Beware Of Latest Energy Scam: Community Choice Aggregators

CCA infograph
Any modern energy initiative is guaranteed to have a Technocrat planner. This story comes directly from an involved participant who is fighting against his local Community Choice Aggregator project. Be assured that this “scheme” will roll out into cities across America, where citizens will be deceived and bewildered, especially when their electricity rates unexpectedly rise.

Other names for the same scheme include: Community Choice Energy (CCE), Municipal Aggregation, Governmental Aggregation, Electricity Aggregation and Community Aggregation. As of 2014, 1,300 municipalities were directly affected. TN Editor

So what is a CCA exactly?

Essentially it is a government created and controlled middle-man that brokers energy contracts on behalf of consumers. Instead of paying Southern California Edison (SCE) directly residents would pay the Community Choice Aggregator of power (CCA). The CCA would then leverage the buying power gained by pooling consumers to purchase energy contracts. The hope is that the CCA would then use this buying power to purchase energy contracts at an affordable price from sources that provide cleaner energy than SCE would normally offer.

The choice part of a CCA is that instead of just paying the one rate afforded by SCE, consumers could choose from various cleaner options to meet their energy needs. For example, Marin Clean Energy (MCE), a CCA touted as a successful model, offers consumers three choices: Light Green (50% renewable), Deep Green (100% renewable), or Sol Shares (100% through local solar farm). As to be expected, the greener options typically would cost the consumer significantly more. In the MCE plan, the Sol Shares rates are 30% higher than the rates paid by those that choose the Deep Green option.

Claims

Proponents of CCA claim that it will bring cleaner energy to communities at more affordable rates. As a government run not-for-profit, instead of paying dividends to shareholders investor owned utilities( IOU’s), they claim the CCA will be able to reinvest profits into developing local green energy sources that could provide jobs and power to local communities.

Risks – Downsides – Facts

One of the downsides is that if the CCA is not successful that taxpayers will likely be caught holding the bag. In San Francisco a CCA was suspended after expending $4.1 million dollars. Another report indicated that in the SF example electricity rates were set to increase by nearly 5 times.

With our current power model, we supposedly have government regulators working on our behalf to ensure entities like SCE are not behaving badly. Whether those regulators are doing a good job is definitely a question up for debate, but with a CCA it is not clear what regulation, if any, they would have. Rates under a CCA would not be regulated by a government agency; instead they would be set by the CCA’s Board of Directors (or City Council) – which typically is comprised of locally elected officials. In addition, how are we to know whether the energy purchased by a CCA is actually cleaner? And who’s to keep the CCA from paying their directors and consultants outlandish salaries and benefits?

Those are exactly the concerns raised by one energy expert with regard to the Marin Clean Energy (MCE) CCA. In startling allegations, energy expert Jim Phelps has claimed that MCE has actually cost consumers more while providing energy that is less clean than PG&E (the local IOU) was providing. According to his analysis, the primary beneficiaries of MCE, which has 22 employees according to the City staff report, appears to be the directors and consultants of the organization that are bilking taxpayers out of millions of dollars a year.

MCE, which consists of the county of Marin, all 11 of Marin’s municipalities and the city of Richmond, serves as the retail electricity provider for 124,000 customers. The county of Napa and the cities of Albany and San Pablo have asked permission to join the authority, which could add another 27,000 customers. And a group of San Francisco supervisors has expressed interested in having the city, with its 475,000 residential and nonresidential electricity accounts, join the Marin agency.

The authority, which competes with the investor-owned Pacific Gas and Electric Co., was founded primarily to reduce greenhouse gas production by boosting the use of renewable energy sources. Fifty percent of the authority’s energy comes from renewable sources, while renewable sources account for 20 percent of PG&E’s energy.

Green Washing

Phelps focused his critique on MCE’s use of Renewable Energy Certificates (RECs). RECs are tradable commodities that certify that 1 megawatt-hour of electricity has been generated from an eligible renewable energy resource.

“These are just like going to the store buying a loaf of bread and getting a receipt,” Phelps said.

He added, “Lots of big companies buy certificates because they feel like it helps the environment. They don’t really know what is going on, that’s just their own visceral sensibility.”

Phelps asserted that clean-energy agencies, such as MCE, purchased RECs to cloak their use of “system power.” He said system power, the mainstay of the electrical grid, consists mainly of energy generated by burning natural gas and coal. That is important because coal and gas produce greenhouse gas emissions, while renewable energy sources don’t.

“What happens is they buy a REC, and it is pasted on the front of this brown power,” Phelps said. “Then they report to you, the consumers, that this is clean energy; but it’s not.” This is known as “green washing”.

Phelps analyzed the MCE’s power mix substituting system power, which has an emission rate of 944 pounds of carbon dioxide per megawatt hour, for all of the authority’s RECs. From that he concluded that MCE is producing more greenhouse gas emissions than PG&E.

Phelps also criticized the authority for waiting more than a year to purchase 10,500 RECs that reduced its greenhouse gas emission rates in 2011.

Phelps said, “What had happened was MCE’s emission rate was higher than PG&E’s so they went in the market afterwards and they bought those 10,500 instruments so they could undercut PG&E” in a contrived green washing scheme.

With an uncertain economy, a strained City budget, and roads still in disrepair now is not the time to embark upon a risky government run enterprise that strays so far from core government service.

Here’s how [CCA] works. Local government agencies form a new, semi- invisible government agency to purchase and sell electricity. The local utility company, such as PG&E, provides transmission, distribution, and customer billing services for a fee paid by the new agency’s customers. All people who live and do business in the area become customers of the new agency unless they ask to “opt out.”

The new agency must compete with the local utility company for customers. Government can make everyone their customer for a moment, but then they have to keep them. So what’s their pitch? Is the energy they’re selling greener than, say, PG&E? Is it cheaper? Is it managed by superior experts in the energy industry?

At the end of the day, Community Choice Agencies offer nothing to consumers. They simply cannot compete, long-term, with local utility companies. Facts don’t deter special interest groups that worship at the altar of Climate Change, profit from government contracts and urge government expansion with tireless zeal. Good sense demands that public officials resist the temptation to jump on this bandwagon.

Energy is a long-term business. Procurement contracts are non-cancellable and can span 30-40 years into the future. Cities that join CCAs are on the hook for large, long-term financial obligations. When things turn south (as they surely will), member agencies are stuck because they cannot afford to exit the program.

For example, as of March 31, 2015 Marin Clean Energy had outstanding non-cancelable power purchase commitments of approximately $886.5 million for energy and related services through October 31, 2041. This equates to more than $52 million for each of MCE’s 17 members, which include the Contra Costa cities of El Cerrito, Richmond, and San Pablo. As of June 30, 2015, Sonoma Clean Power had non-cancelable power purchase related commitments of approximately $505.3 million for energy that has not yet been provided under power purchase agreements that continue to December 31, 2026. This equates to more than $56 million for each of SCP’s 9 member agencies.

Once a county or city government gets into the energy business they can’t get out, short of losing their shirts and abandoning the enterprise altogether, as happened in Hercules, CA. CCAs are destined to become just another government money pit that will increase the burden of government debt our children and grandchildren must pay for such obligations as Contra Costa County’s $1.7 billion in unfunded pension and retiree healthcare promises.

Most of MCE’s Deep Green energy is based on a paper trading scheme, known as a Renewable Energy Certificate (REC). Each REC is produced by a renewable energy resource, such as a windfarm in Washington or an industrial scale solar farm somewhere in the US.

One REC represents one megawatt- hour (MWh) of energy from the windfarm. In the case of MCE, Washington keeps the wind energy and MCE buys its inexpensive RECs, giving MCE the right to tell everyone it is the one that’s green — not the wind farm.

But since MCE still needs to deliver actual electricity to its Marin customers, it purchases cheap gas-fired power, then reports that REC to governing agencies. Voila — “clean” gas-fired energy! And it’s all perfectly legal.

Legal, yes. But not particularly ethical or responsible to MCE customers, some of whom, thanks to MCE’s misleading marketing tactics, still believe they get “green electricity” through their light sockets.

Worse still, by using RECs, something bad and BIG has indeed changed – – greenhouse gas emissions are not decreasing, as the agency claims, but actually increasing because MCE is adding to the demand for gas-fired power plants. The more RECs it buys, the more demand it creates for gas- fired power — and the more emissions it produces.

The inherent fallacy of RECs is that they don’t clean anything. And at $2.50 each, they do not stimulate the construction of more renewables, as MCE claims. The real winners in the REC scheme are the regions around that Washington windfarm or out-of-county (or even out- of-state) industrial solar farm.

Those regions are the ones who get the truly clean energy — from their “steel-in-ground,” locally generated renewable resource. And those regions aren’t emitting greenhouse gases (GHGs) either, — as with MCE’s version of “clean power.” They also benefit from Marin’s money from the REC purchases.

So much for the “local benefits” of Deep Green.

The solution is for MCE to deliver renewable power to its Marin customers while also purchasing the RECs – – a transaction technically known as “Category 1 renewable energy” (or “Bucket 1”). It’s more expensive than MCE’s “clean” gas-fired model, but it better conforms to MCE’s representations of “renewable energy” and it eliminates shell games.


Jim Phelps is a life-long Marin resident. He is fluent in electricity pricing and rate structures, and owns one of the largest residential photovoltaic systems in Marin County.

 

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2 Comments on "Beware Of Latest Energy Scam: Community Choice Aggregators"

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Michael Hoskinson
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Thanks Pat !!

KEVIN GAINER
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In Genoa Township, Ohio, we have energy aggregation. In regard to the economics of the program here, all that has been “aggregated”, and thus of any real ECONOMIC VALUE to anyone, is the stream of commission payments that the Township’s “consultant” (LOL), Trebel, LLC has pocketed. My understanding is the “energy consultant” is getting commissions (tied directly to kWh and gas demand of residents) totaling around $200,000 from the energy brokers in this aggregation “deal” while INDIVIDUAL households “save” (LOL) anywhere between zero and $5 a month, on average, depending on how generous you are with the baseline against which… Read more »

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