Community Energy in San Diego Threatened by “Poisoned Chalice” Electric Rate Fix

By Jay Powell

This – below – was one of six parting observations offered by Public Utilities Commissioner Mark Ferron when he resigned from the PUC due to serious health issues in January of this year:

“… with the passage of AB 327, the thorny issue of Net Energy Metering and rate design has been given over to the CPUC. … recognize this is a poisoned chalice: the Commission will come under intense pressure to use this authority to protect the interest of the utilities over those of consumers and potential self-generators, all in the name of addressing exaggerated concerns about grid stability, cost and fairness.

You—my fellow Commissioners—all must be bold and forthright in defending and strengthening our state’s commitment to clean and distributed energy generation.”

This from a gentleman who, before returning to California in 2009 and being appointed to the PUC by Governor Brown in 2011, spent 25 years in global finance, banking and operations with firms such as Deutsche Bank in London, Salomon Brothers and Bank of America. Some other observations included his opinion that he suspects the utilities “would still dearly like to strangle rooftop solar if they could.”

The “poisoned chalice” is what is on the table this next week. Those of you who are trying desperately to mind your “kwhrs” (kilowatt hours) this summer should be aware that you are about to be punished for your conservation, investments in energy efficiency and/or roof top solar.

The Public Utilities Commission is holding “Public Participation Hearings” next week on Tuesday Sept 16 and Thursday Sept 18 in San Diego County. (Locations and times below). Why should you pick one of those afternoons or evenings to show up and speak truth to those who are supposed to regulate our monopoly power?

The more people who make sure the PUC knows they know what is at stake, the sooner we can get on with building a new energy future.

This is all happening because last year our State legislature passed an Assembly bill, AB 327 that was perversely labeled the “Ratepayers Equity Bill”.

They are considering changes in how rates are set for residential customers, or as sometimes more accurately characterized, “custo-meters”. SDGE is proposing to collapse the “tier structure” and put a fixed charge of $10 per month on each and every residential bill. They also have some other proposals that will discourage conservation and rooftop solar installations that will be taken up later in the year.

All of this so they can adjust the billing structure prior to next summer, when bills are going to skyrocket. Yes, I am talking about beyond what you got hit with this summer.

This is all happening because last year our State legislature passed an Assembly bill, AB 327 that was perversely labeled the “Ratepayers Equity Bill”. The utility sponsors painted a picture of elderly customers and their grandchildren sweltering in the Central Valley heat because they could not afford to pay for the electricity to run their air conditioners.

Then as now and, as noted by Commissioner Ferron, they depended on significant manipulation of the facts to convince the legislature that a major overhaul of the rate restrictions was needed. As an example, they continue to leave out the fact that all bills are adjusted for climate zones such that during hot months, those hotter climate zones already are paying less per kilowatt hour in each of the tiers of usage. There is a baseline tier that offers the best rate for those staying below a certain amount and then the rates increase in three more tiers of charge as you use more electricity.

The whole point was to incentivize customers to use less through careful use and/or investment in insulation, energy efficient windows and appliances and even roof top solar.

So what’s the problem? (No good deed goes unpunished)

Well folks, sorry to say, you have done too good of a job. We have a monopoly set up to ensure we get reliable electricity and don’t have black outs like we did that one evening a few years ago–remember they blamed it on a Homer Simpson-type guy throwing the wrong switch in El Centro ? The PUC, in order to provide for that antiquated 19^th century set up, have already authorized a lot of expenditures by SDGE: Another major powerline that was supposed to increase reliability but now they admit it doesn’t, a new “smart meter” for each and every customer, contracts and lots of arrangements that are either secret (yes, they get to enter into secret contracts for power) or are just too darn complicated for our feeble little brains to sort through.

Across the country, the entire energy utility industry is scrambling to figure out how to feed the guaranteed rate of return when each custometer is using less.

The result is that after several billions in those projects they have a lot of fixed costs and assets. And sometime way back last century we agreed that they get to have not only a monopoly, but they get a guaranteed rate of return on their investments and assets which is currently somewhere in the 10 to 11% range.

So back to the good job we have been doing saving energy. Problem is, it doesn’t work for the “Investor Owned Utility” (IOU) monopolies. The abbreviation of “IOU” is an interesting coincidence in that all us “custometers” have to pay up for whatever IOUs the PUC writes supposedly on our behalf. Across the country, the entire energy utility industry is scrambling to figure out how to feed the guaranteed rate of return when each custometer is using less.

And it is only going to get worse, as more and more people are investing in solar because there are so many ways to take advantage of that FREE fuel source (purchase, lease, pay back through your property tax bill over 20 years….). The local solar industry is projecting a 55% increase in business just this year.

In case you hadn’t noticed, when your two billing envelopes arrive (if you have both gas and electric service) they are stuffed with lots of “helpful hints” and invariably the latest notice of a request for rate increases by SDGE. The latest ones tell us about the hearings next week and refer you to SDGE “for further information …regarding this rulemaking.”

SDGE has put together a nifty power point presentation with the two other California IOUs—PGE and SCE—for the hearings where they have lots of charts to show that they are being forced to charge high energy users more to pay for all these profitable investments and that’s just not fair. They would rather spread more of the costs to those using less energy. Actually, they know that if they don’t do that, there will massive screaming from the luxury energy users.

But wait, my billing envelopes also have proposals to contract for a new 600 MW (megawatt) natural gas fired power plant in Carlsbad on top of the recent 300 MW one already approved in Otay Mesa under the pretext they are needed to replace San Onofre. Plenty of evidence has been submitted by case interveners and ignored over the course of this past year that we already have a natural gas powered glut in Southern California. But they just keep greasing those wheels of progress wherever they can.

When all else fails, follow the money…

Which leads us to have to actually look behind the curtain and see who is pulling the levers. Who actually owns SDGE? Sempra Energy. They also own SoCal Gas which provides the gas to SDGE and to their power plant operators. They are a multinational corporation that is heavily invested in natural and liquefied natural gas from South America, Louisiana to Mexico. Recently they were let off the hook for further scrutiny regarding their battle for LNG facilities in Ensenada with Mexican businessman Jose Susumo Azano Matsura who was indicted earlier this year for illegally contributing to several local candidates and politicians. Congressman Juan Vargas says their one conversation was all about Sempra.

A good portion of their success is having a monopoly on providing energy to you and me. A recent headline in the August 7, 2014 Wall Street Journal proclaims: “Sempra Energy Profit Rises, ….Utilities Owner Benefited from (May) 2013 Rate Increase at Southern California Gas and SDGE.”

So Sempra and their subsidiaries are all doing very well.

And isn’t it convenient that these proposed natural gas fired power plants are right next to their gas lines? That was one of the main points made in support of the proposed Quail Brush power plant next to Mission Trails Park two years ago.

While they were begging us to conserve on gas usage earlier this year because it was really cold back East and supplies were restricted, they have requests pending through subsidiaries to expand the major lines and distribution into Southern California and San Diego County, while they propose more and more gas powered power plants to use even more of that finite polluting resource (yeah, not as bad as coal but still not good for Greenhouse Gas reduction).

The management and vice president positions flow back and forth between SDGE, So Cal Gas and Sempra. Sometimes you are not sure which hat they are wearing. Be assured it is always going to serve the Sempra bottom line…

Sempra has a stellar cast led by Debra L. Reed, Chairman and CEO who’s profile doesn’t list any remunerations of less than seven figures. Salary and Bonus, $3.6M; Stock awards, $4.6 M. Sold Sempra stock valued at slightly over $13 Million over the past three years. Oh, and by the way she is also on the board of directors for Halliburton–yeah, Dick Cheney’s old outfit.

There are some other names a few San Diego folks might recognize on the Sempra Board of Directors pulling down special compensation as well (numbers for 2013): Kathleen Brown (yes, the Governor’s sister…), $267,000; Lynn Schenk, former Congresswoman and aide to Governor (energy crisis) Gray Davis, $234,000; William Jones, former City Councilmember and principal in local CityLink investment corporation who built and recently sold the Retail Village redevelopment project in City Heights, $304,000. And several more Board members with interlocking directorships. That’s how it works.

The management and vice president positions flow back and forth between SDGE, So Cal Gas and Sempra. Sometimes you are not sure which hat they are wearing. Be assured it is always going to serve the Sempra bottom line, which with a few forays into utility scale renewables in remote locations, is burn, burn, burn that natural gas.

Most of the renewables invested in by IOUs are utility scale wind plants. You know, the ones that occasionally throw a 100 foot blade or chop up eagles and other flying creatures. There’s a little bit from solar photovoltaic arrays covering vast tracts of land or my favorite which uses thousands of mirrors to focus on a tower full of water set to boil.

But Sempra is first and foremost pushing the natural gas future.

If you really want to be led by the nose on the natural gas trail, pull up “Think About It.org” sponsored by the American Natural Gas Association. There you learn about how natural gas is clean and abundant and the perfect companion for a renewables powered future. Never mind that all these rosy projections are now being downscaled as we learn that the fracking “plays” are leveling off in production much more rapidly than originally estimated.

There is just one other agent for service to Sempra we don’t want to forget to mention that is quite active here in our home town and state. They call themselves “Fix My Energy Bill”. Written about last year in the SDFP article on the same topic–“Sempra Wants to Fix Your Energy Bill” and covered in a U-T San Diego article by Morgan Lee –“Utility Behind Social Media Campaign”– this bogus “astro turf” outfit affiliated with former State Senator Steve Peace’s various Independent Voter projects started out with an original $65,000 donation from Sempra to get AB 327 passed. But they have managed to keep going with more support to promote other utility legislation and follow up with support on the latest SDGE rate proposals.

Their latest website feature complements the IOU’s PowerPoint presentation for the PUC hearings. It gives us the following reasons why our bills are so high: the IOUs have to pay a carbon tax, the IOUs have to produce 33% of their energy from more costly renewables by 2020 (you know from those secret contracts with outfits like Sempra), the IOUs old cheap long term contracts are expiring.

Then, as Commissioner Ferron warned, they resort to “exaggerated concerns about grid stability, cost and fairness” with lots of talk about equity and fairness and how “3 out of 10 energy users will pay the majority of the rate increase this summer”. They leave out that those 30% are using more than the rest of us. They tell us that one in three of those big energy users who are “paying more than their fair share for energy earn less than $60,000 per year.” In the “Send a letter to the PUC” box they also work in one of their key objectives for reducing the amount paid to those elitist roof top solar owners, a thing called “net metering”.

The logos displayed include SDGE, the Chamber of Commerce and the County Taxpayers Association but then curiously there are a number of labor union indicia slapped on too. Curious because right below that they are exhorting people to not support the Senator Hueso bill to mandate more geothermal power purchases—a bill supported by some of the very unions listed. Well, they told us they were “independent”; they just didn’t mention they talk out of both sides of their… pick your appropriate orifice.

Before we leave the Sempra extended family, let’s not forget about how this multinational and its subsidiaries further influence lawmakers and public opinion. They proudly support a wide variety of community organizations. They are very adept at sprinkling grant funds around town. And why shouldn’t they, as a good “corporate citizen”?

But when you show up to one of the “public participation hearings” don’t be surprised if you hear representatives of these recipient groups singing the praises of Sempra and SDGE. It happened during the PUC hearings on wildfire cost recovery back in Spring of 2012 and later at the PUC hearings on the proposed Quail Brush and Pio Pico power plants in early 2013.

This is perhaps the most visible and egregious evidence of inappropriate influence. What does support for a host of laudable non profit initiatives have to do with the topic at hand? One wonders if the not so implicit message is : we sure would like to see you show up and sing our praises or maybe even, without these rate increases we can’t afford to keep funding your projects?

What’s the alternative?

Solar Panels, Navy, Old Town

In spite of all this influence peddling and special legislation, progress towards a new energy future continues because technology and entrepreneurship is really just outstripping the regulatory, fixed game framework. And our previous legislators created a vehicle for an alternative energy provider through jurisdictions like counties and cities aggregating their residents into what is known as a community energy district.

You might recall a state ballot measure a few years back where the northern Pacific Gas and Electric utility tried to kill this option through a statewide initiative. It was defeated. But now that there are two county energy districts set up in Marin and Sonoma and the City of San Diego is considering establishing one of these “Community Choice Aggregations” (CCA) as a means to achieve ambitious renewable energy goals in the draft Climate Action Plan, the IOUs decided to dial up some friends in Sacramento and, yes once again enlist FixMyEnergyBill to misinform as many people as possible to support a bill that would have made that option essentially impossible to achieve.

Good News Alert: the anti-CCA bill (AB 2145) sponsored by State Assemblymember Bradford, an ex-SoCalEdison utility PR executive, was miraculously pulled from the Senate floor in the waning days of the legislative session this past month. Our San Diego City Council led by interim Councilmember Ed Harris had previously passed a resolution opposed to this specific bill. And yes, it once again split on a party line vote.

So now a coalition of groups under the banner of “Friends of San Diego Clean Energy” is pushing for completion of a feasibility evaluation of this option for the City of San Diego.

A City sponsored community energy district would have the potential to aggregate nearly 500,000 current SDGE customers into a purchasing power for more renewable energy. The energy would still be distributed on power lines owned by SDGE.

You can now buy a roof top solar installation that includes the provision to store energy into the evening. While this is exciting in itself, there is the potential to start installing neighborhood and community scale storage facilities that could be located in conjunction with local utility substations.

SDGE would change from a primary power generator to an energy distributor for City residents and businesses. The experience in Marin and Sonoma is encouraging. Marin just added the city of Richmond to its district which is a radical change in geography and demographics. And they are pursuing renewable power purchases from a new solar electric generation facility to be located on Chevron-owned land in Richmond.

“CCAs” can set up what are called “feed in tariff” rates to properly compensate solar roof top generators for sending electrons down the street, and fund energy efficiency retrofits so that instead of cranking up the air conditioner, the home is cooler because it resists heat absorption.

All of which is moving us in the right direction, but there is even more opportunity ahead of us if we can throw off the monopoly utility yoke. One of the more promising new technologies is being rapidly advanced by Tesla CEO Elon Musk and his relatives over at Solar City. You can now buy a roof top solar installation that includes the provision to store energy into the evening. While this is exciting in itself, there is the potential to start installing neighborhood and community scale storage facilities that could be located in conjunction with local utility substations.

Musk and his partners know that we have the technology and ability now to be generating energy from within our urban areas where the need exists. In previous commentary it has been shown that we have potential in our County to generate a conservative estimate of 7,000 megawatts (that’s over 3 times what San Onofre was generating) from solar photovoltaics mounted on the roof tops and parking lots of developed business, institutions and homes.

This potential combined with community scale storage located in conjunction with utility substations would give us the ability to not just reach the goal of 100% renewables by 2035, as outlined in the City draft Climate Action Plan, but to become a net energy producer. The huge powerlines that are currently bringing in electrons and sending out dollars could be sending out electrons and bringing in dollars.

The added benefit of storage is that it can help stabilize voltage fluctuations and the electric grid which was another concern with renewables and loss of the San Onofre base generator. Instead of the new monster gas fueled plant in Carlsbad we could have a more distributed system combined with proper scale storage.

What Can We Do Right Now ?

First: Show up and speak at the PUC’s “Public Participation Hearings:
Tuesday, September 16 at 2:00 PM and 6:30 PM at
Al Bahr Shriners Center, Upstairs Room,
5440 Kearny Mesa Rd, San Diego
(just off Clairemont Mesa Blvd and west of Hwy 163).
And
Thursday, September 18, at 2:00 PM and 6:30 PM at
El Cajon City Council Chambers,
200 Civic Center Way, El Cajon
(this is in a huge municipal complex so allow time to park and find the council chambers)

There are others who are making the technical arguments as official public intervenors in the rate case—groups like Sierra Club, TURN and UCAN at other venues.

What we need to do at the hearings is just show up and just say “no!”. No more subsidies to utilities to string us out on fossil fuels while they strangle local solar energy initiatives.

Second: Please share this admittedly long dissertation with your network of friends and colleagues.

Third: Let the City Council know you support the Climate Action Plan proposed by Council President Todd Gloria last year. A resolution to encourage Mayor Faulconer to put this plan out for environmental review will be at City Council on Monday, September 22.

Fourth: Make your own investment in energy efficiency and roof top solar. The California Center for Sustainable Energy (CCSE) can provide you with info you need.

Finally: support Friends of San Diego Clean Energy in promotion of a new Community Energy District for San Diego. You can reach them through San Diego 350.org who, not incidentally, is sponsoring the People’s Climate March San Diego (PeoplesClimateSD.org) on Sunday, September 21.

 This first appeared at San Diego Free Press.