A Deeper Look At Pioneer Community Energy

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By Website on December 29, 2017.

Barry Stigers, KAHI’s former News Director, now retired, contributes a weekly commentary to KAHI called ‘Focus.’ Barry has been working with KAHI News investigating the Pioneer Community Energy switch-over. The following is a transcript of his most recent investigative report that was aired on KAHI Thursday December 28th:

Three weeks ago we opened a dialogue about a new program in Placer County called PIONEER. The reason for discussion was in response from listeners and contributors to our program asking questions sparked by a letter they had received in the mail from the program, informing them that a new program was being opened in January that would provide electricity to county residents, at a cheaper rate than now being offered by the Investor Owned Public Utility PG&E. There were lots of questions: Who was Pioneer, where did they come from, why were we being moved from PG&E without permission, how would rate increases be handled in the future, etc. KAHI NEWS started asking officials that were involved, and released a story last week, which we read here on Focus, that started to answer some of these questions. This past week, I have spent a fair amount of time reading various documents, talking with people involved with the program and others, and I believe we have more answers. The first attempt I made was to try and understand some of the words being used in the documents. I first researched “Pioneer Community Energy” then the statement Community Choice Aggregation referred to as (CCA). Aggregation came first and was explained as a “formation of a number of things into a cluster”. This explains the combining the County of Placer and the Cities of Auburn, Rocklin, Lincoln, Loomis and Colfax into one cluster and calling it PIONEER. More on the name Pioneer later.

Then came “Public Agency” defined as an organization responsible for oversight and administration of specific functions. Further explanation is that a Public Agency is used as a way government functions day to day, and there are many agencies at all levels of Government. Comes to mind, Federal Communications Commission, Cal Trans, Fish and Game, etc. We moved on to try and understand PIONEER and its function here in Placer County. We now understand we have a “Cluster” of local Governments, each passing ordinances under process and adhering to the Brown Act, creating a public agency, an organization responsible for the oversight and administration of our power systems called Pioneer.

Next I looked at the history of this process. The state of California created an Assembly Bill 117, approved by Gov. Gray Davis on September 24, 2002, that established an act amending the Public Utilities code which defined and placed code changes allowing the formation of a “Community Choice aggregation (Cluster) to be formed. It also allowed an aggregation to be formed by a City, a County, or a City and a County, to purchase power directly from generators of power, and resale it to customers. In California, power generators are not permitted to make a profit and must sell to all resellers at cost. Generators of electricity take many forms such as Hydro (several hydro plants in Placer County owned by Placer County Water Agency) Bio-mass plant in Lincoln, SMUD, and SOLAR, etc. AB 117 also gave these “Government Clusters” the right to automatically move current power customers in their jurisdiction, over to the new entity automatically, known here as Pioneer, with an Opt-out process to be exercised by the customer within a specific timeframe with no penalties. If a customer opts-out of PG&E to Pioneer and later on wants to return to PG&E, there could be a switch over fee charged by PG&E. If a customer stays with PG&E and later on wants to switch to Pioneer there would not be any fee charged by Pioneer, at least in the early stages of the new entity. This could change however if the Pioneer board were to enact such as charge.

Next I looked at the history of Pioneer, and here is what I discovered! Placer County started to investigate this concept in the spring of 2015 almost 3 years ago. It was discovered that an entity existed and was called the Sierra Valley Energy Authority which was between the city of Colfax and Placer County. This authority was established with a board of directors and on July 17, 2017, just 5 months ago, this board changed the name to allow the community choice aggregation to include the Cities of Auburn, Rocklin, Loomis, and Lincoln in addition to Colfax. The new name was Pioneer Community Energy. The new organization structure included a board made up of two placer county supervisors, and one elected council member of each of the cities that participate. The Board then elected a Chair Person and a Co-chair person. Board members and the temporary Executive Director are not compensated by Pioneer but are serving as elected representatives and receive a salary from their assigned positions as elected. In other words, they serve Pioneer as an added responsibility for the current period of implementing this program with no additional salary.

The Pioneer board will hire an Executive Director who will hire an administrative staff or hire consultants or sub contractors for the start up period which starts in January. The administrative staff is listed as Governmental Council, and other personnel to support regulatory procurement, finances and communications. It is stated in the plan that expectation is the equivalent of five full time positions that will be filled during the start up period. A full time equivalent employee is an employee that works an average of 30 hours a week for more than 120 days per year. Staff will be at the discretion of the Executive Director with approval of the board as the customer base expands, and as additional services are added, like customer service centers, billing and Collections services, personnel hiring plus administration and administrative needs as the Pioneer organization takes over its duties to administer the power process to customers throughout the county. A staff member at the Treasurer’s office told me yesterday that the employees will not be on the Placer County payroll but on a payroll that is administered by Pioneer. Also these employees will not have access to PERS which is available to County employees.

Financing the startup has been set at 40 million dollars, and the county has approved the sale of bonds for this purpose. The County Treasurer will execute these sales of bonds to finance this move. Under the plan, a revolving credit line will be established for 10 million dollars for operating expenses and early on capitol needs like desks and telephones; then an additional 30 million dollars line of credit will be established to support capital expenditures and support collateral and power purchases. The county has allocated 1.4 million dollars to Pioneer which will be paid back when Pioneer issues debt mechanisms to establish debt. In other words no risk to the county as long as the Pioneer administration can secure their lines of credit.

The other financial information learned is: receipts of power monthly charges from Placer County Residents will start coming into the county to Pioneer 30 to 60 days after the program begins because of PG&E’s billing cycles. Your bills will still be printed and issued by the PG&E Utility and your payments will also be paid to the Utility because Pioneer will technically outsource this function, at least in the early stages. Your bill, however, will have Pioneer on it rather than PG&E.

The revenue generated into this new Pioneer program is based on 84 thousand customers in Placer County which will be switched over to the Pioneer process at a rate of 2,800 per day for the first month. This includes small, medium, and large customers, agricultural pumping, street lights and local government facilities like schools, plus regular residential customers.

The financial chart shown in the plan has for the first year seventy-five million dollars in revenue from the sale of power. Simple math, that is 890 dollars per customer, based on the 84 thousand customers expected. Monthly that would be 75 dollars per customer. For operating expense, the chart lists 66 million dollars, which includes 3.3 million for salaries and professional services and 57.5 million for cost of energy. The net reserves to Pioneer for the first year would be just under 8.6 million dollars. The chart further details how the cash reserves and financing will work to roll over into 2019 and forecasts finance activity until 2027. You can see all this detail on the actual plan which is available on FACEBOOK PIONEER COMMUNITY ENERGY PROGRAM IMPLEMENTATION PLAN Chapter 7-Financial Plan, July 2017. The FOCUS on Pioneer will continue. I have talked with staff at the county and they have agreed to be interviewed and will also make available persons involved with this startup to give us access to any questions we have concerning the Pioneer process. In addition to examining the entire program, we will do a segment on how the solar program that is now under PIONEER will work. Staff told me that all current programs that are in place with solar customers will be kept in place. We will also review the mPOWER program that is now a part of the PIONEER program. This program finances improvement projects that help property owners reduce utility bills and save money. mPOWER, which stands for Money for Property Owner Water and Energy efficiency Retrofitting, can finance energy efficiency improvements, water conservation, and energy generation systems such as solar, to qualified property owners, with no upfront costs. FOCUS will continue to review this program on later broadcasts. Special thanks to Alex Retallack at the Placer County Treasurers office for contributing to this report.

Barry Stigers and FOCUS is broadcast on KAHI, AM 950 and soon FM 104.5 each Thursday at 8:45 AM and 4:30 PM. Barry also broadcasts FOCUS on Facebook each week following the KAHI Broadcasts.