The recent discussion on the Valley Clean Energy switch has caught a number of people off guard. But after all, this discussion of Community Choice Energy (and before that Community Choice Aggregation) has been going on for over four years now.
One of the first articles discussing Community Choice Aggregation (as it was then known) came in November 2014. There had been a recent proposal for the creation of a municipal utility, but polling at that time showed a mixed result. Gerry Braun and Richard McCann co-authored a piece that presented the CCA (now CCE) option.
Some have suggested that the fact many were caught unaware now represents a failure by the city to do proper public outreach. But, given the number of public meetings, public forums, and other outreach, while I generally believe the city is deficient on outreach, it is hard to fault the city here. At some point, the public is responsible for being engaged – or they face the consequences.
Along those lines it is worth noting that the co-authored piece from 2014 generated just three comments, and none of them by current regular posters. In October 2017, the Vanguard published a press release from VCE’s Board of Directors announcing that they had submitted the plan to the California Public Utilities Commission (CPUC) for certification – it generated zero comments.
In May of this year, we published another press release that VCE would launch on June 1 – again, zero comments.
VCE mailed brochures and notices to the public. Both the Vanguard and Enterprise ran ads about the switch.
At what point is the public itself responsible for not knowing stuff?
This whole notion of choice is a strange complaint to be made against Valley Clean Energy. After all, not only was there a long public process that the public had the ability to weigh in on, the governance board is a board of elected officials. From the Davis City Council, Lucas Frerichs and Robb Davis were on the board. Those two were probably the most accessible and approachable on the council.
Robb Davis is now off the council and his replacement will be named at some point. Compare that to the governance of PG&E – which is corporate and not responsive at all to the public.
There have been questions as to why it is an opt-out versus an opt-in, but with PG&E, there was no option at all. PG&E, as a natural monopoly, operated for decades with effectively no choice whatsoever by the public, other than to go off the grid entirely.
The fact that the public can now opt for VCE or PG&E represents a monumental step forward.
There is an issue of cost that is expected to be significantly lower for VCE than PG&E. That alone should be a reason to support the change. Matt Williams on Friday provided a solid explanation of the cost: “the default rates you are paying now under VCE are lower than the same rates under PG&E. The explanation provided for that is that the employee and overhead cost of VCE’s ‘power acquisition’ bureaucracy is no greater, nor less, than PGE’s costs for performing the power acquisition tasks.”
However, the CPUC allows “PG&E to take its costs and add on a ‘reasonable’ return on equity (i.e. profit).” That number is around 10 percent. As Mr. Williams explains: “So each kilowatt hour of electricity delivered to you by PG&E is billed at cost plus 10%. That same kilowatt hour is delivered to you by VCE at cost.”
On the Vanguard there has been some pushback that some local people are standing to make money off this. It is not clear that this is true. Certainly, as some have pointed out, the executives at PG&E are actually making a substantial amount of money, including the CEO who apparently receives $8.6 million.
Given that PG&E is paying about 10 percent of their take to executives while VCE is providing the electricity at cost, this seems like largely a non-issue. If a few local people make reasonable salaries, that hardly seems like a problem.
VCE is largely able to save money because they aren’t seeking to maximize profits for shareholders – they are in fact a non-profit. They have taken steps to reduce costs by making VCE a non-PERS (Public Employees’ Retirement System) agency. So there are no public pensions, only defined benefits plans (401k for instance).
Aside from cost, the big push for public power is local control over energy sources. As a hybrid between a municipal utility and the standard investor-owned utility (IOU) like PG&E, the CCE purchases the power while the incumbent IOU maintains the grid and provides customer service.
The CCE then has the option to seek out greener and more renewable energy sources to its customers. For example, the San Francisco-based CCE, CleanPowerSF, offers three options to the public. They can choose the Green option which is 43 percent renewable energy, the SuperGreen option which is 100 percent renewable, or they can opt out and remain on the PG&E plan which is estimated at 33 percent renewable.
Furthermore, there are significant benefits to the public if they have solar panels on their home. Under PG&E, as Matt Williams explains, “if you have solar production on your house, any excess power that you do not actually use is ‘given’ to PG&E for free.” However, under VCE, “a consumer who ‘produces’ more than he/she consumes will be paid by VCE for that excess power.”
The bottom line here – the public has considerably more choice under a CCE model than they did under only PG&E, and whatever issues there about local employees should be trumped by the corporate structure and the 10 percent allowable profit margin that PG&E gets, which a CCE does not.
One of our big concerns is what happens when the public simply does not get engaged in a public matter until it is very late in the process or, in this case, after the horse has already left the barn. At what point does the public have to become accountable to engage in a public process when they have numerous opportunities to do so?
We see this often in land use projects as well – the developer will hold early meetings, the council and various commissions will have public meetings, and sometimes the public does not get involved until the 11th hour. The case of VCE is a bit extreme, because we are seeing the first public push back, limited as it is, a few months after the formation of the agency and the June 1 starting date.
Sunday Commentary: Choice and Public Accountability with VCE, by David Greenwald, The Davis Vanguard, August 12, 2018.