San Francisco’s Green Power Plan Still Stalled by Corporate Interests a Decade Later

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CleanPowerSF initially called for investing over a billion dollars in energy efficiency upgrades and publicly-owned renewable energy assets at thousands of sites in San Francisco. The plan’s huge public popularity and technical authority have not protected it from attack and subversion.

In 2004, San Francisco committed itself to a revolutionary economic and environmental rejuvenation project centered on complete overhaul of the city’s energy system. Or did it?

Back then, the plan called for investing more than a billion dollars in energy efficiency upgrades and publicly-owned renewable energy assets at thousands of sites within city limits. Voters authorized the issuance of revenue bonds to fund an unprecedented public energy investment program. The money for this gargantuan green energy and local jobs fund was to be sourced from the utility bills of ratepayers, a few pennies a month no longer siphoned off by the investor-owned utility as private profits.

Called CleanPowerSF, the idea was a reinvention of a municipal utility for San Francisco, a perennial sky’s-the-limit goal of the city’s progressives, but reinvented with new legal authority and new technologies that would not require the public to take control of costly and crumbling transmission lines and pipelines. Instead, the public would simply take over energy purchasing, and ratepayer funds, leaving the corporate utility in place to deliver the juice at a strictly regulated rate.

Then nine long years of war between environmentalists, labor, politicians, and the region’s 800-pound gorilla utility corporation, PG&E, ground down the vision of San Francisco as a post-carbon, green jobs mecca into what might be a fatally compromised plan.

Instead of purchasing actual renewably generated electrons, San Francisco’s proposed green power program, through several revisions, became heavily reliant on using opaque market credits that supposedly offset the pollution created by the electricity’s true source: mostly gas-fired power plants. Instead of generating local jobs, the energy would be imported from distant sources, possibly exploiting non-union labor. This has not sat well with environmentalist and unions, two key constituencies in San Francisco’s power structure.

On August 13, the local and truly green potential of CleanPowerSF was dealt its most recent body blow. Three of the city’s five Public Utilities Commission (PUC) members voted down a proposal to set CleanPowerSF’s rates. “Without set rates, the program can’t move forward,” Charles Sheehan, a spokesperson for the PUC, bluntly stated. What was supposed to be a mere regulatory decision based on technical judgment ended up being a political decision, and the balance of political power once again fell against green energy and local jobs.

But even with all these setbacks, the original vision of San Francisco’s municipal power program is slowly coming back into focus, say advocates who have fought for the plan for over a decade. Grassroots activists say that regardless of its flaws, CleanPowerSF will still be the largest municipal green energy and local jobs project of its kind in the nation. Many see it as a model for other communities, a real path away from fossil fuels, and centralized, corporate-owned power plants.

That’s if the political obstacles can be overcome.

Community Choice Aggregation – CCA

“San Francisco is kind of a litmus test for this thing,” said Paul Fenn, president of Local Power, Inc., a consulting firm that helps cities devise clean energy plans. The “thing” Fenn refers to is community choice aggregation, a little-known authority that allows cities and counties to lump their residents into one pool to purchase bulk energy on the open market at the cheapest rates possible.

Community choice aggregation (CCA) is probably the most boring and benign-sounding name possible for one of the most radical policy mechanisms actually within reach today. Aggregation cuts middlemen utilities out of the process of deciding where electrical, gas, and heat energy come from. Most importantly, aggregation programs allow local communities to determine how ratepayer surpluses will be spent. Fitting the nonprofit, public purpose of aggregation, ratepayer surpluses are usually refunded as consumer savings. However, according to Fenn and other energy policy experts, the real transformative benefits of CCA – the litmus test, if you will – depends on whether ratepayer surpluses can be channeled into investments that are intended to green and localize the energy supply.

Community choice aggregation was Paul Fenn’s brainchild. Deregulation of energy markets in the late 1990s wreaked havoc on states like California, but Fenn saw something few others did. Beneath the procorporate agenda that allowed companies like Enron to capture billions of dollars from the public and crash the power grid was a window of opportunity to create a radically democratic reorganization of the economy. It would require subverting the big energy corporations and utilities, however.

In the darkness of California’s rolling blackouts, Fenn wrote Assembly Bill 117, California’s CCA law, which was approved in 2002. The nation’s largest corporate utilities were just then counting their record profits from a ruthless campaign attacking California’s homeowners and businesses with “megawatt laundering” and “overscheduling” scams.

In 2007, Fenn incorporated his company, Local Power, as a vehicle to advocate for the transformative CCA vision. Fenn has become an evangelist of CCA’s potential to eliminate carbon and nuclear energy sources, and to spur the creation of thousands of jobs through what he called the local buildout of renewable energy assets. His team at Local Power, Inc. frequently gives presentations to cities and rural communities considering aggregation and has been influential in Illinois and Ohio, where hundreds of municipalities have embraced the concept, including Chicago, the largest CCA in the nation. None of these aggregation authorities, however, are using their ratepayer surpluses to build local, green publicly-owned assets.

That’s part of the reason CCA advocates have staked so much on San Francisco’s public power plan. The logic goes like this: If San Francisco can’t do it, who can? When it comes to exercising the full potential of the CCA model, no other city has been remotely as ambitious as the West Coast metropolis of 800,000 residents. At the same time, no other city has seen as bruising a political battle over its aggregation program as San Francisco.

Power Politics

“In theory, you have the political will to do this in San Francisco,” said Fenn. “We also have critical mass of technical providers. Elsewhere, you don’t have the strong grassroots political base, nor do you have the real agency to push it forward.”

However, even with this political will and strong grassroots support, CleanPowerSF has faced enormous opposition. America’s energy and utilities corporations, which are possibly the most potent forces in national and local politics, have seen CCA as an existential threat from the very beginning and have sought to kill the idea by any means. They have spared few resources in their anti-CCA campaign.

Eric Brooks, an organizer with Our City, is one of the grassroots advocates who has pushed the original vision of CCA in San Francisco since the mid-2000s. According to Brooks, there have been some allies in government, but many of the city’s most powerful offices have tried to kill the municipal energy plan from the start.

“The reality is some of the staff that were in place at the San Francisco Public Utilities Commission started opposing CleanPowerSF back in 2004, right as it was getting off the ground,” said Brooks. “Much of the staff at that point had been put in place by Willie Brown,” he added.

Brown, the former Speaker of the California State Assembly, ran San Francisco from 1996 until 2004. He was one of the most powerful mayors in the city’s history, and still today exerts enormous influence behind the scenes, and through the legacy of his appointees and former staff, many of whom are still in government.

Among Brown’s many corporate supporters while he was a state legislator, and especially while he presided over San Francisco, was PG&E. In the late 1980s, Brown steered PG&E to do business with favored firms owned by his friends, according to a 1995 report in the San Francisco Chronicle. It’s not clear what the company got in return at the time, but throughout his tenure, Brown staunchly supported the utility and stacked the city’s government with its allies.

In theory, PG&E is a strictly regulated monopoly overseen by California’s Public Utilities Commission and by city agencies like San Francisco’s Public Utilities Commission. In reality, these state and local commissions are characterized by regulatory capture, a process in which the tables are turned and the company obtains power over its government watchdogs. San Francisco Bay Guardian reporter Rebecca Bowe describes “social and professional ties running deep within California’s insular energy community” that result in “cozy relationships” between regulators and industry executives.

PG&E also cultivates a vast web of political allies through its corporate-controlled foundation. PG&E distributes tens of millions annually to nonprofits and local governments. For example, in 2011 PG&E granted $23,000 to environmental organizations in Avila Beach to fund “marine education” programs. Avila Beach is just a few miles down the Pacific Coast from the company’s nuclear power plant. PG&E has funded the select labor unions that have opposed CleanPowerSF and related green energy ballot propositions. In 2010, PG&E paid the San Francisco Fire Fighters $25,000, according to the PG&E Foundation’s tax documents. In 2008, the Fire Fighters union campaigned against Proposition H, a bond initiative meant to fund clean energy investments through CleanPowerSF, with mailers claiming it would cause energy bills to “increase $400 a year, on average, for 30 years.”

PG&E’s energy supplies come primarily from gas-fired power plants and the Diablo Canyon nuclear plant, although the company also controls an extensive network of hydroelectric power stations. PG&E’s major energy generation investment to fulfill future demand is a 586-megawatt natural gas-fired station planned to come online in 2016, according to the company’s most recent annual report. In 2012, PG&E booked $800 million in profit, and its stockholders received $746 million in dividends. With this kind of cash flow, the company and its executives aggressively lobby regulators and state and local legislators, especially in San Francisco.

Since CleanPowerSF was first approved in 2004, PG&E has showered $69 million in campaign contributions, mostly to fund ballot initiatives that would protect its monopoly position, but also to buy the support of various California politicians.

In a town with more than a few billionaires and tycoons, PG&E’s executives and board members are comfortably among the city’s elite. PG&E’s board of directors includes representatives of America’s largest and most powerful corporations and banks, including Pepsico, AT&T, Spectra Energy and the Rothschild banking firm. PG&E’s CEO Anthony Earley, Jr. was paid $9.9 million in 2012, while the company’s president, Christopher Johns, was paid $5.1 million, according to filings with the Securities and Exchange Commission.

After Willie Brown was termed out of the mayor’s office in 2004, PG&E retained him for “consulting services,” with a quarter million-dollar contract. Purchasing Brown’s long-term allegiance was the same as purchasing a portion of the city’s sprawling bureaucracy of employees, especially those in the San Francisco Public Utilities Commission, the city’s energy regulator to which the mayor appoints commissioners.

“Most people in the city understand that in some ways Willie Brown is still the mayor of San Francisco,” said Brooks. “When Brown made appointments to decide who would lead the city’s Public Utilities Commission, he made certain decisions based on what PG&E wanted. Mayor Newsom had the same staff as Brown and also made PG&E friendly-appointments, and the current mayor, Ed Lee, carried over many of Newsom’s staff.”

In 2010, Brown joined PG&E in an effort to pass Proposition 16. Prop 16 would have gutted the state law that allows cities to form CCAs. The same year, PG&E’s corporate foundation made a $15,000 donation to the Willie L. Brown Center on Politics and Public Service, a nonprofit policy think tank set up by Brown a few years prior. Proposition 16 was PG&E’s biggest political expenditure of all time. According to data from the California Secretary of State, the company spent $46 million on the effort. In spite of Willie Brown’s assistance and the corporation’s millions in advertising, the ballot initiative failed on election day.

Bruce Brugman, former publisher of the San Francisco Bay Guardian, the city’s progressive newspaper and one of the main proponents of municipal power since 1969, calls Willie Brown the “ally and mentor” of current mayor Ed Lee. Brugman was one of the first to expose Brown’s $200,000 deal with PG&E and has closely followed the city’s political alliances as they morph over time. Lee, who has been in office since January of 2011, strongly opposes CleanPowerSF.

Eric Brooks believes this dynasty of mayors beholden to Willie Brown and PG&E has been the main impediment to CleanPowerSF.

“PG&E hates CleanPowerSF and wants to kill it,” said Brooks.

In the Shell of the Old

As if PG&E’s vehement attempt to destroy CleanPowerSF wasn’t enough, the program’s own proponents have had a difficult time crafting a plan they can all agree on.

Many advocates of the CCA concept who helped to establish CleanPowerSF have since become skeptics. They are increasingly wary of supporting CleanPowerSF as staff in the city’s Public Utilities Commission have steered it away from a local buildout of renewables and toward a program that relies on renewable energy credits (RECs) and power purchases from large energy corporations, often sourcing “green” energy from industrial plants located hundreds of miles away.

“They have negotiated a contract with Shell Energy for a 30-megawatt purchase of renewable power on the open market,” said Al Weinrub, coordinator of the Local Clean Energy Alliance. “This is not the kind of deal CCA advocates were in favor of back in 2004.” Although Weinrub is unhappy with the current CleanPowerSF plan, he remains a firm believer in the potential of CCAs. Weinrub’s organization is the hub of dozens of groups seeking to proliferate CCAs and other renewable energy development mechanisms across California. He worries that CleanPowerSF is being set up to fail.

CleanPowerSF’s contract with Shell Energy North America, a subsidiary of the giant oil corporation, would supply the city’s public power CCA with part of its total energy portfolio for a few years until the ambitious local buildout and efficiency upgrades are enough to fully support the city’s energy needs. According to Brooks, the contract with Shell only accounts for around 5 percent of the energy that will ultimately be procured by CleanPowerSF through a local buildout. “The peak load in San Francisco is 800 to 900 megawatts,” said Brooks. “Shell was just for 20-30 megawatts. It’s a tiny piece of the program.”

Even so, the prospect of paying Shell $19.5 million has many progressives bristling. They point to Shell’s dismal human rights abuse record in Africa and elsewhere and Shell’s full-blown commitment to developing oil and gas supplies that will destroy the planet’s climate system (for example Shell’s major Canadian tar sands mines) as just two reasons why doing business with the company runs counter to CleanPowerSF’s goals.

“We have asked staff to find a comfortable compromise with this program in order to address the various concerns that have emerged from labor, to the various power mix, to the affordability of this program,” said Francesca Vietor, a commissioner of the city’s PUC, and strong supporter of CleanPowerSF. Part of that compromise is purchasing power from Shell, something Vietor has seemed no more eager to do than staunch critics of CleanPowerSF. Vietor and other proponents say, however, that it’s a temporary means to an end.

“The key point here is that CleanPowerSF is going to use Shell as a bridge – the private outfit will deliver power generated at renewable facilities to the city’s power operation, which will resell it to customers . . . for a while,” explained Tim Redmond, the former editor of the San Francisco Bay Guardian, in a blog post last year about the program’s political obstacles.

“The goal is to use the revenue stream from the sales of power to back bonds that will allow the city to build its own renewable energy system. Five, maybe 10 years down the road, San Francisco will have solar generators on city property (including large swaths of Public Utilities Commission property in the East Bay), wind generators, maybe at some point tidal generators, and will be able to sell cheap, clean local power to customers.”

“Shell will be gone,” concluded Redmond.

By extension so would PG&E, except for its role in upkeeping the wires and pipelines through which a portion of the total energy supply moves.

“We approved the contract knowing full well we were contracting with Shell. It was for a short term, a four and a half-year term to initiate CleanPowerSF,” said San Francisco Supervisor John Avalos. Avalos, a progressive politician with strong support from labor and environmental groups, has championed CleanPowerSF. He is often seen around town at rallies urging action to address climate change, including a recent street protest during an Obama fundraising visit, organized by opponents of the Keystone XL Pipeline.

If CleanPowerSF is sabotaged and unable to launch a local buildout beyond the Shell contract, say activists like Weinrub, it could spell the end of the city’s CCA experiment as residents and businesses opt out of the plan and stick with PG&E.

Because of this nexus of obstacles blocking the launch of CleanPowerSF, progressives have mobilized to keep the pressure on the city’s Public Utilities Commission. According to Weinrub, a coalition of activists in the Bay Area convinced the city to hire Fenn’s company, Local Power, Inc. to produce a detailed business plan based on CCA’s original goals of local buildout. That plan, built on an incredible quantity of data, is about the most granular and complete map of CCA’s radical potential to transform a city’s energy footprint as has ever been produced.

For months the plan got no traction with PUC staff. Weinrub said the city just sat on it. When pressed by Weinrub and other grassroots organizations, the city’s Public Utilties Commission expressed skepticism of the viability of CleanPowerSF.

Todd Rydstrom, chief financial officer of the city’s Public Utilities Commission, has repeatedly warned city officials that he sees enormous risks in Local Power Inc.’s business plan for CleanPowerSF. Rydstrom believes that the billion-dollar local buildout will be bogged down by its own sheer scale, in particular, by the requirement that the city build the solar energy equivalent of 24 more Sunset Reservoir projects over 10 years. Sunset Reservoir is a 5-megawatt solar array, one of the largest municipal renewable resources in the United States, built atop one of San Francisco’s water facilities. CleanPowerSF, as planned by Local Power, Inc., would also require construction of about 2,000 wind turbines in and around the city.

In March of 2013, the San Francisco Public Utilities Commission let their contract with Local Power expire, leaving key parts of the plan unfinished. Even so, Fenn’s last presentation to the city that month spelled out the basics of CleanPowerSF: $1.3 billion in purchases of 100 percent renewable energy on the market over 10 years. A $1 billion local buildout of renewable energy resources, mostly through small, distributed solar installations and efficiency upgrades, many of them “behind the meter.” Being behind the meter means energy would be produced across thousands of rooftops and stretched through countless building and infrastructure upgrades, stored in batteries, distributed, and smartly transferred across the grid at peak demand moments.

“Balanced resources,” said Brooks, describing the plan. “That’s the vision. Every six months to a year we have to just keep hammering on the SFPUC staff.”

Hammering didn’t seem to be working when the city dropped Local Power’s contract. Earlier this year, CleanPowerSF seemed to have been completely gutted of the local buildout originally at its center. PG&E meanwhile was recovering from its disastrous San Bruno pipeline explosion, which killed 8 and injured dozens in a small city just south of San Francisco. Emboldened again, the company was doing all it could to convince city officials to further water down CleanPowerSF. Meanwhile PG&E pressed the California PUC to approve its competing green energy program. That program, dubbed PG&E’s “Green Option,” would allow customers to pay a slight premium on their monthly bills for the privilege of claiming their lights and heat come from 100 percent renewable sources.

According to Weinrub, PG&E’s green option relies on RECs, which are not only not green, but also would undermine the goal of building real renewable resources.

“This PG&E proposal is likely to inhibit the development of new renewable generating sources,” said Weinrub. “For example, if ratepayers are lead to believe that a small price premium will result in 100 percent renewable electricity, they will not support pursuit of other truly renewable energy developments, such as the local energy efficiency and the new generation planned for CleanPowerSF’s nascent Community Choice program.”

Instead, according to Weinrub, PG&E will purchase RECs to greenwash electricity it otherwise generates from natural gas power plants, large hydroelectric damns and its nuclear plant.

And while PG&E is pushing full bore to gain regulator approval for its Green Option, the electricians’ union, allied with PG&E, has been busy plastering the city with ads claiming that CleanPowerSF will cause homeowners’ utility bills to double. Calling this “San Francisco Shell Shock,” the union launched a web site and online petition calling for CleanPowerSF to be nixed. PG&E and its allies have seized fully on CleanPowerSF’s power purchase agreement with Shell as a propaganda weapon to destroy the program before it even begins.

After 10 years, San Francisco’s green energy and local jobs vision never seemed so far away.

Crisis

The roller coaster of San Francisco energy politics took another unexpected turn during an August 3 public meeting, at which the city’s new director of CCA programs, Kim Malcolm, gave a presentation that seemed to embrace the original vision of CleanPowerSF as a municipal green and local energy development engine. She told commissioners that she hoped to use the city’s bonding authority to issue upward of $200 million in debt to finance a local renewables and efficiency buildout.

“They appear to be adopting Local Power’s core recommendations – to build renewable generation and energy efficiency starting from the launch of the program,” said Charles Schultz, a colleague of Fenn’s. Schultz noted that $200 million is far below a billion, but he said it’s ballpark of the kind of thinking that’s required to make good on CCA’s promise. “The public still thinks this is still just a Shell program,” he added.

Malcolm, a former administrative law judge at the California Public Utilities Commission, took over CleanPowerSF earlier this year. “I think she came in and read all the work that’s been done, the draft financial models, the risk reports, and she probably thought, this makes a lot of sense,” said Fenn, who admitted he was surprised by her recommendations.

All of which may explain the next jostling turn on the roller coaster. On August 13, San Francisco’s Public Utilities Commission voted three to two against setting rates for CleanPowerSF, effectively blocking it from moving forward with Malcom’s stripped down, but significant, $200 million local buildout at its center.

Commissioners voting against the plan cited concerns about local jobs and higher utility bills as their major reasons for stalling CleanPowerSF. Angelo King, a member of San Francisco’s environment commission verbalized these concerns in a public comment to the PUC just before their vote: “You need to make sure the metrics of your program show the economic impact and show jobs to those people that don’t drive Priuses, that don’t buy organic foods.” King urged the city’s Public Utilities Commission to block CleanPowerSF and force it back to the drawing board. “This program here, what we have now, is a downgrade from where the original stated goals were. When we originally looked at it, we said there were going to be jobs, in-city generation.”

After the vote, various local newspapers described CleanPowerSF as being caught in limbo, stalemated in spite of the popularity of the idea and in spite of the veto-proof majority the city’s Board of Supervisors used to approve the program last year.

The PUC’s vote led supervisor John Avalos, to exclaim that the commissioners have precipitated a “constitutional crisis.”

“It’s the whole political establishment coming down against public power,” said Avalos. He added that he suspects the “invisible hand” of PG&E is behind the effort to delay the launch of CleanPowerSF, and he said that the Public Utilities Commission’s unwillingness to green-light the program has created a conflict in which the will of the city’s ultimate authority, the Board of Supervisors, is being blocked by a bureaucracy influenced too much by the city’s wealthy corporate community.

The San Francisco Chamber of Commerce’s CEO Bob Linscheid opined after the vote that “It is time to rethink the CleanPowerSF program,” meaning to cancel it. A vice president of PG&E is on the Chamber’s board of directors, and PG&E has long funded the business lobbying group.

“We all understand the politics of the situation,” said Supervisor Avalos in a statement issued before the Public Utilities Commision’s rate-setting vote. “The board of supervisors and every major environmental group in the city supports this plan. The mayor, PG&E, and its union oppose it. We can’t afford any further political gamesmanship in an attempt to kill this program.”

All Eyes on San Francisco

Advocates believe that CleanPowerSF will be a model for other cities to follow. Before casting her vote in favor of setting CleanPowerSF’s rates, PUC commissioner Vietor called the program “an opportunity to lead the nation by example.”

“The whole world is waiting for the us to get our act together,” said Eric Brooks. San Francisco is the most important city right now for fighting the climate crisis because we have this opportunity to do the community buildout of green energy through CCA.”

Officials outside of California concur.

“What San Francisco is doing is a really big deal,” said Catherine Hurley. “The model of doing bonding to do the local buildout actually makes a lot of sense.” Hurley is the sustainability programs coordinator for the city of Evanston, Illinois, and runs the city’s CCA program. Evanston began aggregating its energy purchases in 2012, producing immediate savings for city residents. Ratepayer bills dropped 38 percent below what Constellation Energy, the region’s corporate utility, charged. But Evanston isn’t building local renewable assets.

According to Hurley, the Evanston CCA uses RECs ostensibly to provide customers with 100 percent renewable energy, even though much of the wattage is actually produced by coal-fired plants. That’s true with virtually every existing CCA in the nation.

“I think this discussion of what role the local government should and could play in greening local energy supply is super interesting,” said Hurley. “The San Francisco program could impact us. Our alderman, who are more green and progressive, they’ll see it, and if it succeeds out there, they’ll want to do it here.”