Dear Chair Cheng, Vice Chair Ash, and Members Abadon, Breslin, Hilla, Sandler and Yeung:
You have the unenviable task of making a recommendation to the San Francisco Public Utilities Commission on the “fairness” of the CleanPowerSF-Shell Energy North America contract that significantly raises the electric rates of San Franciscans.
Since 2009, a myriad of City government agencies have spent millions of dollars promoting CleanPowerSF as meeting three fundamentally progressive conditions:
- Lower or equal price to PG&E
- No cost or risk to the City
- Greener energy than PG&E
We know that the first condition will certainly not be met. We also know the second condition will not be met. Deputy City Attorneys Theresa Mueller and Jeanne Sole provided the Board of Supervisors with a memorandum detailing the “significant business risks to the City that result from the proposed agreement with Shell Energy.” (See attachment ‘Mueller Memo’) In addition, the minimum cost for SFPUC to put together the CleanPowerSF-Shell deal is $19.5 million (“Contract with Shell Energy for the CleanPowerSF Program” 8/3/2012). But that figure doesn’t include staff time nor does it include related review and action taken by the Commission on the Environment, San Francisco Local Agency Formation Commission or the other agencies involved in this project. Proponents claim that the CleanPowerSF-Shell contract will meet the third condition of ‘greener’ energy. After all, that is the driving purpose behind contracting with Shell in the first place. Regrettably, as outlined below, Shell electricity fails to meet this critical condition. Worse, this power will increase greenhouse gas emissions and the City has conducted no substantive review of the resulting adverse environmental impact.
In combination with the steep rate increase, in which generation rates will rise nearly 100% and the overall electric bill for San Franciscans will increase from between 45%-55% (CleanPowerSF “Not to Exceed Rates” Presentation on 3/1/13), and the risk exposure to the City and its electric customers, the CleanPowerSF proposal will automatically enroll San Franciscans and require them to affirmatively opt-out of the program. Such an approach is counterintuitive and difficult for the consumer to comprehend. According the City Controller’s Economic Impact Report (“Contract with Shell Energy for the CleanPowerSF Program” 8/3/2012), this forced enrollment will actually diminish the likelihood for success of the program and serve to make predictions of participation less reliable.
This dramatic increase in rates is being characterized by SFPUC staff as a “Premium.” Part of determining “fairness” is a cost-benefit analysis of the relative value of the CleanPowerSF contract with Shell: what benefits does the electric consumer receive in exchange for this ‘premium’ and the significant risk the City and its electric customers are exposed to as the result of this deal?
Sadly, the City and electric customers will receive almost nothing in exchange for the much higher cost and risk of future additional costs.
We know the benefits associated with investment in renewable energy that San Francisco has enjoyed in the past are not available to San Franciscans under the CleanPowerSF-Shell contract. The Shell plan will mean losing nearly 100 local jobs and, per the contract, no new facilities are required to be constructed in order for Shell to meet its supply obligation. We also know the promised 100% renewable power actually will be a combination of renewable energy (called bundled), renewable power backed by grid power when unavailable (called ‘firmed and shaped’) and Renewable Energy Certificates (RECs), which isn’t electricity at all – RECs are financial instruments which will be used by CleanPowerSF to ‘cleanse’ coal or natural gas generated electricity to qualify it as renewable. According to the Controller’s Economic Impact Report, the majority of this renewable power will come from ‘firmed and shaped’ sources. Finally, we know from your discussion during the Rate Fairness Board meeting of March 1st that any decrease in the final rate proposal will be the result of increased use of RECs, thereby further reducing any environmental benefit of the CleanPowerSF-Shell contract.
So we now know that the Shell contract means 100% renewable is not really 100% renewable. But there is another, more important evaluation of the environmental benefits of ‘green’ power – greenhouse gas emissions.
San Francisco has adopted strict greenhouse gas emissions reduction goals. The City has also adopted several resolutions suggesting a plan like the CleanPowerSF-Shell contract is necessary to effectively reduce greenhouse gas emissions. So why has the City NOT evaluated whether the proposed CleanPowerSF-Shell contract will reduce greenhouse gas emissions? More disturbingly, this deal will actually result in an increase in San Francisco’s greenhouse gas emissions.
In 2009, Shell Oil made the strategic decision to transition out of renewable generation sources like wind and solar and into sources such as biomass, biogas and other sources of biopower. Biopower, while classified as renewable, comes from the burning of regenerative materials. Biomass is the burning of wood and agricultural waste. Burning biomass emits 150% more CO2 than coal and 400% more than natural gas. Biogas is the burning of methane and other gases derived from manure or decomposition of organic material.
Shell is contracted to provide electricity to the only operating CCA in California, called the Marin Energy Authority. According to the MEA website, 75% of the renewable electricity Shell provided in 2011 was from biopower. Based on filings with the California Public Utilities Commission, Shell expects to source all of its electricity from biopower by 2014. (RPS Compliance Report, 12/21/2012) Simply put, this information demonstrates the CleanPowerSF-Shell contract will increase greenhouse gas emissions for San Francisco in violation of stated policy and in contradiction to the representations and marketing of the CleanPowerSF program by SFPUC staff and proponents of SFPUC.
Finally, just a few weeks ago, the Federal Energy Regulatory Commission issued a preliminary decision that Shell Energy North America (along with three other energy suppliers) was determined to have manipulated the California electricity market and should pay back $1 Billion (plus $600 Million in interest) they unfairly took from Californians during the height of the energy crisis. IBEW 1245 and Stop the Shell Shock have now organized over 6,500 San Franciscans against this proposed contract.
As Board member Hilla pointed out during the March 1 meeting, some in San Francisco are eager to sign up for any alternative supplier promising greener power. But that sentiment itself suggests the need for caution and that it will be impossible to adequately protect individual electric customers from the exorbitantly high rates, the economic risks to the City and its residents as well as the lack of any demonstrated environmental benefits of the CleanPowerSF-Shell contract.
From any perspective, it is impossible to recommend ‘fair rates’ on the CleanPowerSF-Shell contract. We urge you to reject the proposed rates and declare that no rates can be fairly determined for the customer under this energy purchase program.
International Brotherhood of Electrical Workers Local 1245