This article appeared in the New Times of San Luis Obispo:
Based on the Community Choice Aggregation (CCA) law passed by the state Legislature in 2002, Community Choice Energy programs started taking off in 2010 and are now rapidly proliferating. Community Choice programs have empowered local communities to decide where their electricity comes from and enhanced the economic vitality of the regions where they have been established. There is not much question about where power generation in California is heading: away from centralized investor-owned utilities and toward Community Choice and its ability to offer communities local control, more renewable energy at competitive rates, and the investment of revenue generated to benefit local residents and businesses.
Central Coast Power, a consortium of local governments in San Luis Obispo, Santa Barbara, and Ventura counties, formed in 2015 to explore the feasibility of a Community Choice program. The consortium commissioned a tri-county feasibility study from consulting firms Willdan Financial Services and EnerNex. The study examined eight different geographical scenarios for the region with energy mix scenarios for 33 percent, 50 percent, and 75 percent renewable energy, comparing likely CCA costs with the rates of the two utilities serving the three counties.
On Sept. 12, the Willdan/EnerNex study was released. It concluded, in every scenario, that a CCA program is not economically feasible and would cost ratepayers more than utility-provided power.
MRW & Associates, contracted to conduct a peer review of the study, pointed to half a dozen “areas where the draft study was potentially overly conservative or made questionable assumptions that might explain why its conclusion was negative while others have been affirmative.” These red flags ranged from the fact that the study failed to “reflect the most recently reported contract prices for renewable energy and does not reflect the general downward trend in renewable prices seen over the past few years” to a failure to “account for the proposed dramatic uncontested reductions” in the fees utilities charge CCA programs for billing services.
Energy experts elsewhere have elaborated on the study’s fatal error: using old data on the cost of renewable energy to project future renewable energy costs for Community Choice programs. The report pegs those costs at 8.8 cents per kWh (kilowatt hour). But recent utility contract prices have been averaging about 6 cents per kWh. That’s a 47 percent difference.
The report’s price projections relied on a chart by the California Public Utilities Commission listing average energy contract prices over the years. “Every year of price data going back to 2005 in that chart drags this long tail of all the contract prices from earlier years, rather than the price only for contracts signed in each year,” says energy consultant Robert Freehling. “By creating this cumulative snowball of past prices for each year of data, the CPUC creates what in financial analysis is called a ‘lagging indicator’—in this case an extreme lagging indicator—where each year in the chart actually reflects prices from years earlier.”
This error by itself would be enough to lead to the conclusion that a Community Choice program is uneconomical.
On Oct. 3, the Santa Barbara County Board of Supervisors voted to do a more in-depth peer review of the study that re-examines some of its fundamental assumptions.
Beyond the realm of clashing consultants, reality has already refuted the study’s “not economically feasible” conclusion. As the peer reviewers note, the study’s conclusions contradict other recent CCA technical studies, but Community Choice has already made its own case for itself in the real world, via MCE Clean Energy, launched in 2010 in Marin County; Sonoma Clean Power, launched in 2014 serving Sonoma and Mendocino counties; and many more programs now established or coming online including Redwood Coast Energy Authority, Apple Valley, and Silicon Valley Clean Power.
“Community Choice has proven to be cost-effective in both PG&E and SCE territories,” said Samuel Golding, president of Community Choice Partners. “Willdan and EnerNex insist it’s wildly more expensive. Which is more likely to be wrong: a consultant’s spreadsheet or real-world experience?”
Golding is candid in his assessment of where the study went wrong. “Beyond the outdated renewable power cost assumptions or the failure to understand the basic rules for how the agency would be charged for electricity on the wholesale market, their model is missing half the math. It doesn’t capture the key regulations that impact Community Choice energy agencies in the real world or how the utilities’ rates should be forecasted. This study is a poster child for all the reasons why we strongly advise communities to avoid relying on consultants for this sort of modeling. Redwood Coast CCA bypassed the consultants, brought in a nonprofit owned by public power utilities, and launched a successful CCA in less time than this study took to get it all wrong. Staff should reject this study, call up Redwood Coast for advice, start relying on proven experts, and get on with it.”
For SLO County and northern Santa Barbara County, here’s the most important correction made by the MRW peer review, analyzing a “middle of the road” (50 percent renewable energy) Community Choice scenario: A corrected model with revised assumptions resulted in lower rates and a cleaner energy mix than PG&E.
San Luis Obispo County’s Board of Supervisors and city councils shortly will be presented with the Willdan study—and, one hopes, the MRW peer review of that study—as they ponder the answer to the question, “Should we proceed with a Community Choice program?”
Their answer should be yes.
Andrew Christie is the director of the Santa Lucia Chapter of the Sierra Club. Katie Davis is chair of the Sierra Club’s Santa Barbara Group.