Aggregation works! CCA's track record should silence critics in SF

By Brigid Gaffikin and Matthew Hirsch San Francisco Bay Guardian, July 20, 2005

San Francisco continues to move toward creating an electricity buyer's co-op that would cut local power rates, and Sup. Ross Mirkarimi, chair of the Local Agency Formation Commission, expects to send a proposal to the full board within a month.

But the process may not be entirely smooth: Some activists are still arguing with the City Attorney's office over the management of the project - and Pacific Gas and Electric Co. is quietly launching a campaign to undermine LAFCo and reduce its funding (see Editorial, page 11).

Meanwhile, nobody in City Hall is paying much attention to the fact that aggregation has a proven track record in other states.

The management issue isn't new, but it continued to be a point of contention at the June 14 LAFCo meeting. The City Attorney's office has argued that the aggregation program has to be run by the San Francisco Public Utilities Commission. But Paul Fenn, an energy policy expert, pointed out that so far the SFPUC has been slow to act on community-choice aggregation, and he suggested that the program be managed by a director appointed by the Board of Supervisors.

Barbara Hale of the SFPUC countered that there's no reluctance - only a concern that every question about implementing CCA is adequately addressed. This is "part of the complexity of implementing the program," she said.

But with all the talk of complexity and details, little of the discussion about CCA so far has pointed to the successful track record of the system, particularly in Ohio and Massachusetts. After more than a dozen meetings over six months, LAFCo hasn't given a close look at what's happening out there.

It's a compelling story.

In November 2000, as rate-payers around the country were beginning to realize what a disaster electricity deregulation had caused, 95 towns and cities in Ohio agreed to form the Northeast Ohio Public Energy Council. Now representing more than 600,000 potential customers, NOPEC has become the largest organization of its kind in the United States.

The move to CCA was aided by Ohio Citizen Action, a longtime leader in the antinuclear movement that was never fond of the good ol' boy energy regulatory system. "The idea that regulation worked is a pipe dream," Paul Ryder, organizing director for OCA, told the Bay Guardian. "We weren't in the mainstream of liberal whiners [who flat-out opposed deregulation]."

Instead, OCA fought for - and won - a provision in the Ohio deregulation law that greased the path toward CCA. Ultimately, the community choice provision led to a settlement that forced FirstEnergy, a big Ohio private utility, to pay more than $1 million toward the development of CCA.

By the time California passed its CCA law in 2002, NOPEC had already signed contracts for electricity and natural gas that was cheaper and cleaner than what FirstEnergy had to offer.

According to a recent annual report, NOPEC has saved its customers more than $29 million since those first contracts were signed in 2001. CCA's success in Ohio makes several points that would likely apply here in San Francisco. First, it's clear that voters want an alternative to the traditional electric monopoly. Shari Weir, former OCA consumer affairs director, said CCA passed overwhelmingly in Ohio just about every time it was put on the ballot, despite the complexity surrounding it. "Better to let a few people worry about the complexities and let the rest of us benefit from joining together [in a CCA]," Weir told us.

What's more, NOPEC has saved money - even though it serves only residential and small commercial customers. That contradicts a concern the San Francisco Public Utilities Commission has raised that CCA needs large energy users to operate as a viable business entity.

NOPEC also shows that CCA can work without the millions of dollars San Francisco officials say would be needed to administer the operation. The system operates in Ohio on a budget of less than $1 million. "That was pretty deliberate on the part of the board of directors. They didn't want to create a big bureaucracy," Joe Dirck, a NOPEC spokesman (who works as a consultant) told us.

Ohio wasn't the first state to aggregate. OCA relied heavily on the way aggregation had been implemented in Massachusetts. A state energy supply deregulation bill that passed into law in that state in 1997 allowed communities to aggregate. In Massachusetts today, the Cape Light Compact (CLC) supplies electricity to around 184,000 customers in 21 towns and counties in Cape Cod and on Martha's Vineyard.

In 1997 Cape Cod consumers were paying some of the highest prices in the country for their power. Getting community support for aggregation was a snap once people realized it would give them cheaper electricity and more stable pricing. Between 2002 and 2005, as figures provided by Cape Light show, the community aggregation program has offered power at rates as much as 22 percent lower than the private utility. And while private power rates have bounced up and down like ping-pong balls, Cape Light rates have been remarkably steady - and always lower than private power rates.

If the achievements in Massachusetts and Ohio aren't enough to get the city moving on CCA, there's another incentive: PG&E has already begun talking to state regulators about CCA and is trying to steer thousands of its customers away from the community system. According to an April 28 presentation to the California Public Utilities Commission, a copy of which was obtained by us, PG&E is lobbying to make it expensive to set up a CCA, and it's trying to raise the bar for a CCA to gain recognition from the CPUC.

Based on what's happening at NOPEC, it's no surprise that PG&E is already laying the groundwork for opposition to CCA. Dirck said NOPEC has been in a "run-and-gun fight" with FirstEnergy, the Ohio utility, from the get go. As CCA spreads in Ohio, FirstEnergy has been setting up unregulated utility affiliates to compete with NOPEC. Almost all of NOPEC's customers have stayed with the CCA, Dirck said, but he suspects FirstEnergy hasn't given up trying to steal them back.

"We don't exchange Christmas cards," Dirck said.