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Sonoma Clean Power poised to take big steps


Sonoma County's startup public power agency is set to make some of its biggest business moves yet Thursday.

They include decisions to authorize a $7.5 million line of credit to assist with power purchases and approval of a $9.7 million contract for data management and call center operations.

Sonoma Clean Power's board of directors is also set to give staff a go-ahead to enter into a power supply contract, a step that could come as soon as next week if any of the competing bids meet the agency's price target and other terms.

Combined, the business moves represent a significant shift as the agency gears up to begin serving its first customers by May.

"It's a big deal," said Geof Syphers, interim CEO of Sonoma Clean Power, though he added that other future steps, including setting of customer rates, could draw more public attention.

"There's a lot of interest in what comes next," he said.

Still, after more than two years of planning and preliminary development, the power venture has arrived at decisions that will account for most of its ongoing costs and weigh the heaviest in determining customer rates.

The effort has been touted by supporters as a greener alternative to Pacific Gas and Electric Co., offering a higher share of energy from renewable sources and intended to spur demand for local clean energy projects.

Customer rates, however, have long been seen as the key factor affecting the venture's longterm viability.

Now comes the critical period where Sonoma Clean Power officials will begin to wrestle with how to balance those two objectives — greener power and customer costs.

Thursday, directors are set to discuss and approve a price cap to be used in final negotiations with four competing power suppliers. Agency staff hope the cap and last-minute bidding will result in a contract that allows for cheaper customer rates than PG&E.

"We think it keeps it competitive right up until the very end and that we're going to get some benefits out of that," said Syphers.

The proposed price cap, reflected as an average maximum retail rate, is 8.60 cents per kilowatt hour. Combined with a 1.12 cent surcharge that Sonoma Clean Power customers would pay to PG&E to support the utility's infrastructure costs, the agency's capped price figure would be equal to PG&E's proposed 2014 generation rate of 9.72 cents per kilowatt hour.

"What we're saying is we think we can beat PG&E's rate," Syphers said. Actual rate setting would be done weeks later, with a final board decision scheduled for January, he added.

"What we're doing is just capping things for the purpose of contracting," he said.

Even for Sonoma Clean Power customers, PG&E would continue to handle transmission, billing, metering and grid repair.

The initial three-year electricity contract for Sonoma Clean Power could be worth up to $130 million annually by 2017, based on current enrollment from the county and five participating cities and assuming a 20 percent opt-out rate by customers who prefer to stay with PG&E.

Of the 11 companies and organizations that put in initial bids, the final candidates competing for the deal are:

NRG Energy, based in Houston and Princeton, N.J., one of the country's largest power producers and retailers.

Direct Energy, an energy retailer based in Canada and the U.S., a subsidiary of the British multinational Centrica.

ConEdison Solutions, based in Valhalla, N.Y., a subsidiary of Consolidated Edison.

Constellation, a power and natural gas supplier and subsidiary of Exelon, the Chicago energy producer, trader and distributor.

The power contract discussion comes after the agency last month unveiled green power targets that officials contend would make the venture immediately cleaner than PG&E.

They would dictate that 70 percent of the electricity purchased in the initial contract be from carbon-free sources. By comparison, PG&E's carbon-free power amounts to 51 percent of its supply.

Renewable sources — including wind, geothermal, biomass and small hydroelectric projects — would make up about 33percent of the agency's supply at the outset. PG&E's current renewable portfolio is 19 percent of its supply.

Electricity from nuclear and coal-fired plants would be banned in the contract.

Environmental backers of Sonoma Clean Power have cheered that stand and other terms that would allow flexibility to introduce energy from local sources during the contract term.

"It allows us to develop local resources without penalties," said Ann Hancock, executive director of the Santa Rosa-based Climate Protection Campaign.

While supporting the push for competitive rates, the group has pushed back against those arguing for the cheapest rates, saying the agency should preserve some revenue cushion to support local supply and efficiency efforts.

Such projects have long been part of the supporters' vision to reduce greenhouse gas emissions and create local jobs.

"It is a balancing act," said Hancock. "That's why we have to be deft and very smart in how we unfold this program, so that we deliver on the treasure that was promised."

Bob Williamson, a Mark West-area resident who has been an active ratepayer advocate, said he had not seen any agency direction so far that had made him uncomfortable.

He called Thursday's discussion on the power supply contract "technical, as opposed to a policy meeting."

"This is a competitive situation right now," he said of the final round of bidding. "They want to provide the lowest price possible."

In the other moves Thursday, the board is set to approve a $7.5 million line of credit from First Community Bank. The financing is meant to bridge the gap between incoming customer bills and outgoing power payments.

Because that window has been widened in the proposed contract terms, the $7.5 million may now be enough to support the entire three-year rollout period, eliminating the need for what was once expected to be more than $20 million in bridge financing, Syphers said.

Less borrowing will bring down customer rates, he said.

"It's a small percentage, but we're dealing with small percentages," he said.

The proposed five-year, $9.7 million data management contract is with Noble Americas Energy Solutions, a large energy retailer based in San Diego.

It would manage customer service based out of an existing Santa Rosa call center, oversee customer accounts and coordinate billing with PG&E, among other work.

The firm was the low-bidder among three final candidates, all of them large energy retailers or data managers. Syphers said Noble Americas has a good reputation in the California energy industry and would be a close partner in the agency's launch. It also is handling data management for Marin's public power program.

"They're the first contact for a lot of customers," he said. "So it's really a key role."

The agency's meeting begins at 8:45 a.m. in the county Board of Supervisors chambers in Santa Rosa.

You can reach Staff Writer Brett Wilkison at 521-5295 or brett.wilkison@pressdemocrat.com.