Navigant Research Blog

Local Renewables and Big Oil Bump Up Against PG&E

Peter Asmus — March 3, 2010

When AB 117, which created the “Community Choice Aggregation” (CCA), was passed in the California Legislature in 2002, the program was touted as a way to allow local governments to choose the environmental cleanliness of their power supply portfolios, but leave the business of delivering and billing for electricity to the incumbent distribution utility.

At the time, the distribution utilities couldn’t object because under utility restructuring laws passed in 1996, they were not going to be generating power anymore. In fact, PG&E publicly supported the CCA law and the efforts of Marin County to switch over to greater renewable energy content. But much has changed in the interim.

On February 2nd, the Marin Energy Authority (MEA), a new joint powers agency, approved a five-year contract with a subsidiary of Shell Oil to launch a program dubbed “Marin Clean Energy.” Among the benefits touted by MCE’s promoters for program participants are the following:

  • Instantly boost renewable energy content from 12 to 25 percent, without any rate increases
  • Shift ratepayer income derived from local citizens to local benefit instead of being distributed throughout the vast PG&E service territory
  • All exit fees and transfer costs are picked up by MEA
  • Ratepayer revenues create Marin County’s first enterprise district, allowing its local energy assistance programs to have a sustainable source of funding
  • Allows Marin County to develop its own net metering policy to compensate excess power generated by roof-top solar and small wind systems

According to Marin County staff, the MCE program is the single biggest step the local government can take to meet California’s AB 32 greenhouse gas emission targets, and is the easiest and most cost effective way to respond to the global climate change threat.

MCE almost did not move forward due to concerns about loan guarantees. In a highly unusual move, four local wealthy citizens put up their own wealth as collateral to move the project forward when PG&E threatened to take the Marin Municipal Water District to court if it backed up any loan guarantee with MCE. PG&E has also allegedly refused to transmit electricity over its distribution lines to Marin County residents opting to purchase power through the MCE program.

The selection of Shell, an oil company with a checkered past on human rights and other CSR issues, has raised more than a few eyebrows. Can one really go local and global at the same time?

Some green energy advocates, particularly fans of solar PV technologies thriving under the current suite of state and federal subsidies, have been leery of the CCA model, since it is focused more on lowering the cost of wholesale renewable power than promoting local clean distributed generation. At least that is the case for MCE and its partner Shell during the first five years of operation. The track record of Shell Oil on the human rights of indigenous peoples living in communities in the developing world where oil or natural gas is extracted also emerged as an issue. While originally a pioneer on solar energy among oil companies, the firm, along with other major oil companies such as Chevron and ExxonMobil, has recently shifted to an emphasis on biofuels.

Today, political opposition to Marin Clean Energy is growing within Marin County itself. For example, Michael Smith, Marin County Treasurer, recently came out against the program and 11 former mayors of Mill Valley, a city that elected to join MCE, also signed a joint letter criticizing the plan.

Skeptics wonder whether these recent efforts within Marin County to oppose a program that is now already in place may be a result of PG&E’s aggressive advertising and PR plan to scuttle the program, a lobbying effort that could entail as much as $35 million to pass Proposition 16 on the upcoming June ballot. Prop. 16 requires two-thirds of voters to approve the financing of any new power plants to be developed by any city or county agency.

Prop. 16 would not only handcuff any CCA – such as the MCE — but also limit the abilities of existing municipal utilities and all other California local governments to finance renewable energy facilities that PG&E has itself repeatedly failed to bring on-line, despite a state RPS requiring 20% of its electricity to come from renewable energy in 2010. At present, PG&E obtains less than 13% of its electricity from renewable sources.

PG&E claims Prop. 16 simply gives the public a voice and choice. It was originally entitled the “Taxpayer Right to Vote Act,” a clever way to market this ballot measure in these times of lingering fears about our pocketbooks. That Orwellian title caught the attention of Attorney General Jerry Brown, who renamed the measure the “New Two-Thirds Requirement for Local Public Electricity Providers Act.”

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