SR-900-004
CP:SM\EPD\STAFFRPT\ELECTRICAMER
Council Meeting: June 24, 2003 Santa Monica, California
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Contract with ElectricAmerica for the Purchase of Renewable
Electricity for City Facilities and Update on Community Aggregation
Opportunities
INTRODUCTION
This report recommends that the City Council authorize the City Manager to
amend an agreement with Electric America (formerly Commonwealth Energy) for
the purchase of renewable electricity for City facilities. This report also provides
an update on potential community aggregation opportunities for the purchase of
electricity.
BACKGROUND
On May 13, 1999, the City entered into agreement #745 (CCS) with
Commonwealth Energy for the purchase of 100 percent renewable electricity
(geothermal) for all City facilities within Southern California Edison?s service
territory. After the first one-year term ended, the City renewed the agreement for
one additional year ending in June 2001. In 2001, the market for green energy
had collapsed as wholesale electricity costs spiraled out of control. Most green
energy service providers returned their customers to their serving utility and
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went out of business. Commonwealth Energy was the only remaining green
energy provider in California.
In June 2001, the City once again renewed its agreement with Commonwealth
Energy and renegotiated the price for the electricity to obtain a five percent
discount off of Southern California Edison?s tariff that the City would otherwise
pay. In June 2002, Commonwealth Energy agreed to extend the agreement on
the same favorable terms through June 2003.
DISCUSSION
Commonwealth Energy, now called ?ElectricAmerica,? continued to honor the 5
percent discount off Edison?s tariff despite the California Public Utilities
Commission?s order to charge all ?direct access? customers a Historical
Procurement Charge of 2.7 cents per kilowatt hour. This charge was to help the
State of California recover the costs associated with purchasing power at
exorbitant prices on behalf of the cash-strapped investor owned utilities during
the State?s energy ?crisis.? In May 2003, ElectricAmerica notified the City that its
contract for geothermal energy from Calpine Energy was ending. Staff
commenced discussions with ElectricAmerica to continue the purchase of
renewable electricity for its facilities and achieve a power cost which would still
be less than the Edison tariff.
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Under the terms of the proposed revised agreement, ElectricAmerica will provide
the City with 100 percent renewable electricity at a cost 8 percent below
Southern California Edison?s current tariff for the next three years. Eight
percent below the Edison tariff equates to an 8.74 cents per kilowatt hour
electricity generation rate for all of the City?s more than 500 electricity meters.
This represents a savings of approximately $135,000 per year from the amount
the City would have had to pay Southern California Edison for non-renewable
power, and a savings of approximately $51,000 per year over what the City
currently pays ElectricAmerica for electricity. The proposed three year term will
provide the City with a greater level of certainty over electricity costs. The
proposed amended contract will end May 13, 2006, and includes an option to
renew under the same contract terms, if both parties agree, for five additional
years after 2006.
Under the terms of this contract, ElectricAmerica will procure 100 percent
renewable energy for the City by purchasing renewable energy certificates, also
known as ?green tags.? A green tag is an economic tool. It represents the
added benefits and costs of renewable generation; i.e., the environmental
attributes of a single megawatt hour of renewable generation. Environmental
attributes are the benefits of emission offsets or avoidance of air pollutants such
as carbon dioxide, nitrous oxide, and sulphur dioxide where the value of a pound
of pollution is determined by a market. ElectricAmerica will purchase
approximately 27,745 megawatt hours of green tags (to cover the total annual
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consumption for City facilities) from renewable electricity generators located
primarily in California. The environmental benefits of purchasing green tags are
thus the same as obtaining renewable energy from a specific source because
both replace fossil fuel generation with clean renewables. The California Energy
Commission monitors the efficacy of the green tag program by verifying the
claims marketers make on the content and source of energy in their products
and ensuring that no two green tags represent the same megawatt hour of
energy.
Community Choice Aggregation
Enacted in 2002, AB 117 allows cities and counties to aggregate all classes of
their electrical loads. Everyone within the ?community choice aggregator?s?
(CCA?s) territory is automatically enrolled, but consumers have a penalty-free
?opt out? opportunity for the first 60 days or first two billing cycles. The CCA
procures electricity on the wholesale market (for Santa Monica this would
presumably be from renewable sources) and the electricity is delivered through
the investor-owned utility?s (Southern California Edison?s) infrastructure. Edison
retains the legal obligation to provide energy to customers who opt out or as the
provider of last resort. AB 117 also allows CCAs to administer their
?proportionate? share of the Public Goods Charge funds for energy efficiency
programs.
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City staff is currently participating in California Public Utility Commission (CPUC)
proceedings on AB 117 implementation for the purpose of determining if
aggregation is a viable option for Santa Monica. The final CPUC rules will be
determined by mid-July. Shortly thereafter, staff will present City Council with a
recommendation whether to proceed with community aggregation as part of a
proposed energy strategic plan for the community. Staff and consultants are
currently preparing a technical study that estimates the total potential for
deployment of solar and other forms of clean distributed generation technologies
in Santa Monica. The forthcoming proposed strategic energy plan will
recommend specific projects and financing strategies for achieving the
recommended goals for community aggregation and distributed generation.
BUDGET/FISCAL IMPACT
Under the terms of the proposed agreement, it is anticipated that the City will
save $135,000 per year over what it would have paid for electricity purchased
from Southern California Edison and will save approximately $51,000 per year
over what the City currently pays to ElectricAmerica for electricity. Sufficient
funds to cover the costs associated with the proposed agreement are budgeted in
the Utilities-Light/Power accounts of various departments and various funds in
the Proposed FY2003-2004 Budget.
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RECOMMENDATION
Staff recommends that the City Council authorize the City Manager to amend the
agreement with ElectricAmerica (?Commonwealth Energy?) for the purchase of
renewable energy for City facilities under the terms discussed above.
Prepared by: Craig Perkins, Director of Environmental and Public Works
Management Department
Susan Munves, Energy and Green Building Programs
Administrator
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