SANTA ROSA — Planners for Sonoma County’s startup public power agency have received authorization to enter final negotiations for its first electricity supply contract, with pre-approval from the agency’s governing board to pursue a best offer that matches or beats next year’s anticipated average retail rates from Pacific Gas & Electric Co.
With a price ceiling and other contract provisions pre-approved on Nov. 7, negotiators said they will now be able to act quickly to secure a long-term power supply agreement in a market that can change significantly on a day-to-day basis, according to material presented to the Sonoma Clean Power Authority. That supplier, which would deliver its power over the grid largely maintained by PG&E, could be known in as soon as one week, said Sonoma Clean Power CEO Geof Syphers.
The board approved a negotiation ceiling that includes a maximum of 8.6 cents per average kilowatt-hour from suppliers — less than the 9.72 cent projection that PG&E has recently shared with the California Public Utilities Commission. Additional charges from PG&E would raise Sonoma Clean Power’s price by 1.12 cents, making the two rates equivalent.
If a supply contract is established, Sonoma Clean Power would spend the next two months determining the specific rates offered to individual homes and businesses, Mr. Syphers said. While those retail rates remain unknown outside of general estimates released earlier this year, the framework proposed for the upcoming wholesale supply negotiations represents a sense of confidence that those rates would be competitive with PG&E, he said.
“It means that, very likely, our retail rates will be at or below PG&E rates. But it’s not a guarantee,” he said.
Securing a first power supply contract would be the latest milestone for Sonoma Clean Power, a project that began under the Sonoma County Water Agency in 2010 and received its own governing board in December of 2012. The power agency will be the second “community choice aggregation”-type agency in the state after MCE Clean Energy — formerly Marin Clean Energy — and seek to offer a product that is more environmentally focused than PG&E.
The experience of MCE Clean Energy has helped to inform the rollout of Sonoma Clean Power, including the willingness to recommend a ceiling for negotiations that is on par with PG&E, Mr. Syphers said.
“Everything around our design, including rolling out with 33 percent renewable energy, was focused on rates. We’re doing something meaningful, but not something that negatively impacts prices,” he said.
The agency intends to ultimately ramp up to a power mix that is at least half from renewable sources in the coming years, and will also offer a premium 100 percent renewable product to customers. It is expected to begin serving an initial group of 20,000 customers in May of 2014.
“One of our mottos has been from the very beginning that we would provide competitive rates with PG&E. To beat or be lower than PG&E is going to be the real incentive for the public initially to make sure that they don’t opt out, and to make sure we get the largest pool possible,” said Shirlee Zane, a Sonoma County supervisor and member of the authority’s board.
The upcoming negotiations will focus on the four wholesale power providers considered finalists to provide electricity during the startup phase of Sonoma Clean Power: Constellation Energy, NRG Energy, Direct Energy and Consolidated Edison. Cost of wholesale power is a central concern, but is joined by other elements including protections from liability for participating municipalities and customers and provisions to allow addition of new sources of electricity throughout the life of the agreement.
Mr. Syphers noted that Consolidated Edison, while a finalist, has recently been unresponsive in talks and is assumed to have dropped out of the process. A winning bid would be selected in a combined vote between he and the chair of the authority, Susan Gorin.
“Marin went out and selected an energy service provider to work with them, and after that selection was made, decided price with them,” said Kirby Dusel, a consultant with Paradigm Energy Consulting and a member of the negotiation team. “We are going out to determine the best possible bid.”
The first three-year contract structure also includes a provision that bars the usage of nuclear or coal power as part of the mix, a concern that some participating municipalities had lobbied to include as part of the agency’s underlying governance. Staff determined that omitting those sources would not have a negative effect on costs in the short term, and would allow a more focused discussion on those issues after the governing obligations of the startup phase, Mr. Syphers said.
“Many of the cities wanted to exclude nuclear,” he said, cautioning, “There may be a time in the future when nuclear power becomes more important in the climate sense. This allows us to talk about it over several months, instead of several weeks.”
Nine wholesale providers had originally expressed interest in supplying power for what Sonoma Clean Power currently estimates is a $5.2 million expenditure in its first year, according to meeting materials. That competition helped trim early rate estimates, which saw saw business customers consuming 15,000 kilowatt hours per month paying between 3.1 percent less per month and a half-percent more than conventional utility rates. Residential customers could pay between 1.8 percent less and 1.1 percent more than PG&E.
Those estimates were used to help municipalities determine if they would allow the CCA to serve their residents and businesses. Around 79 percent of ratepayers in Sonoma County are eligible, outside of Rohnert Park, Petaluma, Cloverdale and Healdsburg.
There remain some possibilities that could cause delays in the current schedule for rollout, Mr. Syphers said. A failure for the four finalists to produce a bid under the proposed price ceiling could spur further negotiations or even another meeting of the board to reconsider that limit. If that effort still fails to produce a competitive rate structure, officials may then decide to delay the rollout and revisit negotiations in a matter of months.
Still, Mr. Syphers said that the experience of MCE Clean Energy provided a working example that suppliers were likely to be willing to negotiate under those terms. If a contract is established, Sonoma Clean Power is expected to release its final retail rates in January of next year.
The board also approved a data management agreement with Noble Americas Energy Solutions, and a $7.5 million line of credit from Santa Rosa’s First Community Bank to cover the timing gap between the agency’s first power purchase and the receipt of customer payments.
“It’s an exciting time,” he said.
Copyright © 1988–2013 North Bay Business Journal
View the policy for linking to website content.