Public Power Pt. 6: Alternatives — Episode 170 of Local Energy Rules

So far in this series we’ve shared why communities are pursuing public power, what specific benefits are found in the public power model, why it’s hard to win a municipalization campaign, how communities can make gains even in failure, and a few examples of how public power can fall short. In this episode, we explore what alternatives communities have to a public power takeover that can still advance their clean energy and environmental justice aims.

I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is episode six in our multi-part series, The Promise and Peril of Publicly-Owned Power. It’s a production of Local Energy Rules, a biweekly podcast sharing powerful stories about local, renewable energy.

In the arc of this series, we’ve intended to capture the desire many communities have for more power over their energy system and the promise they see in public ownership. We’ve also explored the difficulty of success and even the need for ongoing vigilance of any utility, public or private, to ensure it continues to serve the public interest. Fortunately, a municipalization campaign isn’t the only strategy available to a community that wants to take charge of its energy future. With the help of the Local Energy Rules archive, I’m going to walk through five measures communities can take to get more accountability from their electricity provider and to meet their needs themselves.

These ideas come with a disclaimer. In some cases, such as community choice energy, there’s as much of an uphill battle to get state legislation as there would be to run a local municipalization campaign. In other situations, advocates have acknowledged that these alternative strategies are necessary, but not sufficient to replace the power of local control. Judge for yourself which ones seem like they’d work best in your community.

One option comes so close to public power that I’ve often called it “municipalization lite.” It’s called community choice aggregation or community choice energy, and it typically requires an enabling state law. For a deep dive, see ILSR’s report on Community Choice published in Feb. 2020 or David Hsu’s interview on the Volts podcast in March 2022. We’ll have links to both in the show notes. The short version is that community choice allows a city to become the energy purchaser on behalf of its residential and small business electricity customers. Then the city gets to decide where the electricity comes from, usually buying more clean energy at a lower price than the incumbent utility. Marin Clean Energy, the first successful community choice program in California, provides a good example. When they took charge in 2010, they immediately offered customers a higher share of renewable energy at a lower price than incumbent utility, Pacific Gas & Electric. I interviewed CEO Dawn Wiesz for Local Energy Rules episode 19 about the project back in 2014.

We’re able to offer competitively priced renewable energy because we have low operating costs. We are a small and nimble shop here in the community. We procure in a very prudent way. We, we are careful about not overspending, but maximizing renewables within our portfolio. Another key factor is that we don’t have shareholder profits to account for. All, any revenue that comes into the agency is used to keep rates low, or to help fund other local programs that benefit the community, like solar rebate programs for low income individuals, energy efficiency programs, electric vehicle charging, that sort of thing.

We have a deep green local renewable development fund that’s been created by the customers in our service territory that have chosen the deep green energy product. That’s a 100% renewable energy offering that we offer to customers. And 50% of all of the deep green customer revenue goes into a local renewable development fund to pay for the pre-development costs of local projects that we will build and own within our jurisdiction.

One of the things that’s very exciting about this and we’ve gotten a lot of support and funding for this project from the California energy commission is the opportunity to do this kind of a multi customer micro grid set up really opens up the opportunity to look at neighborhoods or areas where maybe there’s multiple hospitals or or other kinds of situations where it isn’t sort of like what you might say typical microgrid where it’s a single customer in their own kind of campus that they can Island and isolate from the grid but be able to operate a whole section of the grid that includes multiple customers really will hopefully broaden the range of opportunities where you could deploy micro grids to provide resiliency and emergency response capabilities.

To learn more about the business development plan, I spoke with Jessica Tovar, coordinator of the East Bay Clean Power Alliance, for episode 98 in 2020.

There’s a lot of stuff in the local development business plan, but one of the things is there something called community benefit adders. And so an adder would be to incentivize, you know, if there is some family sustaining wage or union wage job creation. So there’s incentive for that. If you’re like doing a particular project in a income community, there’s a low income community adder. There’s also an adder for storage, for example. So there’s all these different opportunities to incentivize. And you know, this is something that even though it’s created for our community in the East Bay area, Alameda County, it’s still also a useful tool for other communities to look at opportunities that go beyond installing wind and solar energy in your community. Right. And as you mentioned, feed in tariffs are important because if we’re incentivizing our municipal buildings to become solar, then we’re able to provide solar energy into our East East Bay community energy program that then local people could be buying that energy. And you know, over time that stable energy, it’s local clean energy. It’s, it’s a way to stimulate our economy, create jobs and create that clean energy infrastructure that we want so badly to combat climate change and all these other injustices in our community.

We’re anticipating about 80 to $90,000 per year and the aggregation program has about, at any given time, 70 to 80% of the residents of Athens City involved in the aggregation program. The rest of the 20% or more are either in their own supply contract, so they’re not in the aggregation program or they simply opt out of the aggregation program and get the default rate by the utility. And over each year we’re anticipating that we can build a 60 kilowatt installations, you know, saving roughly $10,000 per year throughout the service life of each system and again, each year we have that fee to use from. So the savings will really compound creating a big benefit for the city of Athens. What we like to point to is that because the solar systems will be installed on public serving buildings, this will actually be a net benefit to all taxpayers, whether you’re in the aggregation program or not. And that’s because the city of Athens will be saving on their utility bills, supplying their energy needs with the solar first and then going to the grid to supply the rest of the energy that they may need. And that frees up money within the city’s budget to use on other programs and services that benefit everyone.

What we’re doing pretty soon in the next few months is going to the community again and asking what’s the best way to use the fee money? We’ve been playing around with the idea of using the fee money to attract new capital so that way we can leverage our annual fee for bigger and better projects. But as this carbon fee was initiated through a democratic process in voting, we also want to honor that and create public forums for people to contribute how they think this carbon fee should be spent. If they’re interested in simply taking as much that was gathered each year and spending only that for projects, then we will honor that. But we also want to share our, our ideas knowing that we’ve been in this industry space for a little while, showing the value of kind of leveraging that, that money for more capital.

Even in states that don’t have laws supporting community choice programs, cities can work with electric utilities to develop alternatives. In Milwaukie, Oregon, a suburb of Portland, clean energy leaders in the city didn’t have access to community choice from state legislation, so they pursued direct talks with the utility, Portland General Electric. Natalie Rogers, the city’s Sustainability Coordinator explained how the city was able to get carbon free electricity for municipal buildings.

Communities typically only pursue public power once they’ve exhausted efforts to win support from incumbent utilities, but another approach is to change the incentives for utilities. In 49 out of 50 states, utilities make money by spending on power lines, power plants, or energy distribution, instead of by meeting goals for reliability, clean energy, and other metrics. One state has changed that formula, in a decision described by news outlet Hawaii Tech as quote, “a landmark ruling for the entire nation, putting Hawaii at the leading edge for realigning the electric utility business with a 100% clean energy future.” On episode 130, Isaac Moriwake of Earthjustice explained how the concept of performance-based regulation has the promise to change what the utility does for its customers.

There was a study that was commissioned by the legislature for 2 million bucks about, what’s the best model going forward? How do we change the system? And they consider co-ops, they consider munies, to consider divestiture and all that. And I think that the answer that came of that and not to say that it was the end all, but certainly the, the commission I think had independently come to a similar conclusion that working with what we’ve got, in terms of a vertically integrated, privately-owned utility, but aligning or realigning the incentives, was the best way to get the most bang for the buck in the near term.

Instead of that, a treadmill, we’re just going to cap utility revenues and keep it there for a long period of time. In this case, in Hawaii’s case, five years. We pushed for more, eight years, but it’s going to be five years for starters. And then the utility is turned loose to basically find any kind of efficiencies, cost savings so that anything, any savings underneath that cap where that index, which is externally calculating driven, will go straight into the utilities pocket. And that is said to mimic a competitive environment and as close, I guess, as monopoly utility regulation is going to get where the utility is basically left to its creative competitive juices to, to basically maximize his profits and increase efficiencies across the board. So that’s key. And, and how does that work in terms of, you know, creating customer value? Well, whereas traditionally, the utility would automatically reach for that centralized fossil fuel plant as a way to boost its profits and its revenues, now it will consider hopefully on a more level playing field, distributed energy resources, non wire alternatives, alternatives to traditional utility infrastructure investments, as a way to get the job done, to reach our clean energy goals without spending utility and ultimately rate payer money. And so again, leveling the playing field between all options, de-linking from that traditional cost plus engine of just more utility stuff is the fundamental premise and starting point for performance regulation. And then on top of that, once we have an idea of, okay, there’s certain areas where we want better targeted utility performance, whether it’s faster interconnection, whether it’s greater customer satisfaction, whether it’s more sort of attention to low and moderate income needs, then you can establish what they call performance incentive mechanisms for PIMS, for short, to drive utility performance in those targeted areas. But I want to emphasize that unlike, I think some people, when they think about PBR, they automatically think about PIMS the performance incentive side. What we really need to focus first is that foundation of breaking the link between cost of service and utility revenues first. And that’s what Hawaii did for sure, as a foundation.

I think that through innovation and collaboration, no matter what industry space you’re in, you get to better and different solutions and you’re sort of guaranteed to always be forward looking and forward moving. So to me, being a benefit corporation really ties in very well with that. And I think particularly in a business where you’re providing, at the end of the day, a really critical essential product and service to society, to say that you want to go about doing that in a way that is providing benefits to multiple stakeholders and to the communities that you serve and the environment. I mean, my gosh, it’s very, very intuitive that any business would wanna do that, but certainly that a utility would.

Yeah, so again, my view is, when change is gonna happen, the best way is to embrace it and focus on how you can create a new and different value proposition for yourself and your company and for your customers as you look to the future. So, on many levels we’re excited about the disruption that’s happened in solar. You know, going back to you referenced, 2008 and the energy vision that I launched, as well as the fact that we actually led the discussion around valuing solar in our state by creating a solar adder that we gave our customers that wanted to put rooftop solar on their homes. And we came to that through really aggressively analyzing how can we go in this direction that we know our customers wanna go in, but do it in a way that creates value for all of the customers that we serve.

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In Portland, Ore., residents passed a ballot initiative creating the Portland Clean Energy Community Benefits Fund by levying a new tax on big corporations, pouring $30 million per year into equitable clean energy development. I spoke with Alan Hipólito at Verde, a nonprofit in the Cully neighborhood, on the eve of the 2018 election about the local renewable energy resolutions and community interests that led to the ballot initiative.

There were really three commitments that we moved forward in the resolutions. The first was working with rate payer advocates to protect low income rate payers from price impacts during these transitions. The second, was, advancing workforce and contracting diversity goals. So, that workers and business from all communities have the opportunity to participate in the development and construction of our renewable energy infrastructure. But, then there was a third commitment, that, we think is especially connected to the Portland Clean Energy Initiative.

As, I mentioned we did some pretty good work on advancing workforce and contracting equity commitments in the resolutions. But, a lot of these projects that will be done will be very big scale projects. So, it will be done by, big contractors, big companies working at big institutions. And, there’s a lot of reasons why that make sense. But, that’s a difficult level for frontline communities to compete. So, we wanted to open up a new playing field for low income people and people of color and their community serving institutions to be a part of our transition 100% renewables. And, we called that “community-based renewable energy infrastructure.”

So, each resolution recognizes that that’s a model to ensure that the benefits of our transition are made available to low income people and people of color communities. Then each sets standards for what percentage of community-wide energy will come from community-based renewable energy infrastructure. Each of them says that by 2035, two percent of all the energy in the city of Portland — so, not just things that are owned by the city out right or city building — but, every unit of energy that’s consumed within the city, that two percent of all of that will come from this kind of infrastructure. And, then the city goes even further and says by 2050, 10 percent. So, one out of every ten units of energy in the city will be created by community-based renewable energy infrastructure. This is a massive transfer of generative capacity to the community level. The Portland Clean Energy Initiative is really of one of our first efforts to increase the toolkit. Both, in terms of funding, as well as policy, to give communities the opportunity to respond to that challenge.

We’re now in the process of distributing those funds and getting organizations ready to apply for this round of funding that is open right now, again, that $8.6 million and in future rounds we’ll have significantly more resources. The kind of annual budget for the Portland Clean Energy Fund is more on the order of 40 to $60 million per year. But this introductory round is kind of a ramp up to that full funding amount.

In Seattle, citizens similarly targeted high-wealth businesses to source a new fund to support city priorities. Of the $230 million per year Jumpstart Seattle tax revenue, $20 million will be dedicated to equitable clean energy and climate work, or what locals call a Green New Deal. Like Portland, the program will be overseen by an advisory board. Jill Mangaliman, Executive Director of Got Green, and Abigail Juaner, Equitable Program Development Manager at Puget Sound Sage, joined me in October 2020 to talk about the organizing effort and intent of Seattle’s new fund. Here’s Abigail describing how the fund works:

We’ll conclude by looking beyond cities and utilities to a novel community-centered approach to advancing clean energy and climate goals. In Iowa, Andy Johnson organized one of the country’s first energy districts, modeled on soil and water conservation districts of the New Deal. He explains how the Winneshiek Energy District in northeastern Iowa has accelerated clean energy deployment by focusing on technical assistance.

And it’s not easy. There’s good reasons why people don’t do it. Traditionally, it’s been done, it’s been understood of energy auditing. Many people have had an energy audit, most unfortunately that have had an energy audit, haven’t actually implemented any major changes from it. It’s just the way the industry is has evolved over the years. So what we try to do is a, is a much broader level of energy analysis and typical audit. We try to include the efficiency and renewables opportunities. We look carefully at the economics and then we try and help people make those changes. And we’ve done this with hundreds of homes and businesses and now farms increasingly here in northeast Iowa. And to conversion rates of, you know, 50 to 95% in terms of projects that actually get done. So that work is a little bit costly and it’s a little bit intense. But we’re seeing really great results there. So of course the other side of what we do is a lot of the engagement, outreach, education, engagement, awareness and working directly on projects with partners like local governments, helping folks understand, hey, y’all could build a solar array. Here’s how it works, here’s how third party ownership works. Here are how all the incentives work and essentially being the catalyst that drives change at the local level

We’ve done a great deal of efficiency as we mentioned, renewable energy is on a tear here. And we’ve worked with all kinds of partners, for example, the community college there and Luther College and other entities, and solar installers. So there’s a lot of catalyzing that can be done when you have an organization whose mission is to do it. Of course it takes energy to build that organization here in Decorah. We’re pretty confident we have more solar per capita than any other town in Iowa now and possibly any other town in the Midwest. It’s really rolling along. And again, it’s not easy to build those organizations to try something new that’s not just a subset of, say, a city government or a county government or something else, but it pays dividends. And part of what we’re really excited about now is that we’re talking with neighboring counties and startup groups nearby and far away about starting an energy district and a network of energy districts. And we think that’ll really create increasing movement awareness, power and everything else. So we’ll share resources, which to share some services, but everyone needs that local mouthpiece and catalyst for change.

Thank you so much for listening to this episode of Local Energy Rules, the 6th and final episode in our multi-part series, The Promise and Peril of Publicly-Owned Power. We hope you enjoyed hearing about strategies that cities and communities have employed when public power isn’t probable. We also hope you’ve enjoyed the entire series, covering an entire arc from why cities want public power to why it’s not a panacea. You can find all six episodes on the Local Energy Rules podcast feed — episode 163 is the first of this series, and episode 170 is the last — with a couple bonus episodes sprinkled in.

If you’re working to support community and city level equitable clean energy progress, we also have many other resources on the website of the Institute for Local Self-Reliance. Our interactive Community Power Toolkit provides case studies and sample ordinance language of city-level actions. Our Community Power Map shows the policy environment in each state and the location of every existing municipal electric utility. And our wide range of research explores the technology and market structures that can prioritize local and community ownership of clean energy.

Local Energy Rules is produced by me and Maria McCoy, with editing and sound production by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system.