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Thursday, May 1, 2014, 12:26 pm

Sonoma Clean Power flips switch for first customers

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    Sonoma Clean Power launch

    Gary Wysocky, Geof Syphers, Susan Gorin and Mark Landman celebrate the beginning of service from Sonoma Clean Power on May 1. (credit: Eric Gneckow)

    SANTA ROSA — After three years of planning, Sonoma County’s new renewable energy-focused electricity provider, Sonoma Clean Power, on Thursday officially began serving its first group of more than 20,000 customers.

    It marks the second launch of service in California for a community choice aggregation–type power agency, a model that purchases power on behalf of its customers and delivers it over the power grid largely maintained by Pacific Gas & Electric Co. The start of Marin Clean Energy in Marin County in May 2010 was the first.

    Officials in the Sonoma County effort celebrated a higher-than-expected rate of enrollment during a regularly scheduled meeting of the governing Sonoma Clean Power Authority on May 1.

    “Today’s the day,” said Susan Gorin, chair of the agency’s board of directors and a Sonoma County supervisor. “It’s going to be a day of celebration.”

    The agency on Thursday began service to 23,070 accounts — 16,845 commercial and 6,225 residential — spread evenly around participating municipalities in Sonoma County.

    Less-than-expected opt-out

    Enrollment has so far exceeded projections. Around 7 percent of potential accounts and 5.2 percent of potential customers have opted to remain with PG&E, compared with a 22 percent to 25 percent projected rate by the end of 2014 based on data from the launch of Marin Clean Energy.

    Geof Syphers, agency CEO, cautioned that the ultimate opt-out rate for customers is still anticipated to grow to around 18 percent. Yet Sonoma Clean Power has been able to launch with an attractive incentive for customers: while individual rates for homes and businesses will vary, the agency’s prior negotiations with power wholesalers and a recently approved rate increase for PG&E customers will mean a comparative savings of 4 percent to 5 percent for ratepayers.

    “People are generally very excited about this,” Mr. Syphers said. “We have very low opt-out rates. I think that reflects the fact that we’re doing two things — we’re delivering significantly cleaner power at a significant rate savings compared to PG&E.”

    He noted the overall cost savings across all ratepayers.

    “This is the single largest step that Sonoma County has taken so far to address climate change, and were doing it at a cost of negative $6 million,” Mr. Syphers said.

    Those savings are expected to extend to customers in the upcoming two enrollment phases as well. While Sonoma Clean Power officials have cited competitiveness concerns in declining to share their own profit margin after wholesale power purchases, that agreement has allowed the agency to hold some of its previously budgeted funds for power purchase in reserve for the benefit of future ratepayers, officials have said.

    Projections of power purchases

    A proposed budget for the fiscal year starting June 30 — Sonoma Clean Power’s first full year of serving customers — includes $64.8 million for power purchases. Revenue is budgeted at $77.6 million.

    The agency entered into its two current power purchase contracts in November, with $5.2 million budgeted for power purchases in its current fiscal year.The agency expects to break even in revenue and expenditures by June 30.

    A three-year supply contract with Constellation Energy, a subsidiary of Chicago-based Exelon, will supply the majority of the agency’s power needs during launch. A smaller contract with Houston-based Calpine Corp., the largest operator at The Geysers geothermal field in the Mayacamas Mountains, will provide for a premium 100 percent renewable product offered as an option for customers.

    Power purchasing will ramp up along with customer enrollment to an estimated $114.8 million projected by 2017.

    While recent negotiations have allowed for favorable rates, the startup agency has long cautioned that those rates are not guaranteed to beat PG&E. Goals include a power mix that beats the incumbent utility in renewable-energy attributes, rate stability and the potential to promote new renewable energy project development within Sonoma County.

    Still, Marin Clean Energy — now operating as MCE Clean Energy — has provided rates that in many cases beat PG&E for both residential and commercial customers.

    Subsequent groups of customers will be enrolled in two phases through 2016. Nearly 80 percent of Sonoma County ratepayers are ultimately eligible for service — elected officials in Petaluma, Rohnert Park and Cloverdale have previously voted to not allow service to their municipality in the agency’s first year.

    Sonoma Clean Power’s joint powers authority in March approved a measure that would waive an approximately $85,000 fee for cities joining by Aug. 31. If joined by that time, ratepayers in those municipalities would be eligible for service in upcoming phases of enrollment.

    “I personally am very anxious in the city of Rohnert Park that we join your number,” said Rohnert Park councilmember Jake Mackenzie. He cautioned the board that he was speaking just for himself.

    Healdsburg operates its own power utility, including maintenance of infrastructure, and is thus not considered eligible for service.

    Potential customers have been given multiple notices of the opportunity to remain with service from PG&E — a requirement under the California legislation that allows the existence of CCAs. Residential customers who receive a bill for service from Sonoma Clean power will then have to pay $5 to return to PG&E if desired, with a $25 charge for commercial customers, Mr. Syphers said.

    It wasn’t until late 2011 that MCE Clean Energy had the approval of all Marin County municipalities, and the power agency today counts approximately 80 percent of eligible ratepayers as part of its customer base. The agency launched when community choice aggregation was relatively unknown in California, and faced opposition from PG&E in the form of the Proposition 16 effort defeated by voters in 2010.

    Opposing opt-in CCAs

    Sonoma Clean Power staff and consultants have previously cited a highly functional relationship with PG&E. Yet Mr. Syphers said a new PG&E-supported measure making its way through the California legislature, Assembly Bill 2145, could deal a major blow to the potential for success from future CCA-type agencies.

    The bill would require that potential customers are not automatically enrolled in a CCA, and instead must “opt-in” to the service.

    Mr. Syphers said that the opt-out structure is fair given the lack of choice that most ratepayers in California have in selecting electricity service from PG&E, which provides that utility with a competitive advantage. He argued that lower-income ratepayers may be among those who lack sufficient access to information concerning enrollment in a CCA, and that the opt-out structure provides an additional level of confidence for power wholesalers during purchase negotiations.

    “It’s not a surprise,” said Mr. Syphers, recounting the utility’s opposition to Marin Clean Energy and Sonoma Clean Power’s recent lobbying efforts in Sacramento against the bill.

    Credit for feeding the grid

    Among the areas of heightened interest for the Sonoma County business community has been the prospect of a favorable treatment for those who produce excess power from photovoltaic or other systems. Those arrangements are currently under development and are expected to go before the board again on May 15.

    Sonoma Clean Power offers a primary “CleanStart” program including a one-third renewable energy mix as a baseline, as well as a 100 percent renewable “EverGreen” program at a 3.5-cent-per-kilowatt-hour premium. That premium currently goes to pay the additional cost of energy from Calpine but has been proposed for allocation to a fund for certain incentive programs.

    Finding ways to support the creation of local programs and services connected to Sonoma Clean Power is expected to be a new area of focus for Santa Rosa-based Climate Protection Campaign, a group that has lobbied extensively for the creation of a CCA in Sonoma county since 2005, said Ann Hancock, executive director.

    “How do we localize all of these resources?” said Ms. Hancock, whose group and supporters staged a large celebration outside of the formal meeting. “It’s not enough to have cleaner and cheaper power — we want to have local power, too.”

    Nearly 260 customers have signed up for the EverGreen program to date — all prior to any marketing. Public outreach is expected to begin this summer.

    Sonoma Clean Power has so far operated with $10 million in total financing from Santa Rosa-based First Community Bank, along with a $1.7 million loan from the Sonoma County Water Agency. The water agency first began researching the prospect of a CCA at the request of the Sonoma County Board of Supervisors in early 2011.

    The board also discussed its proposed fiscal year 2014–2015 budget as a whole. The budget includes a proposed $600,000 cap for benefits from a potential feed-in tariff, and a net income of $3.2 million after regular business operations and debt service.

    “This budget is exciting, because we actually have revenue,” said Mr. Syphers.

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