Sonoma Clean Power enters crucial expansion period

Seven months ago, when Sonoma Clean Power launched service to a select group of businesses and homes across Sonoma County, officials representing the public agency outlined a modest plan that would stage the rollout to additional customers over two years. Officials said the plan would ensure the venture did not grow too fast and that it remained competitive with PG&E, the investor-owned utility the agency seeks to dislodge from its dominant role in the local power supply business.

A legislative threat earlier this year scrambled that timeline and prompted the agency to greatly accelerate its expansion in a bid to head off what ultimately became an unsuccessful maneuver to change the way Sonoma Clean Power and agencies like it enroll new customers.

Now Sonoma Clean Power is entering a critical phase, extending service this month to tens of thousands of homes and businesses and reaching 170,000 accounts in all, representing more than three-quarters of PG&E’s electricity customers in the county.

The sevenfold expansion presents the public venture both with new opportunities and significant challenges as it seeks to make good on pledges to offer greener, competitively priced power, spur local renewable energy projects and help create jobs.

So far, the agency has set rates that are 4 to 5 percent below those of PG&E while purchasing power from sources that emit a third less greenhouse gases, according to Sonoma Clean Power. Maintaining those advantages while driving more local renewable energy development will be the agency’s chief challenge in the next few years, officials say.

“One thing we need to do is work with customers to build renewable energy here at home,” Sonoma Clean Power CEO Geof Syphers said. “I have a lot of confidence that we can do this over the long haul.”

In the short term, the agency hopes to persuade Petaluma, Sonoma County’s second-largest city, to join the program. It must also keep current customers and win over skeptics who still see the agency as a government overreach into a sector they think is best handled by private business.

Rich Harkness, a strategic business planner with a background in electrical engineering, has been critical of the agency’s claim to provide clean power. The agency’s basic CleanStart program draws 33 percent of its power from renewable sources - mostly geothermal and some solar - but gets 30 percent from burning natural gas. Another third comes from large hydropower plants, which the state does not consider renewable.

“I have a problem with the implication that they offer clean power,” said Harkness, a Santa Rosa resident. “To my knowledge, the mixture of fossil fuel and clean power is not clean power. I think they are lying to the public. If you mixed a glass of clean water and a glass of dirty water, it would be dirty water.”

Sonoma Clean Power offers a 100 percent renewable plan called EverGreen, which comes at a premium.

Harkness also took issue with the agency’s use of renewable energy credits, which are tradeable commodities that package a premium payment for undelivered green power with contracted electricity from a conventional source. Since its inception, Sonoma Clean Power has scaled back its reliance on such credits, which critics have said amount to greenwashing. The agency now says 3 percent of its mix comes from such credits and they are not counted toward greenhouse gas savings.

Sonoma Clean Power is encouraging the development of rooftop solar projects. But any new local large-scale renewable power plant is still years off, Syphers said. The agency first needs to find suitable land, a tricky proposition in a county full of prime agricultural land, scenic vistas and sensitive wildlife habitats. It also would need to partner with a company that could build such a system, likely to be a solar installation.

“It’s the kind of thing that could be a multi-year research project,” Syphers said. “Those projects don’t happen fast.”

The cost of such renewable projects could also put considerable upward pressure on the agency’s electricity rates. At peak load, the agency anticipates it will need up to 400 megawatts of electricity to serve all its potential customers. The installed price of electricity from solar projects currently runs about $3.7 million per megawatt.

Through a mix of long-term renewable power contracts and shorter-term deals for hydropower and energy from gas-fired plants, the agency has managed to keep electric rates just below those of PG&E, saving county ratepayers a total of $6 million annually, according to the agency.

Sonoma Clean Power is now the default provider for all residents and businesses in Santa Rosa, Windsor, Sonoma, Cotati, Sebastopol and the unincorporated county. It has purchased enough electricity to serve all its current customers through 2016. The agency has a 10-year deal with Calpine Corp. to provide up to 50 megawatts of renewable geothermal power from The Geysers complex on the Sonoma-Lake county line, and a 20-year contract for 70 megawatts of solar power from San Francisco-based Recurrent Energy’s project in the Central Valley. The agency needs nearly 200 MW of baseload - and about 400 MW of peak power - to meet its customers’ energy needs.

Sonoma Clean Power has purchased two-thirds of its electricity supply from Exelon subsidiary Constellation Energy, which will provide power from dams and natural gas plants through 2016, when the main contract will be put out to auction.

Syphers, the Sonoma Clean Power CEO, said that a PG&E rate increase, expected to be approved at the beginning of next year, will make the agency’s rates even more appealing.

“We are focused on keeping costs low,” he said. “PG&E is motivated to make a profit.”

PG&E is prohibited under state law from marketing against Sonoma Clean Power and similar public electricity suppliers. But PG&E spokeswoman Brittany McKannay said the utility stands by its service. It will continue to deliver electricity, maintain the grid and handle billing.

“For more than a century, we’ve had the opportunity to serve the customers of Sonoma County, and we hope to continue to serve them,” she said. “Our No. 1 priority is to provide safe, reliable service.”

Sonoma Clean Power currently has assets to cover its $5.6 million debt in startup loans from First Community Bank and the Sonoma County Water Agency, and it has $9.6 million left in the bank.

Those opting to stay with PG&E currently make up about 6 percent of all customers, and the agency is forecasting that about 15 percent will eventually opt out, less than the 20 percent initially predicted.

The city of Santa Rosa, one of the largest power users in the county with 859 different municipal accounts, switched all of its electric business over to Sonoma Clean Power in the fall. The city estimated that joining the agency’s basic CleanStart program could shave $369,000 a year off its $5.3 million annual power bill.

Switching to the premium EverGreen program was not pursued by the city because it would have cost taxpayers and ratepayers $1.2 million more per year.

Rohnert Park and Cloverdale are set to come online next summer after officials in those cities recently voted to participate. Convincing those holdout cities to join was another early success, agency officials say.

On Dec. 15, Syphers will again make a pitch to the Petaluma City Council, which last year decided to wait and see how the agency’s startup phase went before deciding whether to join. Petaluma has 33,400 accounts, or 12 percent of those controlled by PG&E in the county.

Some Petaluma council members say their initial concerns have been addressed by Sonoma Clean Power’s rollout.

“They are not a startup anymore, and they are gaining momentum,” said Mayor David Glass, who will miss the upcoming meeting due to a family conflict. “I like the fact that it has a track record. It’s time for the people of Petaluma to have that choice.”

Councilman Gabe Kearney said the competitive rates are a big selling point.

“The savings to the city alone will be substantial,” he said. “We have seen savings to ratepayers throughout the county in addition to saving greenhouse gases.”

Councilman Mike Healy said he still has questions about Sonoma Clean Power’s ability to keep rates below those of PG&E over the long term.

“I have an open mind about the whole thing,” he said. “I want to see city staff’s take on it.”

Staff Writer Kevin McCallum contributed to this report. You can reach Staff Writer Matt Brown at 521-5206 or matt.brown@pressdemocrat.com. On Twitter @MattBrownPD.