Kroll Bond Rating Agency Releases New Report – A Better Way: The Emergence of CCA in California

Kroll Bond Rating Agency (KBRA) has continued to monitor the proliferation of Community Choice Aggregation (CCA) incorporations in California and believes that the burgeoning industry presents a compelling alternative to traditional utility generation services.

Key Takeaways:

  • KBRA believes that well-run CCAs with favorable characteristics in California can achieve strong investment-grade ratings through an asset-light and community-centric business model that provides clean, competitively priced power to residents.
  • As stakeholders increasingly prioritize environmental, social, and governance (ESG) considerations, CCAs in California are uniquely positioned to ride the coattails of this movement, helped by social dissatisfaction with traditional vertically integrated utilities.
  • KBRA sees a window of opportunity for CCAs in California, given the higher-cost electricity supply and legacy governance issues that burden existing utilities.
  • Although KBRA’s outlook for CCAs in California is positive, we do see some challenges ahead including regulatory rulings regarding the calculation of the Power Charge Indifference Adjustment (PCIA), and the ability of CCAs to continue to offer discounted electricity to customers compared to traditional vertically integrated utilities.

To view the report, click here.

San Diego community energy program gets official certification

San Diego Union-Tribune

It was largely a formality, but the California Public Utilities Commission has officially certified San Diego Community Power, the five-city community choice aggregation program that plans to launch next year as an alternative to San Diego Gas & Electric when it comes to purchasing power for customers in San Diego, Chula Vista, La Mesa, Imperial Beach and Encinitas.

“We kind of expected it because we’ve had third parties look at our implementation plan and all of our documents,” said Joe Mosca, an Encinitas City Council memberand the chair for San Diego Community Power, known as SDCP for short. “Even though it was expected, we certainly feel good about this first step and I think it bodes well for all the other steps that we have coming up.”

Under the community choice aggregation, or CCA, model, local governments can form entities that assume an important function that had always been reserved for investor-owned utilities — what sources of power to buy. SDCP anticipates offering a default program consisting of 50 to 60 percent renewable energy sources at rates 2 percent to 4 percent cheaper than San Diego Gas & Electric.

SDCP’s customer base in the five cities is expected to come to 920,000, which would make it the second-largest CCA in the state.

Last month, SDCP’s board members — made up of one city council member from each of the five cities — unanimously voted to approve a three-year, $1.15 million contract with Pacific Energy Advisors, a Folsom-based consulting group, to advise the board on wholesale power services that include energy planning, purchasing, risk management and rate design.

Pacific Energy Advisors “is really well-respected” among California CCAs, Mosca said. The firm’s website counts at least nine community choice energy programs as clients, including Marin Clean Energythat launched in 2010 as the first CCA in the Golden State.

SDCP is also moving forward to recruit a CEO. Mosca said he expects the names of three or four candidates will be submitted to the board by the latter part of May or early June. He did not disclose the salary range. “We will offer competitive salary and benefits and so we’re expecting a really positive response,” Mosca said.

Read more here:

Powering a Region

Comstock’s Magazine

During last year’s PG&E public safety power shut-offs throughout California, nearly 800,000 customers across Northern California were left without electricity, in some cases for several days. But the residents and businesses of Roseville were unaffected. That’s because these customers get their electricity from the City of Roseville-owned Roseville Electric Utility, which operates on a different grid than PG&E.

Roseville Electric provides some of the most reliable power in the state. The municipal ownership of the system also allows the utility provider to offer electricity at a lower cost than many other power providers in Northern California. Local control has also meant that the city can integrate its electric utility with its city-owned water, wastewater and solid-waste services to better serve residents and businesses, and be more efficient with its use of natural resources.

Other Placer County cities, including Lincoln and Rocklin, are also proactive when it comes to providing energy at lower rates for its residents. They do so by participating in a community choice aggregator, Pioneer Community Energy. This approach provides lower energy rates and reliability to these Placer Valley cities’ commercial and residential customers, as well as environmental advantages, adding value to those who work or live in the region.

Roseville Electric gets about 40 percent of its electricity from a city-owned natural gas power plant in Roseville. It accesses other sources of energy as a member of the Northern California Power Agency, a collective that enables utilities to jointly invest in energy sources. “That gives us access to geothermal power (from Lake County) and hydropower from Shasta Lake and the Central Valley (Project),” says Todd White, assistant director of Roseville Electric. “We also buy solar and wind power on the open market.”

As a result, about 50 percent of Roseville Electric’s generation is carbon-free, exceeding the state renewable-energy portfolio mandate of 33 percent. “We are seeing that more and more of our customers are looking for environmental stewardship and energy efficiency,” White says.

With Pioneer Community Energy, a community choice aggregation, a board of elected officials procures lower and stable prices for customers in Auburn, Colfax, Lincoln, Loomis and Rocklin. CCAs like Pioneer were created in the aftermath of California’s deregulation of investor-owned utilities in the early 2000s, intended to enable local control of prices for power and advance the use of renewable fuels.

Pioneer is part of a larger cooperative that includes the Bay Area Rapid Transit and several cities in Northern California to boost its buying power. The power it purchases is distributed to customers by PG&E, which also is responsible for billing customers.

Although Pioneer’s customers lose power in a fire safety shut-off, they benefit from the savings created by Pioneer’s electricity purchases, which currently make up about one-third of its electrical power, according to Jenine Windeshausen, Pioneer’s executive director. “We posted our most recent rates in November (2019), and they are about 11 percent lower than PG&E’s,” she says.

Windeshausen says Pioneer is also working with PG&E to improve electrical distribution and reduce disruptions from shut-offs. “We are working with PG&E to identify circuits that are vulnerable to power outages and encouraging them to beef those up,” she says. Longer term, Pioneer is also studying how to create microgrids in areas near hospitals and other vital services to improve electric reliability.

Although the CCA can buy power from many sources, Windeshausen says Pioneer’s priority is to buy as much as possible locally, including from a bio-solids facility near Rocklin, the Western Placer Waste Management Authority and local commercial-sized solar farms. “We very much like local control in buying power that also has economic benefits for the area and supports local jobs,” she says.

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There’s a better way out of the PG&E bankruptcy

San Francisco Chronicle

By San Jose Mayor Sam Liccardo

Pacific Gas and Electric Co.’s lawyers recently submitted a revised plan to take the company out of bankruptcy, masterfully sprinkling billions among the company’s most powerful stakeholders — hedge funds, shareholders and bondholders — along with perhaps $1 billion in fees to consultants, banks and, yes, attorneys. All will cheer the company’s procession out of bankruptcy court and over to the California Public Utilities Commission, again and again, for rate hikes.

But 73,000 wildfire victims and 16 million California ratepayers should not be cheering.

The wildfire victims deserve better. The utility will pay those claimants from a $13.5 billion fund financed half in cash and half in stock — PG&E stock. That’s right: The current plan tethers the victims’ financial futures to the performance of the company that burned down their homes. It also saddles those families with the risk of any future wildfires started by PG&E’s failing equipment. That’s chutzpah.

If the victims are worried about uncertain PG&E stock valuations, they should be. In the 23-month span over which the company’s wires ignited 18 wildfires — killing 107 people and destroying 15,700 homes — the company’s shares plummeted 90%. What about the next wildfire season?

More here:

Lancaster City Manager touts innovative thinking for city governments

The Daily Independent

When Lancaster City Manager Jason Caudle spoke at the IWV Economic Outlook Conference Feb. 17, he started by joking that “this presentation is going to blow your head off the top of your shoulders.”

Caudle was joking of course — after his presentation, everyone present had heads firmly attached — but the comment was his way of preparing the audience for his perhaps unfamiliar ideas about how cities can acquire more revenue.

Specifically, Caudle said he wanted to encourage citizens and city governments to think creatively when it comes to finding funds.

One example he gave was something called Community Choice Aggregation. According to the EPA, CCA consists of “programs that allow local governments to procure power on behalf of their residents, businesses, and municipal accounts from an alternate supplier while still receiving transmission and distribution service from their existing utility provider.” CCAs are currently authorized in seven states: California, Illinois, Ohio, Massachusetts, New Jersey, New York, and Rhode Island.

Caudle said Lancaster created CCA in partnership with Edison and the energy revenue generated from CCA is $4 million a year. He compared his to the $1 million a year generated by the Costco in Lancaster, adding “to create or replicate 4 Costcos in this marketplace you’d have to quadruple the population of the Antelope Valley” as well as provide additional services.

Caudle noted that many city budgets are strapped for funds, due to multiple issues including e-commerce reducing brick and mortar stores and the associated property tax.

He used an analogy, saying many cities are making hamburgers for $10 and selling them for $8. Continuing the analogy, he said Measure V is what is making up the deficit in “hamburger” prices in the Ridgecrest city budget.

Using what he said was Lancaster’s positive experience with creating a CCA as one example, he encouraged the community and city of Ridgecrest to get together and look for creative and innovative ways to increase revenue streams or make money, test new ideas and push the envelope.

More here:

Why Microgrids are at an Inflection Point

Microgrid Knowledge

Microgrid installations are accelerating in a range of settings, including communities, industrial operations, ports and airports, business parks, fire and police stations, schools, data centers, water treatment facilities, military bases and other operations.

North America is on track to see the microgrid market grow to $10 billion in the next seven years, according to Navigant Research, a Guidehouse company. Worldwide the market is expected to grow from roughly $3 billion to $30 billion over that time frame.

As aggressive as that forecast sounds, it may underestimate microgrid penetration, given recent events. Since Navigant published its forecast in 2018, activity has picked up dramatically, with California appearing to bring the microgrid market to an inflection point.

For example, Pacific Gas & Electric intends to rely on microgrids to power a significant number of its customers during future public power safety shutoffs. The utility is planning to add 522 MW of microgrids in 2020. To put that in perspective, that’s nearly as much microgrid capacity as the entire US added in 2019, according to a Wood Mackenzie report. On top of that, businesses, cities, schools, additional utilities, and others in California have been issuing plans to build microgrid projects of their own since the wildfire shutoffs, making the state an epicenter of development.

Communities, too, are seeking more control over their energy production and use. In seven states, including California, this trend has led to a rise in community choice aggregators (CCAs), entities formed to secure power on behalf of the residents, businesses and public accounts in a municipality or county. California’s first CCAs appeared in 2011 and the state now has nearly 30 operating or in planning.

CCAs attempt to use their collective buying power to drive down energy costs for the community. CCAs attempt to use their collective buying power to drive down energy costs for the community. They also work to reflect community values. So in green-leaning California., the CCAs offer customers the choice of using power that comes at least partially from renewable sources. California’s CCAs also focus on electric reliability, so several are exploring microgrids. Redwood Coast Energy Authority in Humboldt County already has a microgrid under development. Monterey Bay Community Power has released an application seeking customers to host microgrid projects.

CCAs and microgrids are a natural fit: both champion local energy that can reduce costs, accelerate sustainability, and improve reliability. As a result, adoption of CCAs is likely to foster more microgrid installations.

Lancaster Choice Energy assists local small business ventures

Our Weekly

The first phase of Lancaster Choice Energy’s (LCE) Small Commercial Direct Install program is reportedly off to a great start, helping 138 local businesses save almost 2 million kilowatts of energy.

“As a local community choice aggregator, LCE enables us to reinvest in our community,” said Mayor R. Rex Parris. “The opportunity to provide money-saving programs such as these to locally owned, mom-and-pop businesses, as well as local residents, is a big part of why Lancaster chose to establish its own CCA – in addition to creating a more sustainable environment for generations of residents to come.

“We are proud to offer this no-cost program to support our small local businesses,” Parris added. “Not only will businesses use less energy and reduce their carbon footprint with the installation of energy efficiency measures, they will also realize a decrease in energy costs.”

In April 2019, LCE launched its Small Commercial Direct Install Program. This program, funded with $1.2 million from Southern California Edison at the instruction of the California Public Utilities Commission, offers local businesses free energy efficiency consultations and equipment upgrades and installations.

Read more here:

Butte Choice Energy Authority moves forward

Enterprise Record

A new electricity agency that is expected to change the energy mix-up and rates for Butte County customers is taking shape with the launch of a website and requests for proposals.

Chico and Butte County formed the Butte Choice Energy Authority in November. It is a Community Choice Aggregation program, or CCA, that gives local officials power over the purchase of electricity for a region’s customers.

The service is expected to become available in the spring 2021. Pacific Gas & Electric, Corp. will maintain ownership and operation of the local electrical transmission system. But the energy flowing through the system to local homes and businesses will have been purchased by the joint powers authority.

According to the program’s plan, that will let local officials pursue a few goals, including lowering rates by 2 to 4 percent compared to PG&E; offering options in which renewable sources make up 36-40 percent, 50 percent or 100 percent of the energy mix; and pulling from as many local energy sources as possible.

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Calif. bill calls for turning PG&E into a public power utility

Public Power Daily

California State Senator Scott Wiener recently introduced legislation that would transform Pacific Gas and Electric into a public power utility.

The legislation, S.B. 917, would turn PG&E into a publicly owned entity, creating the Northern California Energy Utility District. The structure of the utility district would be modeled on the Long Island Power Authority in New York, which operates as a publicly owned utility that contracts with a public benefit corporation to staff a variety of jobs, such as tree trimmers, line workers, and truck drivers.

LIPA was created in 1998 when New York State acquired Long Island Lighting Co. In 2013, state law was amended to make LIPA a public-private partnership. Subsequently a subsidiary of Public Service Enterprise Group won a 12-year contract to operate LIPA’s electric system.

Northern California Energy Utility District’s public benefit corporation would be known as Northern California Energy Utility Services. The proposed public power utility district would also include PG&E’s natural gas distribution system.

PG&E is a subsidiary of PG&E Corporation.

The legislation would also help local jurisdictions as well as Native American tribes that want to form publicly owned utilities, and it would not interfere with communities that are already in the process of forming public power utilities. The legislation would also allow community choice aggregators to maintain and expand their current role providing power procurement services to customers.

“This proposed public-private partnership has the benefit of protecting workers’ salaries and benefits, and providing the positive value of community ownership,” said Barry Moline, executive director of the California Municipal Utilities Association. “Californians are asking for transparency, public accountability, high reliability and lower costs.”

In December, the city of Davis, Calif., became the latest city to support transforming PG&E into a customer-owned utility. Community choice aggregator Valley Clean Energy in late 2019 recently submitted a $300 million bid to purchase Pacific Gas & Electric’s lines, poles and other electricity distribution assets within Yolo County, Calif.

In June, the South San Joaquin Irrigation District (SSJID) forwarded to California Gov. Gavin Newsom a letter signed by the Mayors of the Cities of Escalon, Manteca, and Ripon renewing the cities’ endorsement of SSJID’s 15-year bid to takeover PG&E electric service for these Central Valley communities.

“Under existing law, investor-owned utilities such as PG&E make money not by selling electricity but by building power lines,” a memo from Wiener’s office summarizing the legislation, said. “As a result, they have a strong incentive to keep building power lines out into the fire zone, despite the potential risk, and very little incentive to prioritize safety and reliability.”

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Power to the People: Community Choice Aggregation in California

Electricity production is the second largest source of greenhouse gas (GHG) emissions in the United States, with approximately 62.9% of our electricity coming from non-renewable fossil fuels. In light of the federal government’s failure to enact comprehensive climate legislation, municipalities across the country have begun to tackle climate change at the local level. One such example is Community Choice Aggregation (CCA). Community Choice Aggregation allows local governments to aggregate the electrical loads of the residents, businesses, and institutions in their geographic region to purchase energy on their behalf. Since the first CCA was established in Massachusetts in 1997, CCAs have continued to grow in popularity. However, no state has seen more significant growth than California. Since the launch of Marin Clean Energy in 2010, nineteen CCA programs now exist in California and reports estimate that 16% of the state load will be serviced by CCAs in 2020.

Though climate change is a collective action problem that no one municipality can solve, CCAs offer a way for local communities to make a significant impact. In particular, community choice aggregation in California highlights CCA’s recent successes in increasing renewable energy generation, reducing GHG emissions, and empowering communities. These triumphs suggest that CCAs should be implemented nationwide. As more states begin to pass CCA-enabling legislation, more Americans can choose to get their energy from renewable sources. Over time, the collective impact of a wide network of CCAs may have a significant impact on mitigating against the threat of climate change. Looking towards the future, we should focus efforts on resolving the PCIA debate, continuing to build renewable, local generation facilities, and working to fund the expansion of the CCA model across more states and communities.

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