Tom Butt is a Richmond City Councilmember.

California Proposition 16 is an effort by California’s largest utility company to thwart Community Choice Aggregation (CCA), as defined by AB 117, which permits any city, county or city and county to aggregate the electric loads of residents, businesses and municipal facilities to facilitate the purchase and sale of electrical energy.

Prior to AB 117, individual customer participation in electric load aggregation programs required their positive written declaration indicating their choice to participate (opt-in programs).

In contrast, CCA under AB 117 provides for aggregating customer loads within city or county boundaries, but each customer is given an opportunity to leave their community’s aggregation program and thereby continue to be served by the incumbent distribution utility (opt-out program).

If a customer makes no negative declaration, that customer is served through the CCA program. This is a major departure from previous aggregation structures as it frees the aggregator from the need to market the program and ensures wide-scale customer participation.

Cities and counties have typically pursued CCA for one or both of two reasons: to increase the proportion of green energy purchased or to save money.

If Proposition 16 is approved by voters, it will take a two-thirds vote of the electorate before a public agency could participate in CCA. . This will make it more difficult than it is currently for local entities to form either municipal utilities, or community wide clean electricity districts called Community Choice Aggregators (CCAs).

Forming a local municipal utility or a CCA, if this measure is enacted, will require the approval, through election, of 2/3rds of the voters who live in the area of the would-be local municipal utility or CCA.

Pacific Gas & Electric is the primary financial sponsor of the initiative, having contributed $28.5 million through March 26, 2010. That makes PG&E the Goliath in a David-v-Goliath battle, since Prop 16’s opponents have raised $40,000 through late March.

The proposed constitutional amendment would require a two-thirds majority vote of local voters before a local government could:

  • Establish a Community Choice Aggregation (CCA) program.
  • Use public funding to implement a plan to become a CCA provider
  • Expand electric service to new territory or new customers.

The CCA program, established in 2002, allows local governments to purchase blocks of power to sell to residents, and to construct municipal electricity generation facilities, which means that cities and counties can become competitors to private utilities. It’s only endorsers are either fronts for utilities or paid consultants:

  • California Taxpayers Association
  • California Chamber of Commerce
  • The Oakland Jobs and Housing Coalition
  • Willie Brown, former San Francisco Mayor

Opponents, however, abound. Nine California state senators sent a letter to PG&E President Peter Darbee in which they said that they believe Proposition 16 is “misguided as a matter of public policy.” The letter was signed by senators Darrell Steinberg, Mark Leno, Jenny Oropeza, Lois Wolk, Christine Kehoe, Alan Lowenthal, Gilbert Cedillo and Dean Florez. The Palo Alto City Council voted by 9-0 in early February to pass a resolution against Proposition 16. The city is worried that if Proposition 16 passes, it might make it harder for the city to buy new non-renewable production or transmission facilities outside its borders. The Modesto Irrigation District voted 5-0 to oppose Proposition 16.

There are scores of public utilities in California – the California Municipal Utilities Association represents about 70 of them – that are owned and operated by local governments. Often, they confronted opposition from the major utilities when they were created. “There are really two models on customer retention,” said Mark Toney of TURN (Toward Utility rate Normalization). “For any company, the first model is that you maintain customers by offering them the best service with the lowest prices and good customer care.

That’s the preferred method.

The other method is customer retention through captivity by locking in higher rates and buying a constitutional amendment. That’s PG&E’s method.” The creation of local utility districts draws ratepayers from PG&E’s base, thus cutting into the utility’s revenue over time.

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Tom Butt
Richmond City Councilmember