The California legislature decided in 2002 that communities could form their own community choice agencies to buy and sell electricity in competition with investor-owned utilities.
It’s clear lawmakers did not think that through.
The state had just endured the chaos of the 1998-2001 energy crisis, and officials wanted to give communities more control over their electricity supply without having to acquire wires and do the billing. Those tasks would stay with the area’s utility.
Many hoped this new competition would reduce prices, increase clean energy and protect communities from the market and regulatory failures of the energy crisis.
It now appears lawmakers did not consider how to manage the grid if many communities fled utilities and embraced community choice, an explosion that has been underway in earnest since 2014.
Dramatic disputes have broken out between the old grid – that is, the state’s three giant utilities and their regulator, the politically appointed California Public Utilities Commission – and the new grid, with its 19 community choice agencies and their locally elected boards of directors.
Stunned by the new fragmentation, the public utilities commission wants more control over the new community choice agencies, who have to report to the commission but which make their own decisions. The commission wants the ultimate authority to decide how power is purchased and paid for.
Angry community choice agencies — which believe they are handling their mandate effectively — accuse commissioners of trying to hold onto power.
After five years of trying to work the system, slogging through minutia to try to convince a gnarled bureaucracy that it and the public will benefit from working with community choice agencies, Sonoma Clean Power’s board of directors exploded during their December meeting.
They vowed to fight an unelected commission they see as trying to take away their autonomy, thwarting the public will, threatening “our climate fight” and using utilities as pawns to maintain power.
They instructed CEO Geof Syphers to be aggressive, to fight any commission interference and enlist help from the state legislature.
“It’s become clear that CCAs are perceived as a threat and very aggressive action is being taken to financially disadvantage us,” said Sonoma Clean Power director and county Supervisor Lynda Hopkins. “We need to go on the offense. We need to be the drivers. This is a moral issue.”
The disputes could threaten the future of community choice agencies.
In the face of “significant financial risk,” Syphers said he has made “fairly significant cuts” in program budgets and has asked staff to cut operating costs, so he can keep building up reserves to cushion potential blows.
The turmoil is caused by the state’s recent success in attracting multiple suppliers of energy in competition with utilities, including 19 community choice agencies, almost a million solar projects and 15 independent retailers. Each segment is thought to provide about 16 percent of the state’s electricity and climbing fast.
“We are seeing absolutely dramatic changes in California’s electric utility industry, things that most people tell me are absolutely unprecedented in the past 100 years since the industry first came into being,” Michael Picker, president of the public utilities commission and formerly a renewable energy adviser to Gov. Jerry Brown, told a hearing in Sacramento. “That’s another set of developments, it’s another set of opportunities, that we never really thought through in a coherent way.”
Some notable steps:
• Between 2014 and 2019, community choice agencies grew from two to 19.
• In 2020, building codes will require all new homes to have rooftop solar, even though California already has more mid-day solar than it can use at times and sometimes has to pay to give it away to neighboring states.
• Last year the state legislature raised the cap on how much electricity the independent retailers can sell, a cap the state legislature had set after retailers like Enron Corp. played key roles in the dramatic failure of deregulation in 2000.
Community choice agencies, TURN and others fought the bill, complaining that retailers buy cheap power with high emissions. Some labor groups supported the bill, believing retailers are most likely to create jobs.
By 2030, 85 percent of the customers who pay utilities to deliver their power might be buying that power from someone else, the commission predicted.
“The commission has to make a choice. Is the future letting a thousand flowers bloom and promoting a customer-choice-driven, competitive-market-based, set of outcomes, or is the state looking to engage in centralized long-term resource planning?” said Matthew Freedman, staff attorney with TURN, the energy issue watchdog agency.
“It’s hard to come up with a statewide plan to get things done. It used to be that politicians could just tell utilities to do it,” said Freedman. TURN is a consumer advocacy nonprofit financed by its members, foundations and fees approved by the California Public Utilities Commission for intervening on behalf of residential customers.
Then even more dramatic changes erupted, with two years of murderous firestorms, another PG&E bankruptcy in January, this time caused by the massive fire losses it faces, and a flurry of unpredictable bills in Sacramento this year that tackle nearly every aspect of energy markets in California, from potentially dramatic increases in PG&E rates to profound challenges to community choice agencies.
Syphers said he understands concerns that a fractured market could make it harder for the state to achieve its clean-energy goals. He said he’s confident community choice agencies and utilities can co-exist and Californians will benefit.
He notes that PG&E’s 2001 bankruptcy was a key reason the legislature approved the creation of community choice agencies, to provide market stability, and the agencies are fulfilling that role today while continuing to expand renewable energy at a time when a bankrupt PG&E can not.
“California’s energy markets and regulations are in need of repair and updating to make sure ratepayers and the climate are protected,” Syphers said. “Smart leadership will be needed to sort through the tough problems.”