Loading...
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 1 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. 2 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 3 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. 4 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. 5 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 6