-known to Sonoma County, including Houston-based Calpine Corporation. The company operates the world’s largest complex of geothermal power plants, located in an area spanning Sonoma and Lake counties, and is looking for long-term contracts to support expansion at the site, according to spokeswoman Danielle Matthews Seperas.
“If these big players are interested, then it really supports Sonoma Clean Power’s business model,” said Amy Bolten, a water agency spokeswoman and one of the project leaders.
The first contract, for what Mr. Stillman called a “parachute provider,” will provide all of the power needs of the agency’s customers and at least 33 percent of its electricity from renewable sources. PG&E currently considers 19 percent of its power to be from renewable sources, though approximately half is considered to be low-emission.
That percentage of renewable energy is expected to increase — and rates to decrease — in subsequent years, following other long-term contracts with renewable energy providers that prioritize projects large and small in Sonoma County, according to Mr. Stillman.
Marin Clean Energy lessons
It is a process that is already well under way in Marin County, home of a power agency that, like Sonoma Clean Power, operates under the “community choice aggregation” model by supplying electricity over a grid largely maintained by PG&E. It is the first such agency in California, and has been incrementally adding long-term contracts with renewable energy providers throughout California since its launch in 2010.
With 14 current power purchase agreements, those partners range from “mom and pop” operations to large photovoltaic projects, said Dawn Weisz, executive officer of the Marin Energy Authority that governs Marin Clean Energy. The agency also entered into an agreement that allowed construction of a nearly 1-megawatt project recently completed at the San Rafael Airport.
“Whenever we go out looking for power, we get inundated with bids,” she said. “There’s a ton of power out there.”
Monthly rates are currently 90 cents higher for residential customers versus those from PG&E and slightly lower for commercial customers, she said.
The Marin agency has served as a consultant to planners for Sonoma Clean Power, but implementation will have notable differences. Planners in Sonoma County intend to ramp up from 33 percent to a 50 percent baseline mix for renewable energy, an easier and more affordable target than Marin’s launch with 50 percent renewable. Like Marin, Sonoma Clean Power would also offer a premium, 100 percent renewable energy product starting from launch.
In addition, the potential customer load in the county’s unincorporated areas alone rivals that of Marin Clean Energy, allowing a reliable critical mass if municipalities are reluctant to join. Yet planners emphasized that it was not an ideal scenario.
“The unincorporated areas in Sonoma County are about the size of all of Marin,” said Geof Syphers, an energy consultant working with the water agency. “But economically for us, it would be better to have more cities involved.”
Marin Clean Energy currently serves approximately 90,000 customers, and will add approximately 30,000 when the city of Richmond joins later this year.
Financing startup costs
The cost for work to develop Sonoma Clean Power, paid by the water agency, is expected to total $1.2 million. An agreement with the power agency will allow those funds to be paid back over time.
Efforts continue to secure startup financing. Early interest in doing so came from Santa Rosa’s First Community Bank, Mr. Stillman said. Planners are considering how the county can collateralize a potential $2.5 million loan to fund startup costs, noting that the additional bridge financing could be unsecured.
The agency is expected to roll out to an initial 10,000 customers in January, ramping up to a full load over three years.
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