.Struggles at Central Coast Community Energy

Critics say the public agency has lost sight of its community-focused mission

Over the last few years, communities along the Central Coast have been hoping a new public agency would transform their bills and lead a sustainable energy revolution.

Central Coast Community Energy (3CE) began as a local alternative to Pacific Gas and Electric Company (PG&E) in 2018. The nonprofit Community Choice Aggregation (CCA) promised to procure electricity from sustainable sources and put earnings into local clean energy programs. But five years in, reviews for the fledgling organization are mixed. Some customers are disappointed that 3CE has failed to make more progress on community-led initiatives. Others see its current path as an overwhelming success. And there are others who have never even heard of 3CE, despite the fact that they receive energy services from them on a monthly basis. 

From any angle, challenging PG&E’s monopoly-like grip on energy procurement is complicated.

What is a CCA?

A CCA, also called community choice energy, is a public, nonprofit government agency that provides alternative energy supply. Instead of investor-owned utility companies (IOUs) like PG&E making decisions about energy contracts, CCAs allow local communities to buy power. They sell the energy to customers and partner with IOUs to deliver it over the grid. In many cases, CCAs aim to buy power from renewable sources and put profits into local clean energy programs.

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In 2002, California Legislature passed Assembly Bill 117, which mandated that CCAs become the default providers for customers in their areas. People can opt out if they would rather buy from an IOU, but in many cases, the price doesn’t change.

Currently, 23 CCAs operate in California, and 3CE has grown to be one of the largest of the bunch.

“It’s an environmentally sound program, it’s economically viable and it really creates local control over our energy resources,” says 5th District County Supervisor Bruce McPherson. “So it’s a trifecta of sorts.”

He adds that his office spent several years and over 100 meetings studying how a CCA would work on the Central Coast before the establishment of 3CE.

3CE began as Monterey Bay Community Power in 2017. In 2018, local elected officials gathered at the County Building to celebrate its launch of residential service in Santa Cruz, San Benito and Monterey counties. They pitched the organization as a less expensive alternative to PG&E that would gather energy from sustainable sources.

It soon expanded to cover much more territory than the Monterey Bay Area. It adopted the name Central Coast Community Energy in 2020, and now also procures power for customers in San Luis Obispo and Santa Barbara counties, as well.

PG&E still maintains power lines and delivers electricity. Most users see 3CE as a line on their PG&E bill.

“It’s really a distributor of electricity,” says UCSC Emeritus Professor of Politics and sustainable energy expert Ronnie Lipschutz. “It doesn’t own anything. It has no capital assets to speak of.”

TENSIONS RISE

Much like a school district or municipality, 3CE operates as a public entity. Elected officials and city managers from cities and counties around the Central Coast make up a policy board and operations board that govern its direction. A separate, volunteer community advisory council (CAC) gives feedback and suggestions to the agency.

In a tense board of directors’ meeting earlier this year, CEO Tom Habashi and 3CE staff proposed to cut the CAC’s ability to set agenda items.

“They’re not to operate as an institutionalization of special interests or to steer or drive or tell the policy board where the policy board should be engaging,” said Chief Operating Officer Robert Shaw at the meeting. The proposed actions, he continued, were meant to stop an “emerging rift” between CAC members and staff. 

“The amendments are not specific to any particular policy discussion,” said Shaw. “But in the last six months or more, we have seen, increasingly, issues that have come up that this sort of unchecked agenda-setting is beginning to conflict with board direction and staff’s prioritization of how to accomplish those goals set out by the policy board.”

Habashi says the CAC was complicating things like budgeting for energy programs. 

“We had our own recommendations,” says Habashi. But some members of the CAC disagreed and created their own report to take to the policy board.

The proposed change would have limited the council’s role to commenting on topics brought up by the board and staff. Dozens of people shared thoughts on the proposal. 

Some supported the direction. Others, including speakers from the Romero Institute, Ecology Action and the Sierra Club, opposed the change.

Several people worried it would limit public access to the agency and transparency.

“The perception was that the amendments would somehow stifle public input through the CAC regarding agency policies and programs,” says McPherson, who argues that this would not be the case. “At no time has there been an attempt to stifle public input either through the CAC or directly to the governing boards during public testimony.”

Dennis Osmer, the former Mayor of Watsonville who has sat on the CAC since it formed in 2018, sees the change as a transparency issue and says frustrations have been growing for a while.

“The focus has been less on the community part of things than profit-making,” says Osmer, who since 2004 has been the executive director of nonprofit Central Coast Energy Services. “It really blurs the line between private industry—a corporation—and a government entity.”

The bylaws change did not end up passing. Instead, 3CE created an ad hoc committee to discuss possibilities. “There was general agreement on a path forward to improve the CAC processes, which we’re planning to formalize and recommend to the board,” says 3CE spokesperson Catherine Stedman.

A QUESTION OF PROFITS

Although 3CE strikes some as corporate, the entity still differs from PG&E in a key way: profits, instead of going to private stockholders, are allocated to local sustainability programs. 

3CE lists a wide range of programs on its website, including sustainable transportation, new construction, agriculture and energy resiliency.

“The overall picture is that we are investing more than $12 million in programs this year and have set a policy goal of spending 5% of our annual revenue to support programs moving forward,” says McPherson. 

The agency funded 12 electric school buses in the last few years, including one that went to Bonny Doon Union Elementary School District. Last year, 457 customers received rebates for electric vehicles or EV chargers through the Electrify Your Ride program, and 270 EV chargers were installed.

The Ag Electrification program “provides incentives for replacing fossil fuel-powered agricultural equipment with new electric versions, including irrigation pumps, farm tools, utility vehicles and other equipment,” Stedman said. “Since this program has been running, 3CE has distributed or reserved a total of $684,000 in incentive payments for the purchase of all-electric ag equipment.”

“I think that 3CE is a resounding success story from the perspective of customers served, greenhouse gas emissions saved, cost to the customers and investment in complementary energy programs,” says McPherson.

But Osmer and other CAC members want to see more, citing that the agency makes “an outrageous amount of money.”

The 3CE 2021/22 annual budget lists $352,045,000 in total revenues. It allocated $12.2 million to energy program incentives and grants. As of Dec. 31, 2021, only $640,632 of that has been spent—$2 million less than the estimated YTD budget.

“A huge disappointment has been the absence of energy programs for the community that help with energy efficiency or electrification,” says Osmer. “And while they have a budget for that, it remains unspent.”

Supply and Storage

In 2020, 3CE bought about a third of its power from renewable sources—roughly the same percentage as PG&E—and more than half of its power from large hydroelectric sources. The agency promises to ramp up those numbers in the near future.

It took a big step in that direction this month as a large renewable energy project came online. The Slate solar and energy storage project is located in Kings County, and 3CE estimates that it will produce enough electricity to power 126,000 households a year. Alongside 3CE, Bay Area Rapid Transit, Silicon Valley Clean Energy, Stanford University and the Power and Water Resources Pooling Authority made power purchase agreements to support the project.

“We are on track to meet our goal of 60% renewable by 2025 and 100% renewable by 2030—15 years ahead of state goals,” Stedman said. “We have invested $1.1 billion in renewable energy projects, but those take years to develop—as we knew going in. We will have, by the end of this year, two of the large solar projects we invested in back in 2018-2019 starting to deliver power.”

Some of these projects, like Slate solar and storage, are somewhat local to the service areas. Others, like Yellow Pine solar and storage in Nevada, bring electricity in from out of state.

Smaller-scale, local energy generation could lower transmission costs and prevent large grid blackouts. But 3CE is in a bit of a catch-22 when it comes to pursuing that goal.

“3CE’s goal is to bill just a little bit cheaper than PG&E, which means it really has to procure the lowest-cost power that it can,” says Lipschutz. “And anything that’s built locally and is relatively small is going to be more expensive.”

Space for things like solar panels poses another issue.

“The conundrum is that local would probably be more sustainable and resilient,” says Lipschutz. “But you would need a lot of local generation.”

Habashi says the agency tries to support local suppliers, but keeps running into roadblocks—like when 3CE first put out a request for offers for energy contracts, and no local suppliers responded. 

Then “one of them came in for 20 megawatts, which is very, very small,” says Habashi. “We need usually about 100 megawatts or more to be serious about negotiating.” But the agency told the supplier they would take it. 

Two weeks later, the supplier withdrew its offer because of operating costs. 

“For the third RFO, we basically said, ‘we’re only entertaining local offers for supply plus storage,’” says Habashi. “We got quite a bit of storage. A little bit more expensive than we can get elsewhere, but we took it. We got one—only one—supply contract that was solar plus storage, and we jumped on it.”

But after six months of negotiations, that supplier also withdrew its offer. Its land lease had fallen through, and it would not be able to build a solar field.

Now, 3CE plans to invest in local storage “large enough to be able to handle if you have a disconnection upstream,” says Habashi, explaining that local storage will greatly improve resiliency and system reliability for customers. 

“It is a key strategy for us that we will go for large suppliers—whatever we can get, as long as it’s renewable as well as reasonably priced. Then all of our storage is going to be done locally,” he says. 

The agency will soon select a single vendor to work with, and has its sights set on purchasing. “We want to own the assets,” says Habashi. 

3CE and other CCAs are still startups compared to PG&E’s 117-year history, and they have several directions they could evolve.

“It’s hard to say how it’s going to go at this point,” says Osmer. “But it’s a new world.”

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