https://www.sacbee.com/community/roseville-placer/article290662609.html#storylink=cpy
Rocklin: Energy
Options Report Recommends Working with Current Providers, PG&E,
... estimated at $220 million.
And has proven unsuccessful in jurisdictions that are much larger and better
equipped financially than Rocklin.
https://www.rocklin.ca.us/pod/energy-options-report-recommends-working-current-providers-pge-pioneer-energy
Energy Options Report
https://www.rocklin.ca.us/sites/main/files/file-attachments/rocklin_options_report_-_final.pdf?1598483991
Estimates of the acquisition cost of the PG&E system in the city of
Rocklinare between $ 62 million to $ 192 million.
It is worth noting that there will always be a significant
range of the potential acquisition cost given
different
methodologies for valuation and disparate views
as to the relative worth depending on one’s
perspective.
In many cases over the years PG&E has simply rejected such offers stating
that their system
is not for sale.
PG&E has spent millions fighting, litigating and investing considerable sums in
public petitions, advertising and political contributions to successfully deter
such attempts.
An excellent example of one of several acquisitions that PG&E has been fighting
since
2005 is the South San Joaquin Irrigation District (SSJID).
In 2006 SSJID offered PG&E $ 79.6 million for its
system within the SSJID service area.
In September 2019 SSJID raised their offer to $116
million.
PG&E has steadfastly stated that its system is not for sale and claimed
before the San Joaquin LAFCo that its system
was worth $426 million.
This significant disparity in value can be expected, not just between a buyer
and seller,
but in this case by PG&E fundamentally trying to hold onto its asset base and
business model.
In response to PG&E’s unwillingness to negotiate, some communities have
looked to more drastic measures to force PG&E to sell through
condemnation.
In 2009 SSJID requested that the
San Joaquin County Local Agency Formation Commission (San
Joaquin LAFCo)
approve its plan to provide retail electric service through
eminent domain.
After five years the San Joaquin LAFCo
approved SSJID’s plan to move forward
with acquisition attempts.
To this day, PG&E has kept the implementation tied up
in ongoing legal proceedings,
even with San Joaquin LAFCo’s approval of
the plan.
SSJID reports that it has spent $27.7
million to date pursuing this acquisition, including $4.2 million for
consultants, and $18.5million for legal support.
SSJID has been able to fund these costs
without impacting rate revenue from their water customers by using revenues
generated from hydroelectric power generation and water transfer revenues, but
the financial and administrative cost is very substantial.
www.ssjid.com/district.services/electric-services/opinion-editorial-retcit-electric.worth-the-cost
The annual operating expenses including renewals
and replacements, (again based on per customer data obtained from
Roseville Electric ), is estimated to be
approximately $88,100,000 per year.
(33,600 electric customers in
Rocklin using around
346,000 MWh annually, with a peak demand of 61.9 MW)
=================================
SOLUTION
Unless a better scenario is presented --- for RENEWABLES to be 80+ % of
our Energy source by 2035,
UTILITY COMPANIES must be forced to make a deal with
break-free Communities.
Perhaps an ARBITRATION BOARD might value the cost of Transmission
Infrastructure and
even guarantee that the Utility company would be MADE
WHOLE, annually, up to 3-5 years after selling. ?
But GOVERNMENT MUST PASS A BILL to make arbitration,
and the Sale, take place !!!
It is only then that communities and homes and
businesses can become ENERGY GENERATORS !
=================================
Reducing NET-METERING is not helping
The state’s three big investor-owned utilities contend that existing
net-metering rules allow solar-equipped customers to avoid paying their fair
share of fixed utility costs such as building and maintaining the power grid and
paying for the construction and maintenance of power plants and solar and
battery farms.
To make up for those unpaid fixed costs, utilities will be forced to raise rates
for customers at large, they say.
That view is also supported by some utility customer
watchdog groups and the Natural Resources
Defense Council.
They warn that this net-metering “cost shift” disproportionately harms
lower-income and disadvantaged communities that can’t afford solar.
In fact, some of those groups are asking the CPUC
to reduce even further the payments for rooftop solar power fed into the grid in
an attempt to rectify the cost shift.
https://www.canarymedia.com/articles/solar/californias-gov-newsom-says-changes-need-to-be-made-to-states-polarizing-net-metering-proposal
The American Public Power Association is
the voice of not-for-profit, community-owned utilities that power 2,000 towns
and cities nationwide. More than 55 million people are served by
Public Power
Utilities.
https://www.publicpower.org/about
=================================
Rocklin's - Energy Options Report
see here:
https://www.rocklin.ca.us/sites/main/files/file-attachments/rocklin_options_report_-_final.pdf?1598483991
July 24, 2020 Prepared by:1 Mr. Steven Rudolph July 24, 2020 City Manager
City of Rocklin
3970 Rocklin Road
Rocklin, CA 95677
Dear Mr. Rudolph:
Michael Bell Management Consulting (MBMC) is pleased to submit this Report on
the City of
Rocklin Energy Options for your information and consideration. The Report
provides the City
with a high-level analysis of the options available to it given current
conditions in the local energy
market. There are a number of options available to the City. They represent a
wide range of costs
and risks that should be considered before selecting a path forward. At the
conclusion of the
Report MBMC offers its suggestions based upon this analysis, but ultimately the
decision should
be made by local officials with the best understanding of the community’s
interests.
It has been a pleasure working with you and your staff. If I can be of any
further assistance, please
let me know. I believe that it is wise for the City to continue to monitor the
situation moving
forward so that local needs and concerns continue to be met.
Very truly yours,
Michael Bell, Principal
Michael Bell Management Consulting, Inc.
2
1.0 INTRODUCTION
Michael Bell Management Consulting, Inc. (MBMC) has been engaged by the City of
Rocklin
(Rocklin or City) to identify and describe broadly the potential energy service
provision options
available to the City. The City of Lincoln has also requested a similar analysis
with a comparable
scope of work. While similar, these studies were performed separately yet
simultaneously since
the circumstances in both cities are different and merit independent
consideration.
The purpose of this report is to identify the potential range of options
available to the City to
exercise greater local control of its energy future. Options evaluated in this
analysis include a
broad spectrum from the full provision of electric service as a municipally
owned public utility to
taking no action. This high-level review includes a discussion of the pros,
cons, costs,
opportunities, risks, and likelihood of success of each of the options
identified. These
considerations do not purport to be all inclusive and additional analysis,
including but not limited
to the costs, should be considered to the extent the City elects to proceed
further with any option
outlined herein. Hopefully, this information will help to assist the City and
its stakeholders,
including policy makers, to identify what alternatives merit considering and
potentially pursuing
further with the interests of the community in mind.
1.1 Historical Context
The provision of electric service in California has evolved meaningfully since
the State’s
unsuccessful experiment with deregulation in the late 1990’s. One significant
change has
been the ongoing evolution of the business model for investor owned utilities
(IOUs). At
its heart, IOU’s once were the dominant players, with few alternatives, who
controlled
every aspect of providing power to the retail customer. This is no longer the
case today
with substantial alternatives for the procurement of power and ample political
and financial
pressure on IOU’s given their performance and customer service levels. The
investor
owned utilities continue to change from vertically integrated service providers
(generation,
transmission, and distribution service) to predominantly transmission and
distribution
companies. This evolution is ongoing but is a trend that continues to develop.
IOU’s have
either divested or are in the process of retiring most of their generation
resources. Unlike
IOU’s, municipal utilities have continued their vertical integration, but rely
more on
contracted generation, particularly for renewable resources. Filling this void,
Community
Choice Aggregators (CCA’s) such as the current local CCA, PCE have become a
significant and growing source of supply for many customers including those in
Rocklin.
The Cities’ incumbent electric service provider, Pacific Gas and Electric
Company
(PG&E) has had a challenging time adapting to changes that have occurred in the
industry
over the last 25 years, as evidenced by their most recent bankruptcy filing.
These
challenges are also not limited to the most recent events, including wildfire.
In 2001,
PG&E declared bankruptcy for the first time when it was unable to meet its power
purchase
obligations due to power market manipulation by companies such as ENRON. The
State
had to become PG&E’s supplier of last resort through power supply contracts
procured
through the Department of Water Resources. The legacy and cost of these problems
from
3
two decades ago still remain with the last of these contracts, which are part of
PG&E’s
current charges, due to expire in the next 3 years.
In recent years, PG&E has had a succession of reliability and safety problems
which
combined with drought and climate change has made it susceptible to the gas and
electric
service disasters which have created tens of billions of dollars of liabilities
resulting in what
is now PG&E’s second bankruptcy. Documented maintenance, safety, and record
keeping/reporting shortcomings as well as inappropriate contacts with regulatory
officials
at the California Public Utilities Commission (CPUC) by the company has resulted
in huge
fines, criminal convictions and has severely eroded public confidence in the
utility. Recent
Public Safety Power Shutoffs (PSPS) has exacerbated the situation and created
the
environment that many communities are reacting to. For cities like Rocklin, the
disruption
to local residents and businesses is simply unacceptable, particularly if this
is expected to
become the new norm as PG&E has stated. The question then becomes what
alternatives
may exist in whole or part that can help the City to achieve potentially greater
energy
independence.
1.2 Summary Findings
A detailed Summary of Costs and Recommendations is presented in Section 4 of
this
report. While there are many alternatives, and subsets of each, that exist for
the City,
MBMC recommends that the City open a dialogue with: i) PG&E, and ii) PCE in
order to
assess how each entity may serve as a partner with the City to achieve greater
energy
independence, reliability, customer service and local control. We do not
recommend taking
no action, nor do we recommend creating a stand-alone municipal utility at this
juncture
without the benefit of the recommended dialogue.
The electric service industry is undergoing transformative change, and the City
is well
advised to consider how these changes will impact the community moving forward.
While
each of the alternatives have different levels of cost and complexity – and in
turn likelihood
of success – our recommendation is to take steps today that will help to define
better what
alternatives are the most feasible. By opening a dialogue with key players in
the short
term, the City will be able to refine the options for policymakers in order to
identify a
preferred alternative from a financial, operational and policy perspective.
2.0 RANGE OF OPTIONS
There are a wide range of potential options open to the City depending upon its
objectives and risk
appetite. Each option has its own unique structure, opportunities, risks and
costs. Importantly,
these options are not always mutually exclusive, and in some cases, it may be
valuable and
informative to start down one path if it is easier and cheaper to determine if
more substantial steps,
even if more complex and costly, merit pursuing.
When other California Cities have considered such options in the past, they have
made a variety
of choices dependent upon local needs, priorities and resources. The
alternatives available today
can be further complicated by the history that a community or region may have in
the provision of
4
electric service. For example, some cities established municipal utilities one
hundred years ago to
be competitive with areas that were beginning to be served by IOU’s. At the
time, these
communities were typically smaller cities that the IOU’s were not interested in
serving due to the
perceived high cost of doing so. Many of these cities believed in the importance
of local control
and the value of energy independence, including as an important tool of economic
development.
Over time, additional cities and special districts, such as the Sacramento
Municipal Utility District
(SMUD), came into existence as a cheaper alternative to the IOU’s with greater
customer
participation, input and accountability. More recently, new options such as
CCA’s have continued
this trend by providing an avenue for greater local control on the generation
side of the business.
Such local control has frequently resulted in new resource development,
particularly green power
that have also contributed to the economic development and addition of jobs in
the local
community.
Today, after experiencing reliability problems, runaway costs and lengthy
precautionary PSPS
outages that have wreaked havoc on local economies, many cities like Rocklin are
in early stages
of reviewing the range of potential alternative that may exist in order to take
greater control of
their energy future. The analysis presented herein is intended to outline
broadly the spectrum of
options available to the City that may merit additional analysis and
consideration. The analysis is
further intended to be far reaching by looking at a wide range of alternatives
from forming a stand-
alone fully integrated utility to facilitating electric service through other
service providers to
attempting to influence PG&E’s operations or practices based upon local
circumstances to simply
doing nothing. Each of these alternatives have a different set of
considerations, including cost,
complexity and the likelihood of success. In some cases, it may be valuable to
look at several
alternatives simultaneously to determine which option is viable; however, in all
cases, there is a
question of fit and what makes the most sense for the City balancing the
different – and at times
competing – considerations while always recognizing and putting the needs of the
community first.
3.0 OPTIONS ASSESSMENT
An entire spectrum of options is available to the City. In order to begin to
make a more informed
decision about a potential path forward, each of the identified options for
Rocklin’s consideration
include:
- estimated costs;
- pros and cons;
- the likelihood of success, and
- basic steps needed to implement.
Finally, MBMC provides its preliminary recommendations to the City based on
these identified
considerations. It is important to note that the provision of electric service
is a complicated
business, and this is one reason that the IOU’s have successfully held such a
dominant market
share for so long by trading off of this narrative of complexity for an
essential service. This is not
to downplay the wide-ranging challenges that this business presents. The
complexity of providing
electric service introduces nuance into any decision because there are
financial, credit, customer
service, risk and policy implications that are all deeply intertwined. In some
ways, there are no
right or wrong answers to this question. The ultimate path depends on local
needs, risk appetite,
5
and resources as determined by the elected officials and policy makers that have
the best
knowledge of their constituents’ interests and priorities.
3.1 STAND-ALONE MUNICIPAL UTILITY
There are substantial examples of stand-alone municipal utilities in California,
but most of
these have been in existence for a long time. Forming a new stand-alone
municipal utility
has proven more challenging in recent years given the financial and operational
challenges
and the generally widespread political opposition by the IOU’s. A number of
cities and
special districts have attempted to form their own local utilities by acquiring
PG&E assets
over the last 20-30 years. Many of these attempts began after PG&E’s first
bankruptcy in
2000. None have been successful in replacing PG&E as service provider. Examples
of
nearby jurisdictions that have attempted or are attempting to replace PG&E
include:
• City and County of San Francisco
• Yolo County including the Cities of West Sacramento, Davis, and Woodland
• South San Joaquin Irrigation District
Using information gathered from these attempts at municipalization along with
data
gleaned from the City of Roseville’s Electric Utility (Roseville Electric), as
well as PG&E
information obtained from PCE’s implementation of the Placer County CCA, MBMC
has
been able to make high level estimates of the potential range of costs to
acquire and operate
a stand-alone municipal utility in Rocklin.
In its 2016 Feasibility Study PCE reported that there were approximately 33,600
electric
customers in Rocklin using around 346,000 MWh annually, with a peak demand of
61.9
MW.1
3.1.1 Acquisition Cost
Using the offers made to PG&E by several jurisdictions and data available in
financial
reports from Roseville Electric MBMC estimates the acquisition cost of the PG&E
system
in the city of Rocklin to be between $ 62 million to $ 192 million. It is worth
noting that
there will always be a significant range of the potential acquisition cost given
different
methodologies for valuation and disparate views as to the relative worth
depending on
one’s perspective. Further complicating the objective value is the business
strategy
associated with any individual bid for particular assets, which may or may not
have
additional and intrinsic value for a local community. Table 1 provides offers
made to
PG&E on a per customer basis by the City and County of San Francisco and Yolo
County
through it’s Valley Clean Energy CCA. The Roseville investment is based on data
obtained
for non-generation assets of Roseville Electric from its 2019 audited financial
statements.
Based upon MBMC’s experience in other jurisdictions PG&E would likely value its
system
in Rocklin in the range of $350-$400 million. In other jurisdictions PG&E argues
for
1 Placer County Community Choice Energy Financial Analysis and Due Diligence
Report, October 10, 2016
6
replacement cost new less depreciation rather than depreciated cost, which is
commonly
used to calculate an offer price.
Table 1
Sample Investment per Customer
Jurisdiction Offer/Investment
Amount
Number of
Customers
Dollar
Investment/
Customer
San Francisco $ 300 million offer 150,000 $ 2,000
Yolo County $ 2.5 billion offer 425,000 $ 5,531
Roseville Electric $ 347 million investment 60,752 $ 5,719
In many cases over the years PG&E has simply rejected such offers stating that
their system
is not for sale. PG&E has spent millions fighting, litigating and investing
considerable
sums in public petitions, advertising and political contributions to
successfully deter such
attempts. The City of Rocklin, should it decide to proceed with the formation of
a
municipal utility, can expect that PG&E may vigorously oppose such acquisition.
It may
include claims that PG&E is basically the only viable option based upon their
assumptions
regarding power cost; operations, maintenance, administrative, general expenses;
public
benefits programs; in-lieu tax payments; exit fees, and future capital
investments.
Importantly, PG&E may assert that any alternative will put customers at risk in
receiving
this essential service.
An excellent example of one of several acquisitions that PG&E has been fighting
since
2005 is the South San Joaquin Irrigation District (SSJID). In 2006 SSJID offered
PG&E
$ 79.6 million for its system within the SSJID service area. In September 2019
SSJID
raised their offer to $116 million. PG&E has steadfastly stated that its system
is not for
sale and claimed before the San Joaquin LAFCo that its system was worth $426
million.
This significant disparity in value can be expected, not just between a buyer
and seller, but
in this case by PG&E fundamentally trying to hold onto its asset base and
business model.
In response to PG&E’s unwillingness to negotiate, some communities have looked
to more
drastic measures to force PG&E to sell through condemnation. In 2009 SSJID
requested
that the San Joaquin County Local Agency Formation Commission (San Joaquin LAFCo)
approve its plan to provide retail electric service through eminent domain.
After five years
the San Joaquin LAFCo approved SSJID’s plan to move forward with acquisition
attempts.
To this day, PG&E has kept the implementation tied up in ongoing legal
proceedings, even
with San Joaquin LAFCo’s approval of the plan. SSJID reports that it has spent
$27.7
million to date pursuing this acquisition, including $4.2 million for
consultants, and $18.5
million for legal support. SSJID has been able to fund these costs without
impacting rate
revenue from their water customers by using revenues generated from
hydroelectric power
generation and water transfer revenues, but the financial and administrative
cost is very
substantial. 2
2 ssjid.com/district.services/electric-services/opinion-editorial-retcit-electric.worth-the-cost/
7
This example is included to provide Rocklin with actual context around PG&E’s
reaction
to an attempted municipalization. It can be argued that PG&E is concerned that
if just one
of these municipal efforts succeeds it will lead to a domino effect across their
entire system.
Given their recent bankruptcy, PG&E’s apprehension in regard to breaking up
their assets
is likely only heightened. It is further worth noting that notwithstanding the
tremendous
financial and political pressure caused by PG&E’s actions and inactions – not
the least of
which is the admitted loss of life – they continue to protect their core
business model, and
there is no reason to believe that this approach will change over the immediate
future.
3.1.2 Ongoing Operating Cost including Renewals and Replacements
Operating and maintaining an electric utility is an expensive and complicated
activity. This
is not likely an activity that the City alone could effectively construct from
the ground up.
If the City were to proceed with the acquisition of PG&E assets it would likely
need to
obtain expertise from another provider to operate and maintain the system.
Logically, a
local or nearby provider with such experience, such as Roseville Electric or
SMUD, may
be best qualified to provide operational support and the core expertise
necessary to run this
highly specialized service. While logical from an operational perspective, the
City would
also need to recognize that the relative appetite to do so may be governed by
their own
policy and business decisions. SMUD in particular, after PG&E’s highly political
opposition to a prior Yolo annexation move, may not entertain the idea.
Alternatively, a
private provider such as an out of state provider could be another option worth
considering
filling in the skills, requirements and expertise necessary.
Beyond the complexity of finding or augmenting the operational skills necessary,
the cost
of operating the utility is not insignificant. The annual operating expenses
including
renewals and replacements, again based on per customer data obtained from
Roseville
Electric, is estimated to be approximately $88,100,000 per year.
3.1.3 Pros, Cons and Likelihood of Success of Stand-Alone Municipal Utility
• Pros:
o Self-rule and policy determination – Replace State regulation (CPUC) with
City Council jurisdiction.
o Local control and accountability – Local control is one of the greatest
benefits of this ownership model. The utility is accountable to local
ratepayers through elected officials who hear first-hand what their
constituents likes, and dislikes are.
o Potential reduction of PSPS in future – Although it might take time and be
costly to Rocklin since it would be a new operation, most municipal utilities
have greater control over disruptions of power service and reliability
standards. Roseville Electric and SMUD are good examples, having not
disrupted the provision of power when the power was turned off in Rocklin.
It also should be noted that Roseville Electric and SMUD’s reliability is
higher than PG&E’s.
8
• Cons:
o Cost – Rocklin may lack the financial resources that other larger
organizations such as San Francisco and SSJID have to fund such efforts
without having a negative impact on the City’s budget.
o Time and impediments to implementation – As identified above, the
barriers to entry are considerable as are the legal proceedings that are likely
to be employed
• Likelihood of success – Given PG&E’s decades of success in fighting off such
efforts it would appear to be highly unlikely that a community the size of
Rocklin
could pull off what much larger organizations have been unable to achieve.
3.1.4 Implementation Outline and Timeline
As provided in the SSJID example this option could take many years to implement,
and
realistically may not be achieved at any cost. Major steps for implementation
include:
• Detailed Feasibility Study, including appraisal
• Offer to PG&E
• Placer LAFCo process
• Eminent Domain process
• Severance from PG&E
• Operational Set-Up
3.2 FORM JOINT UTILITY DISTRICT TO SERVE EXISTING ROCKLIN AND
LINCOLN ELECTRIC SERVICE
Since the City of Lincoln has also expressed an interest in evaluating their
electric service
options, also being studied by MBMC, it is possible for the cities to combine
their efforts
and form a joint utility district to serve both cities and/or pursue some sort
of joint strategy
for energy independence. This section of the report provides the same
information as
previously presented using the same methodology but adding in the City of
Lincoln to the
analysis.
3.2.1 Acquisition Cost
Using the same methodology described above, a joint acquisition of PG&E
facilities in the
cities would amount to approximately $111 million to $335 million based on other
such
offers and Roseville Electric’s investments in their system. It is likely that
PG&E would
claim that the value is between $600 million to $700 million and that they have
no intention
to sell any of their assets.
3.2.2 Ongoing Operating Cost including Renewals and Replacements
Again, based on Roseville data, MBMC estimates that the combined Rocklin/Lincoln
annual operating and replacement cost would be approximately $153.6 million per
year.
9
3.2.3 Pros, Cons and Likelihood Success of Joint Utility District
The pros and cons of a Joint Utility District are similar to those identified in
the stand-alone
municipal utility analysis in the previous section of the report. With this
consideration, it
would differ in this sense:
• Pros
o Shared resources with Lincoln provide economies of scale and some sharing
of risk.
• Cons
o Less control than stand-alone municipal utility, but more than with current
provider.
o More difficult and costly to separate from PG&E given larger footprint.
3.2.4 Implementation Outline and Timeline
The steps and timeline of this option is basically the same as described in the
previous
section. This option may be a little more complicated as it involves two cities
rather than
one, however, it would likely be less costly to the City sine there are
economies of scale.
The impediments would be no less formidable.
o Detailed Feasibility Study, including appraisal
o Offer to PG&E
o Placer LAFCo process
o Eminent Domain process
o Severance from PG&E
o Operational Set-Up
3.3 FORM JOINT UTILITY DISTRICT WITH LINCOLN AND ROSEVILLE
FOR NEW DEVELOPMENT
Rocklin’s limited new development opportunity is located on the north-eastern
side of the
City. The new developments on the eastern edge of Rocklin and Lincoln would not
be
good candidates due to their distance from Roseville. New developments in those
areas
would need to be served by PG&E as a matter of practicality. Conversely, the
City of
Lincoln has significant new development plans, much of which is within
relatively close
proximity to Roseville.
The Rocklin, Lincoln and Roseville Spheres of Influence are provided in
Attachment 1.
Having Roseville Electric serve the new developments on the west side of Lincoln
may be
an option that will improve service and reliability from what currently exists
with PG&E
within the existing city limits. Unfortunately, this opportunity does not appear
to be
feasible for Rocklin.
10
3.4 ADVOCATE FOR LARGER CONSUMER OWNED ENTERPRISE
Another option is to look for broader based solutions that may involve other
municipalities
beyond the local communities surrounding the City. Last year, more than 20 city
and
county governments lead by San Jose advocated for the formation of a statewide
electric
cooperative to become the successor agency though the PG&E bankruptcy.
Practically,
this idea may likely be the best model for replacing PG&E as the northern state
electric
service provider since it was unlikely that the state would allow PG&E to be
split into
numerous smaller pieces. Splitting off large numbers of urban customers would
leave
rural service areas without an adequate base of revenues to cover the cost of
providing safe
and reliable electric service, particularly given PG&E’s neglect in maintaining
their largely
rural service area. Given that PG&E has managed to emerge from bankruptcy this
option
is no longer viable, at least for the time being.
New legislation has just passed the legislature and is on the governor’s desk
that would
create a public benefit corporation that could take over PG&E if it fails to
emerge from
bankruptcy by September 30, 2020 or fails to meet safety obligations in the
future.3
Given all of PG&E’s problems that have been exposed in recent years it is
entirely possible
that the utility could fail once again. There are a number of risks in addition
to wildfires
that could cause this to happen. PG&E will likely be on probation for criminal
violations
for years to come and promises made to reform could be culturally difficult to
deliver as
the organization has repeatedly failed to deliver on promises of improvement.
Whatever
goodwill the organization had is lost and customer patience for reform could
well expire
before the organization can correct all of its deficiencies. The public benefit
corporation
option could well re-emerge again at some point in the future.
3.4.1 Pros, Cons and Likelihood of Success of Advocating for Consumer Owned
Enterprise
• Pros:
o Removes source of problems – PG&E
o Provides for public ownership – Greater public participation and
accountability, albeit not nearly as responsive as local ownership
• Cons:
o Would require further failures by PG&E
o Could take years to harden PG&E’s facilities serving Rocklin
• Likelihood of success – This option is something of a long shot given that
PG&E
appears likely to reemerge from bankruptcy
3 Senate Bill (SB) 350
11
3.4.2 Implementation Outline and Timeline
It is not possible to identify today as this is not currently a viable option.
The feasibility
and timeline would need to be determined if and when an opportunity exists.
3.5 INFLUENCE INCUMBENT SERVICE PROVIDERS WITH REGARD TO
LOCAL CONCERNS
Another option is for the City to open up a dialogue with PG&E to see if any
local concerns
could be addressed and/or improvements made. The objective would be to work in
partnership as opposed to an environment of political and potentially legal
confrontation.
The success of this approach is likely the hardest to handicap, but at the same
time, the
ability to determine if this alternative can be meaningfully fruitful may be
easiest to
ascertain in a shorter timeframe. PG&E has recently proposed for the
authorization of the
CPUC to be reimbursed for the cost recovery of several programs to help address
grid
outage events. PG&E proposes to deploy a Distributed Generation Enabled
Microgrid
Services (DGEMS) program at PG&E substations4. The components of this proposal
include the following:
• Make-Ready Program – This program would enable prioritized substations to
operate in islanded mode when the transmission line serving the substation is
de-
energized.
• Temporary Generation Program – This program would deploy temporary
mobile generation to critical facilities such as hospitals, water, wastewater
treatment facilities, and transportation.
• Community Microgrid Enablement Program (CMEP) – CMEP proposes to
provide technical and financial support for community requested microgrids for
PSPS mitigation purposes.
The City could attempt to work proactively with PG&E to adopt such programs
locally to
help alleviate the impacts of future PSPS and improve reliability for critical
services such
as hospitals, water, wastewater treatment facilities, and transportation.
On June 4, 2020, a coalition of 11 Community Choice Aggregators, not including
PCE,
issued a Request For Information to collect information that may ultimately be
used to
further explore opportunities for locally located long-duration storage projects
that would
simultaneously assist the state in reduction of greenhouse gases and provide a
minimum of
eight hours storage to help the CCA meet Resource Adequacy requirements5. Such a
program could potentially mitigate the effects of PSPS’s, particularly if other
efforts to
decrease the duration of such events are successful. The City could attempt to
work
4 CPUC Order Instituting Rulemaking Regarding Microgrids Pursuant to Senate Bill
1339 and Resiliency Strategies,
Rulemaking 19-09-009, June 11, 2020.
5 https://www.utilitydive.com/news/california-ccas-solicit-info-on-long-duration-storage-with-
possible-procur/579505/
12
proactively with PCE to locate long-duration storage projects within the City
that may help
mitigate the impacts of future PSPS events.
The unsustainable commercial economic and residential lifestyle consequences of
PSPS
are likely to result in additional programs and grants to attempt to reduce the
number and
duration of future outages. It can be argued that PG&E has greater challenges
than SDG&E
and SCE with regard to wildfire safety and overall system resilience, and as a
result, it may
be likely that significant resources will be dedicated to northern California.
If the City was successful in engaging PG&E and new programs or resources were
made
available locally or regionally, it may be possible for Rocklin to help ensure
that critical
services such as police, fire, water and wastewater, hospitals and schools
retain service
during PSPS events at little or no cost to the City. Certainly, the relative
cost would be
much less than some of the more complex and fulsome alternatives associated with
running
a utility directly or indirectly, but the City would also need to decide if the
outcome of any
such dialogue meaningfully helped energy independence and the provision of
critical
essential services for the community.
3.5.1 Pros, Cons and Likelihood of Success of Influencing Incumbent Service
Providers with regard to local concerns
• Pros:
o Could provide for alternative solutions
• Cons:
o Piecemeal approach
o Resources (Time and money to implement)
o May not be successful
• Likelihood of success – Given the range of alternatives available it is likely
that the
City could achieve at least some of these objectives through various sources;
however, the materiality of any such changes would only be known after further
dialogue.
3.5.2 Implementation Outline and Timeline
There is no timeline associated with this option as it would become an ongoing
process.
However, as this problem is prominent and currently has the attention of the
State. Time
is of the essence should Rocklin decide to pursue these options as
implementation is
moving swiftly. It is also worth noting that this alternative is not necessarily
independent
of other options and could be pursued simultaneously. The City may want to open
up this
dialogue to see what may or may not be feasible, especially given the cost and
complexity
of the other alternatives. In many ways, what PG&E can and will do in response
to the
City’s concerns may help crystalize the preferred alternative as a policy and
financial
matter for the City moving forward.
13
3.6 TAKING NO ACTION
All of the other options discussed herein come with some incremental financial
cost and
City resource requirements, some of them very substantial. The last option,
taking no
action, has no immediate financial cost or resource impacts on the City
government.
Depending upon public expectations, this might not be an issue. On the other
hand, public
expectations may dictate that the City at least attempt to improve upon the
current situation
in some demonstrated fashion even if the likelihood of success is limited or
low. The
reason is because taking no action is not costless. Interruptions in essential
service, lack
of reinvestment in safety and service, and lack of local control and
accountability all have
tangible costs to the City, its businesses and its residents. The question
becomes how
strongly the community recognizes and feels these costs and what the
corresponding
political will is to pursue greater energy independence.
4.0 SUMMARY AND RECOMMENDATIONS
There are multiple options available to the City, each one of which comes with
its own risks and
costs. MBMC has attempted to outline a range of considerations for different
alternatives in order
to allow Rocklin to make an informed decision as to how to proceed from this
point in time.
Ultimately such decisions are best made by locally elected leaders and policy
makers.
4.1 SUMMARY OF COSTS
A high-level estimate of the costs of each of the options identified is
contained in Table 3.
Acquisition costs represent what in MBMC’s opinion would be most reasonable. If
higher
than this range the economics of the feasibility would questionable. Set-up fees
represent
an approximation of the legal and consulting fees that would be necessary to
implement
the option.
Table 3
Summary of Costs
Option Acquisition Set Up Fees Annual Cost
Municipalization $62-$192 million $20 million $88.1 million
District – Existing Customers $111-$335 million $15 million $153.6 million
District – New Customers N/A N/A N/A
Consumer Owned Enterprise N/A N/A N/A
Work with Existing Providers N/A $100-$200 thousand N/A
Take No Action $0 $0 $0
4.2 SUMMARY RECOMMENDATIONS
Based upon MBMC’s experience in this sector with this subject matter the
following
recommendations for actions and recommendations for inaction are offered. As
stated at
the outset, ultimately this is a local decision reflecting local priorities and
values that
rightfully should be made by elected officials that know the community and its
risk appetite
14
best. There is no right or wrong answer, but there is the opportunity to refine
further the
City’s thinking in assessing and ultimately choosing a preferred alternative.
4.2.1 Recommendations for Proceeding:
o Open dialogue with PG&E to institute programs that will directly, tangibly and
measurably reduce the impacts of PSPS outages, provide for local essential
services, and increase the reliability of local service. Set a timeframe and
metrics
for measuring success.
o Open dialogue with PCE to review and evaluate the development of local
projects
that provide resources, local jobs and alternative power supply to reduce the
effects
of PSPS.
4.2.2 Recommendations for Not-Proceeding:
o Forming a Stand-Alone Municipal Utility. It is a very costly process that has
not
been proven to be successful in jurisdictions much larger and better equipped
financially than Rocklin.
o Form Joint Utility District with Lincoln. It has the same formidable hurdles
as the
Stand-Alone Municipal Utility.
o Open dialogue with Roseville to review the feasibility of teaming with
Roseville
Electric to provide service to new developments within Rocklin does not appear
to
be feasible.
o Taking no action. While certainly an option, business as usual is not a viable
strategy for the future. The electric landscape continues to evolve considerably
and
the PG&E’s current and past business and operational model for the provision of
electric service is not meeting the needs of local communities and their
residents.
Significant steps need to be taken and alternatives need to be systematically
evaluated and eliminated in order to boost customer service, reliability and
local
control.
MBMC appreciates and thanks the City of Rocklin for the opportunity to submit
this analysis.
Working with your City Manager and staff has been a pleasure. Appreciation is
also expressed
to Roseville Utility for providing information on their own costs which has
proven to be most
helpful in this analysis.
