Marin energy aggregator weighs rate hike

Citing rising energy prices, MCE might raise its rates effective July 1.

MCE, the San Rafael-based energy aggregator formerly known as Marin Clean Energy, announced last week that its executive committee approved the rate hike at a May 3 meeting. MCE’s full board will vote on the proposal next month.

The proposed rate hike would result in an average total bill increase across all rate classes/customer types of 6.6% and a 0.3% discount compared with Pacific Gas and Electric costs. For residential customers the total bill impact is estimated to be 6.7%.

“The bottom line that will be true for all customer classes at the end of the day is they will all be just below PG&E’s costs,” said MCE’s chief executive Dawn Weisz.

A typical residential MCE customer pays an average of $104.07 per month, compared with an average PG&E residential customer who is paying $109.07 per month.

Weisz said rising energy costs are the primary reason MCE is considering raising rates.

“We’ve been on an upward trajectory now for the last nine months or so,” Weisz said. “We see that reflected in PG&E’s rates. They’ve had two rate changes already this year. They’re expecting another one on July 1.”

PG&E’s most recent rate increase was implemented on May 1, increasing its average customers’ bill by $2.77 per month. PG&E has two more rate hike requests pending with the California Public Utilities Commission that combined would boost a typical residential customer’s bill by more than $22 per month starting as early as 2020. One of the rate hike requests is to help pay for upgrading technology and electric and gas infrastructure, the other is to enhance wildfire safety and make the company more attractive to investors as it goes through bankruptcy.

“Over the next several years, PG&E plans to make important additional safety investments to enhance gas and electric safety and reliability, while addressing the risks of California’s year-round wildfire season,” said PG&E spokeswoman Kristi Jourdan.

Mindy Spatt, a spokeswoman for the Utility Reform Network in San Francisco, said, “If PG&E gets its way all customers — including community choice aggregation customers, who still pay PG&E’s distribution and transmission rates — will see drastic increases in their monthly bills.”

“We don’t trust that PG&E is spending the money we’re already paying for tree-trimming and other safety measures cost-effectively or that PG&E is being held accountable for its many failures,” Spatt wrote.

Weisz said the type of energy for which prices are rising the fastest is natural gas.

“Because the state is phasing out natural gas and a lot of solar is now on the grid, it is changing the pricing dynamics and making things a bit more expensive,” she said. “The good news is that California is moving in the right direction as far as its environmental goals, but it is causing some constraints in the market.”

While fewer natural gas power plants and other 24-hour-a-day energy producers, such as coal-fired and nuclear power plants, are being built, the electricity they produce remains critical to fill in when the sun isn’t shining and the wind is blowing.

“One area where we’ve seen very big cost increases is for a product called resource adequacy,” Weisz said. “Resource adequacy is what all retail load serving entities have to buy in order to maintain grid stability.”

After the California electricity crisis of 2000-01, which resulted in rolling blackouts, the Legislature enacted a law mandating that all retailers of electricity, such as PG&E and MCE, purchase sufficient energy resources to meet their share of the state electrical grid’s peak demand at all times. That includes during evening hours when solar generation is winding down.

“It basically requires that we buy 15% extra energy and have it be available at all times,” Weisz said. “It allows the California Independent System Operator (who operates the state electrical grid) to call on those resources if needed.”

“This product, resource adequacy, has become more difficult to procure in the market,” she said. “There have been some shortages of that product; that has driven up prices.”

In a January blog posting, Mark Specht, an energy analyst for the Union of Concerned Scientists, wrote, “California’s resource adequacy requirements present a sizable challenge in the transition to a cleaner electricity system. These requirements are one of the reasons why California is slow to retire more natural gas power plants.”

Specht added that a recent Union of Concerned Scientists analysis “found that strategically putting batteries in the right places on the California grid could allow many more natural gas power plants to be retired.”

Weisz said a related factor in MCE’s decision to raise rates is the fact that the solar energy it has contracted for is worth less in the market now because there is so much more solar being used in the state.

MCE says 60 percent of its energy comes from renewable sources, while PG&E says 33 percent of its energy comes from renewable sources.

Weisz said another reason for raising rates is that MCE wants to boost revenue so it can increase its reserves.

“It is standard for local government power agencies to have four to six months of cash on hand to protect against volatility,” Weisz said. “We do not yet have four to six months of cash on hand but we are hoping that by next year we will have achieved that.”

MCE estimates it will have more than $80 million in reserves at the end of the 2018-19 fiscal year.

MCE provides electricity service to approximately 470,000 customer accounts and more than 1 million residents and businesses in 34 member communities across four Bay Area counties: Napa, Marin, Contra Costa, and Solano. Less than 14 percent of its potential market has taken the initiative of opting out to remain with PG&E.

MCE serves Marin County and all of the cities and towns within it, Napa County and all of the cities and towns within it, unincorporated Contra Costa County, unincorporated Solano County, and the cities and towns of Benicia, Concord, Danville, El Cerrito, Lafayette, Martinez, Moraga, Oakley, Pinole, Pittsburg, Richmond, San Pablo, San Ramon and Walnut Creek.