Arcata Eyes Costly Divorce

City weighing Community Choice energy options



If Arcata divorces PG&E for its own "personal space," speaking electricity-wise, that independence may come at a cost rivaling alimony, according to a recently released feasibility study.

Arcata and the county of Humboldt are currently in the process of researching community choice aggregation, which would allow them to start their own electric providers or contract out to a third-party electric broker in an effort to find cheaper rates or power from more renewable sources. But the feasibility study, compiled by California Clean Power, one of two companies Arcata is looking at to potentially manage its program, found that the city creating its own electricity management agency "is not financially feasible."

The key words are "its own," said Peter Rumble, chief executive officer of the for-profit California Clean Power. But Rumble said his company is still willing to front start-up money and take the financial risk even on an Arcata-alone project — offering a potential "no-fault" divorce from PG&E.

But California Clean Power's "model has not been proven yet. In some ways it's too good to be true," said Jim Zoellick, senior research engineer for Schatz Energy Research and a member of Arcata's energy committee. "If things go really well, the profits go to California Clean Power. If they take too big a hit, then we're left holding the bag and may have to go back to PG&E."

But, according to California Clean Power's feasibility study, what won't work financially is if Arcata were to decide to start up its own electric provider, using its own funds. With a 50-percent renewable energy component in delivered electricity, it would cost Arcata $1 million to $1.6 million to break up with PG&E and strike out on its own, according to the study.

While the numbers don't look good, Rumble said his company is set to spread out the financial risk among other communities who may use its services. "That's by design, to give smaller communities the opportunity beyond waiting until the region decides," Rumble said.

An estimated price tag exceeding $1 million for Arcata's go-it-alone option is a far different conclusion than earlier this year, when the same company predicted "large amounts of revenue" for the city, noted Mayor Michael Winkler. Arcata asked for more details, and now the feasibility study shows otherwise. There's been discussion of having a set payment to the city if a for-profit company is hired, but there are no details.

Enter the polyamorous approach.

Arcata, Humboldt County, and the Redwood Coast Energy Authority are all looking into Community Choice. That is, the city/county/authority could become its own electricity provider, in a separation from the current utility. PG&E would get to keep the poles and wires sending electricity to you, but purchasing power, billing and other necessary accoutrements would be provided through a municipality. The agencies could do it on their own, or could hire one of the two for-profit companies — including California Clean Power — that are offering services to create a new utility.

"The way I've been thinking is to go through Redwood Coast Energy Authority," Winkler said. That is the regional organization that has a joint powers agreement with the county, several cities, and the Humboldt Bay Municipal Water District.

Redwood Coast Energy Authority Director Matthew Marshall said that's just the route being explored. "We are moving forward with the goal of a regional program," he said.

He noted that on June 29, the authority established priorities to "pursue development of a [Community Choice] business plan that prioritizes utility rate savings for the community combined with the utilization of local renewable energy resources, including existing facilities, to the greatest extent technically and financially feasible."

Marshall added that the county and cities "will need to each adopt an ordinance for their jurisdiction to participate in the community choice program, so we will be providing presentations in August to city councils to introduce the topic prior to them considering an ordinance."

The Humboldt County Board of Supervisors is also supposed to vote on an ordinance in support of the concept in August. "The specifics of the ordinance are still being developed," county spokesperson Sean Quincey said.

Local municipalities have a wealth of expertise to rely on in looking at various options, said Kim Malcolm, a consultant for Local Energy Aggregation Network. "Humboldt seems savvy about what it's getting into," Malcom said.

Sources say what's being discussed is having a private company either handle the whole move away from PG&E, or facilitate administration of the plan. This is unlike other Community Choice programs. Sonoma County (with the exception of Healdsburg) administers its own Community Choice. Marin County not only runs its own, but has reached across county lines to other regions. Lancaster is set to run its own program within the city.

If either Arcata or Humboldt County instead proceeds with a private company to administer the program, it would be the first in the state to do so. So, while Rumble noted he plans to spread the financial risk, there's yet to be another entity to help with dispersing it.

The county-wide economies of scale could push it into more financially fruitful territory. With 154,000 accounts, Sonoma's program, for example, has higher-than-expected revenues, although it is still operating with tight margins due to its initial start-up costs, according to Sonoma Clean Power.

Another private firm, Community Choice Partners, is also interested in putting together a program for the local region. Anticipating profits, this company would initially take the financial risk, like California Clean Power, but would turn over management to the local entity after a few years, according to Winkler. Community Choice Partners is "much more amenable" to developing in-county, or in-city renewable resources than the Clean Power, he added. California Clean Power intended to act more like an electricity broker, with the municipality reduced to a "passive" position, Winkler added.

In a less-passive position, municipalities would have more authority over what to do with any proceeds from creating a Community Choice program, which aims to give customers more say in where their power comes from. That could result in investment in solar, wind and even biomass infrastructure in the county, as well as in efficiency and conservation efforts. Participating entities could also choose the percentage of renewable electricity procured, in some cases even trading higher rates for cleaner power.

Even if the authority, the county and Arcata do not adopt Community Choice, getting 50 percent of electricity from renewable sources may soon become state law.

A bill, authored by Senate President Pro Tem Kevin de León (D-Los Angeles), requiring half of California's electricity to be derived from wind, solar or other renewable sources by 2030 passed the senate June 3 with a 24-14 vote. It's now moving through the Assembly with an excellent chance of being signed into law with the governor's support.

J.A. Savage is a freelance journalist living in Trinidad. Former editor of California Current, she's written for the San Francisco Chronicle, the Los Angeles Times and the S.F. Bay Guardian.

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