“Community Choice” needs close scrutiny

What’s the impact on workers?

Enabled by Assembly Bill 117, Community Choice Aggregation (CCA) is a system that allows local governments to procure electric energy for residents and businesses within a community. The legislation requires that investor-owned utilities such as PG&E cooperate with local governments to provide electricity delivery over its existing distribution system, including consumer metering, billing, collection and all traditional retail customer services (i.e., call centers, outage restoration, new service, etc.)

CCA proponents argue that putting procurement of electricity under public control can reduce greenhouse gas emissions while providing a platform for local economic development. But this has not been the case thus far.

First, 60% of PG&E electricity generation is from non-greenhouse gas emitting sources and that number will increase over the next 5 years to 70%. Second, CCA implementation in Marin County and the proposed implementation in San Francisco and Sonoma County are based on contracting electricity procurement out and such an approach has not produced jobs in Marin and cannot produce jobs elsewhere.

Worse, this contracting-out approach is anti-union on several levels.

First and foremost, CCAs undermine the structure of electric utilities by prying away the responsibility of procuring (generating and purchasing) electricity. Utilities have long been a source of unionized work for working Californians. Union members are directly employed by the utilities; union members work for many of the contractors hired by utilities; and third party energy generators whose electricity is purchased by utilities are built by union members under project labor agreement. This means electricity generation that has previously come from unionized generators may no longer come from these sources under a CCA.

Community Choice Aggregation entities are not regulated by the California Public Utilities Commission (CPUC) or the California Energy Commission (CEC). Instead, they are overseen by local elected officials under a Joint Powers Agreement. At best, these local electeds are novices in the operation of the electricity industry. At worst, they are openly hostile toward the utility.

In Marin and San Francisco, these electeds are particularly critical of PG&E and have approved a CCA that contracts with Shell Energy of Houston, TX. Consequently, CCAs can give predatory energy trading company’s access to California electricity customers without the CPUC regulatory protections. This is known as “direct access” and was a root cause of the California Energy Crisis of 2000-01. Energy trading companies buy and sell electricity and make their money (profit margins 2-3 times the regulated rate of return for PG&E) off these transactions.

Second, CCAs have not provided jobs or local development of renewable energy generation. These energy trading companies shun employees; they look for profit in each transaction and source electricity from anywhere. Their approach is to purchase energy from outside California at low rates, resell into the state at California prices. So if any jobs are created those jobs occur outside of California as nonunion.

Shell Energy is the main player in the CCA game. They currently hold a 5-year Power Purchase Agreement with the only operating CCA in Marin County called the Marin Energy Authority (MEA). In almost three years, MEA has only constructed one local renewable project and it was done non-union. In San Francisco, Shell Energy was the sole bidder and has been awarded a 4-year contract to provide energy to San Francisco residents beginning sometime in late 2013 or early 2014. This contract provides rate increases of over 100% to the expected PG&E generation rates for 2014 and beyond.

Finally, the Shell Energy contract has two fundamental flaws that preclude any job creation or benefit to workers. The contract specifically states that no new renewable energy generation need be built for the duration of the agreement. Consequently, Shell Energy is the sole energy supplier and has the right to provide that energy from only its sources. The San Francisco Controller issued a report saying that if the Shell Energy contract was adopted, the City would actually lose 95 jobs during the duration of the agreement.

Further, the Shell Energy contract defines energy as renewable that does not qualify as renewable under the California definition for renewable energy, known as the Renewable Energy Portfolio Standard (RPS). In other words, the renewable energy provided by Shell under its contract can be substandard or in some cases can be produced by burning coal but laundered through the use of Renewable Energy Certificates (RECs). As a result, Shell Energy will provide some amount of energy that does not reduce greenhouse gas emissions.

In any event, since most of the renewable power Shell provides to Marin comes from outside California, it is unclear how MEA can claim its electricity choice is reducing greenhouse gas emissions for Marin residents. In fact, no greenhouse gas emissions reduction is occurring in Marin County.

The IBEW has had difficulty identifying a union-friendly version of CCA.  This is not for lack of trying.  There are substantive economic, technological and regulatory barriers to developing a CCA entity that would be union friendly as well as actually providing renewable electricity at affordable rates. One such version of a union-friendly CCA was established by the City of Chula Vista (San Diego County) in 2007. But the entity has never entered into the market because of lack of funding and unfavorable contractual terms; it was and remains economically unfeasible.

At present, there is no pathway from a power purchase agreement with companies like Shell Energy to creating local jobs with union-scale wages and benefits. Based on these difficulties, it is essential that until such time as the conditions change substantially and funding is secured before a CCA project launches, the IBEW and other unions must actively oppose implementation of a CCA entity.

However, there continues to be a steady drumbeat to investigate and establish Community Choice Aggregation entities to procure electricity by advocates and certain elected officials. In response to the continued interest in CCA, here is a possible pathway to a union-friendly CCA:

Energy Aggregation and High Road Job Creation

Good jobs, green jobs, can possibly be produced through the aggregation of energy customers.  But these jobs will be created only if the elements below are established in writing and the CCA agrees in advance to the following objectives. Without each one of these elements, no jobs will be created.

• The CCA agrees to a “Deep Green” approach to energy generation, energy use and energy financing.  This means increased production of renewable energy, retrofitting energy systems and building stock to increase efficiency and “banking” the energy savings.
• The jobs needed to create the “Deep Green” approach are high road, union jobs with sustainable wages and benefits plans.
• Identification and use of affordable financing methods that are economically viable to fund the upfront costs of investment in “Deep Green” technologies and systems.

Regrettably, these elements have not been part of implementation of the Community Choice Aggregation law in Marin County.

So we must require that the following conditions are established in writing prior to unions providing any support of a proposed CCA. This includes identifying funding or likely funding sources required to successfully implement the CCA in advance.

1. Power Purchase Agreements (PPAs) from union generating companies/agencies – The power procured by the CCA must be sourced from generators who employ union workers, or at least are located in-state. For example, in the Washington DC area, electric customers aggregate their electricity purchase and negotiate a Power Purchase Agreement with their utility to ensure a baseline, reliable supply of electricity using a variety of plans available from the utility.  This increases the buying power of the customers while using the utility’s infrastructure and power generated and delivered by union workers.
2. PLAs Covering Renewable Energy Generation – The CCA must purchase the renewable power from generating plants that have been built under a Project Labor Agreement.  Currently, this is universal in California, where utilities who generate or purchase green power do so from generating facilities that have been built under a PLA using a union-friendly model.  But funding for these new renewable generation projects must be in place before agreeing to the CCA because no funding means no construction and no work.
3. PLAs Covering Energy Efficiency Work – The CCA must agree upfront to perform necessary energy efficient work on their customers’ buildings under a PLA. This work must create sufficient energy savings to pay for these improvements and to perform the energy efficiency work under a Project Labor Agreement.  A wide variety of financing strategies are available from Energy Service Companies (ESCOs) to Property Assessed Clean Energy (PACE).  The work is performed by trained union workers ensuring high wage and benefits to the workforce.