Peninsula Clean Energy (PCE), San Mateo County’s Community Choice Energy program, is slated to launch in October of this year. Assuming that it meets this schedule, PCE will have gone from inception to serving customers in less than two years, faster than California’s existing four operational CCEs.
In addition to its speedy launch, PCE has impressed observers by receiving unanimous commitments from all twenty city councils in the county. Also, the program is prepared to launch with an unprecedented initial package of 50% renewable energy while providing its customers the opportunity to “opt up” to 100% renewables at a modest premium.
Given its impressive beginning, we sat down with PCE’s founder and Chair, San Mateo County Supervisor Dave Pine on July 5, to determine what other emerging CCE programs can learn from PCE. The following is a transcript of the interview.
How did you first become aware of Community Choice Energy and get interested in exploring it?
Community Choice Energy (CCE) first crossed my radar a number of years ago because of the program in Marin County. But I didn’t begin to explore it any detail until 2014 when a couple of things happened. First, I serve on the Resource Management and Climate Protection Committee of the San Mateo County City and County Association of Governments (C/CAG) and CCA was placed on our agenda as an informational item, which piqued my interest.
Second, the investor-owned utilities’ efforts to curtail CCA with Assembly Bill 2145 made me want to learn more about the model. At that point I did not fully appreciate the power of CCA. But I knew that it should not be taken off the table by bad state legislation, and I made sure that San Mateo County joined the opposition.
And, third, and most importantly, a couple of knowledgeable community members reached out to me about CCA. San Mateo Planning Commissioner Rick Bonilla, who now serves on the City Council, and San Mateo Sustainability
Commissioner John Ebneter, who now serves on the Planning Commission, informed me that CCA had come up in the context of their sustainability work and had been included as a possible option in the City of San Mateo’s climate action plan. Mike McCord of the Burlingame Citizens Environmental Council also alerted me to the promise of the CCA model. This outreach set the hook, and as I learned more about CCA it became clear to me that this one single program had significant potential to reduce local carbon emissions in an immediate and significant way.
So this is a case where community advocacy had a real impact?
Yes, it really did!
Of course, the irony of the AB 2145 battle was that it was an attempt to limit the impact of CCA programs, but the process of combatting it created the incredible groundswell and network of CCA advocates round the state.
Yes, it was certainly a catalyst to strengthen the CCA movement.
You still needed to take a leap into making it happen and determining the role the County should play.
Yes. The next thing that happened is that Rick Bonilla and I connected with Shawn Marshall of LEAN Energy. That was the next key step. It was obvious from the start that she had tremendous expertise in the area having played a leadership role in developing Marin Clean Energy. By connecting with LEAN Energy right from the beginning, we didn’t flounder around trying to figure out the road map for going forward. With her help, along with Seth Baruch from Carbonics, we were able to rapidly sketch out a timeline for bringing CCA to San Mateo County. Marin County paved the way and my hat is off to them for what they accomplished in pioneering the model.
So then you were in a position as a member of the Board of Supervisors to move the County in this direction.
In the fall of 2014 it became clear to me that we should have a CCA program in San Mateo County. And I realized that the County was in a good position to provide leadership. So, early in the process, I asked my colleague Supervisor Carole Groom if she wanted to work on the effort, which she enthusiastically did. At that point we had two very committed county supervisors on board. We then brought CCA to the attention of the full Board of Supervisors for the first time in December 2014.
There were a couple of things that got us off to a good start. One was having a very capable of team of outside advisors, which in addition to Shawn and Seth included the energy gurus at Pacific Energy Advisors. Also, early on we had strong political support here in the County, because it was evident at our Board of Supervisors meeting in December that this was something the Board was supportive of. Lastly, we had a home in which to put the effort. About a year earlier we had formed the County Office of Sustainability. I talked with Jim Eggemeyer, the office’s director, and he immediately embraced the project and assigned staff members to it. And we’ve been fortunate to have some very talented young staff members– Kirsten Pringle, Gordon Tong, and Carolyn Raider – involved in the project.
It seems to me that having the program championed by the County and operating with the support of staff members paid by the County enabled you to move forward quite effectively.
Yes. We not only had a good roadmap but also excellent people to do the blocking and tackling. Every Monday we convene a team meeting of everyone working on Peninsula Clean Energy (PCE), including Supervisor Groom and myself, staff, and our outside advisors. We started doing this early in 2015 and have continued having these meetings to this day. At these meetings we can keep focused, make sure we’re not dropping any balls, and set our immediate priorities for the weeks and months ahead.
And finally, the amount of financial support the County has provided to launch our PCE program is remarkable.
How did that happen? Where did these funds come from?
Well, our timing was good. Right now, like many other jurisdictions, San Mateo County’s budget is extremely strong. That’s a reflection of the economy. The County has a couple of other things going for it. In November 2012 we passed a half-cent sales tax that has supplemented the general fund. The County’s financial position may be stronger now than it ever has been. So bringing the CCA program forward was much easier in this robust economy.
We put together an initial request for a $1.5 million loan from the County to get us through the formation of the Joint Powers Authority and enlisting all of the cities by the end of February of this year.
Then we made the decision to go forward with an aggressive launch starting this October. But two problems confronted us. First, how were we going to get a bank loan? We had some naïve hopes that, given the prior success of CCA programs, we would not have to collateralize the loan, but we learned otherwise. Fortunately, the County was willing to provide the collateral for the loan. With collateral in hand, there was no shortage of banks interested in our business. I think it is getting easier to secure bank financing with each new CCA launch now that it is more of a proven model. Barclays Bank came up with a $12 million bank loan and the County came up with $6 million to collateralize it. That was an enormous step forward!
Second, we realized that we would need six months or so after our launch to have the financial stability to fund our own operations. And here again the County stepped up and loaned us almost another $1.5 million to bridge us through that period. So, all in, the County has committed almost $9 million to support PCE. That is extraordinary and probably very difficult to replicate.
That’s one of the big issues here. How much can other jurisdictions emulate Peninsula Clean Energy’s development and success to date?
Well, certainly many counties are well situated to provide leadership in the formation of a CCA program. In particular, counties are in a good position to recruit their cities to join a CCA program and to provide staff support. And if a county can provide start-up funding, that will make the formation process move much faster.
Keep in mind too that Peninsula Clean Energy is a big CCA. San Mateo County has almost 300,000 electric customers that used approximately 4,300 million kilowatt-hours of electricity during the 2014 calendar year. Other jurisdictions looking to form a CCA would not necessarily require the same level of financial support from their respective counties as we did given our size.
Did you ever imagine that all 20 cities in San Mateo County would vote unanimously to join PCE?
No, we never imagined that all 20 cities in San Mateo County would join Peninsula Clean Energy. And never in our wildest dreams would we have predicted that out of 104 local city councilmembers not one would vote against adopting the program. I was thinking that if we got half to two-thirds of the cities to sign up we’d be doing well. We’ve seen in other counties that some of the cities joined gradually. When we started the process I figured that some cities would take a pass and wait and see how PCE worked for six months or so.
I attribute this remarkable level of support from San Mateo County cities to two factors. First, our outreach to cities was very thorough and comprehensive. We really worked hard with every single city. We made presentations not only to city councils but also to key city staff members.
For example, we used the creation of our joint powers agreement as a way to engage all the city attorneys in the county. Initially, a number of the city attorneys were skeptical about their city’s participation in a CCA program. But we offered special trainings where they were provided opportunities to learn how CCA works. Deputy County Counsel David Silberman did a great job addressing the concerns of the city attorneys and invited all of them to participate in the drafting process. This resulted in a joint powers agreement that all of the city attorneys could support.
When we started working on the joint powers agreement, I assumed that we would just take an existing template and we’d be 95% there. But by engaging the city attorneys, we made a number of significant changes to the template and made it a lot better. So, the next CCA program that wants to establish a JPA will have the benefit of this new and improved JPA agreement.
One thing that the city attorneys were very concerned about was how their cities could exit the JPA. We included a lot of language about the cities right to exit prior to launch if PCE could not deliver clean energy at a lower price. The city attorneys also wanted to be sure that their cities were insulated financially which they are in the JPA structure.
Also, there were a number of city council members who were skeptical that PCE would be successful. Some asked if the model was too good to be true. But I think that what carried the day with these council members was their reluctance to deny their constituents a choice of energy providers. If we were establishing a new program where ratepayers did not have the option to stick with PG&E, I think a number of council members would have voted against it. At the end of the day, I think the council members who were more reticent asked themselves, do I want to deny my constituents choice?
Of course, the manner in which CCAs are structured as a “opt out” rather than an “opt in” program makes a huge difference too.
Yes, the power of the enabling legislation cannot be overstated. One thing I didn’t understand before getting involved with CCA, in fact I still find it quite sobering, is that “opt in” will only get you so far. In fact, you could never successfully implement CCA without the “opt out” model. As I recall, that was one of the things AB 2145 was trying to get rid of.
PCE is going to be faced with the challenge of getting customers to “opt up” from the default 50% renewable package to the more expensive 100% package.
Yes, but that’s an opportunity as well to make customers aware of the value of the 100% renewable option. I think that some cities like Menlo Park may set targets of 15% of their ratepayers choosing the 100% renewable option. Although such opt up percentages have not been achieved elsewhere, I am hoping we can do better here.
I should also point out that the Town of Portola Valley has done something very unique. Under the leadership of Town Councilmember Jeff Aalfs, Portola Valley has decided to enroll ALL of its ratepayers in the 100% option at launch. Ratepayer will then have the option to opt down to a lower priced 50% renewable product or opt out and stay with PG&E.
In addition, many of our cities have expressed interest in choosing the 100% renewable product for their municipal accounts. This will be a great way for our city governments to lead by example.
Finally, we will be offering an “early adopter” program to ratepayers who want to enroll in PCE in advance of the rollout of our service in their neighborhood. We think many of these customers will pick the 100% green product.
So, what do you see as the key lessons that you’ve learned about CCA formation from your experience with PCE thus far?
One — Establish a single entity within your county to take the reins. And I think that in most cases it is the county government that is in the best position to play that role. It takes a lot of time and effort on the part of both elected officials and paid staff to be effective.
Two — Obtain solid financial support to launch the CCA program and secure bank financing.
Three — Acquire professional expertise under contract. In our case LEAN Energy and Pacific Energy Advisors were indispensable. Both of these organizations are doing yeoman’s work to bring the CCA model to jurisdictions across the state.
Four — Set an aggressive timetable for launch. In our case, there are times I think our schedule may be too aggressive because it has been stressful for us to get everything in place for an October launch. On the other hand, it has been exciting. We are acting more like a Silicon Valley start-up than a government agency. People are getting things done quickly, they are responding effectively to deadlines, and they are working at a pace that one typically does not see in government. And ultimately, the quicker you launch, the quicker you reduce your carbon footprint.
So, in addition to launching successfully, what are PCE’s next big challenges?
There is the challenge for our new CEO, Jan Pepper, to transition Peninsula Clean Energy from a county-supported effort to a fully functioning, independent joint powers authority. She has put together a staffing plan that contemplates hiring half a dozen people by year’s end. And, finding good people and getting them on board is a big task. But, I think we are well served to move quickly. Lots of CCAs will be coming online in Northern California in the months and years ahead, so we will have first pick of the available talent.
Also, the uncertainties surrounding PG&E’s future Power Charge Indifference Adjustment, or what we simply call “exit fees,” are a concern. Ideally, this will be addressed by all of the CCA programs working together – and the sooner the better! Going forward, there may be other regulatory challenges as well.
Right now we are concentrating on having a very successful launch starting in October. We don’t want any hick-ups with that. In the long term, our goal is to provide competitively priced energy with an ever-increasing component of renewable power that is delivered by a well-run, customer friendly and innovative agency.
There are so many potential benefits a CCA program can deliver to our communities. We are all — staff, board members and community members — extremely excited about the possibilities that lie ahead.