Pg&e Spending Big to Protect Its Monopoly Against Municipal Aggregation

Michael Giberson

For a number of years, state law in California has permitted cities or counties to arrange to become the electric power service provider for their areas – an arrangement where they would be responsible for acquiring the electric energy needed for consumers in their areas while the local utility would continue to operate the transmission and distribution.  (Consumer in the affected areas are allowed to opt-out, and stay with the private utility.) Only in the past few years have a few local government taken the “community choice aggregator”  idea seriously, and so only recently have the state’s privately-owned utilities worried much about the prospect of losing customer base.

San Francisco-based PG&E has initiated an effort to change the law so that local governments would need a two-thirds majority favorable vote from citizens in their communities in order to become a community choice aggregator.  Advocates of the local government-centered efforts worry that a two-thirds requirement will be insurmountable.  Details of the story are available at the Mercury News.  The state’s Legislative Analyst’s Office supplies a description.

Hat Tip for the link goes to Tom Fowler, NewsWatch: Energy, but he misleadingly styles the story as “California utilities spending big to block electric competition.”  For one, just a single utility – PG&E – seems to be involved. The state’s other investor-owned utilities appear not to be participating in the effort.  And the effort isn’t so much an attempt to “block electric competition” as it is an attempt by one monopolist to block other potential monopolists from horning in on its action.

Of course there has long been competition between private utilities and municipalities in the electric industry. According to Forrest McDonald’s biography of Samuel Insull, one reason Insull became an advocate of state-regulated private monopoly utilities in the late 1890s was as an effort to avoid municipalization of his companies.  Historically, municipalities were motivated by a hope of lower rates (at least that was usually the story for public consumption).  In the case of at least of few of the local governments exploring becoming an aggregator now, however, the announced motivation is to purchase a larger amount of renewable power, even though it can be more expensive.

As an aside: In parts of Texas with significant amounts of real retail electric competition, consumers can already choose the amount of their power that comes from renewable sources, with multiple companies offering contracts ranging all the way from 0 to 100 percent renewable energy content.