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Green Scheme 

The city's master plan for cleaner energy is fraught with risk. And, like it or not, you're already signed up.

Wednesday, Jan 14 2009
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When the Board of Supervisors formally adopted CCA as the city's energy policy in 2007, these activists got their wish: San Francisco would, at last, become the laboratory for a radical new energy scheme. Fenn calls it "the largest green-power project in the world."

Customers themselves might be reluctant to participate in this experiment — but under state law, their opinion no longer matters as much. That's because CleanPowerSF, the better to achieve its lofty ends, strikes a Faustian bargain in the territory of consumer rights. The most significant aspect of the 2002 Community Choice law was to authorize local governments to enroll their residents in CCA without asking them beforehand. Call it Community Choice — minus the choice.


A generally accepted principle of contemporary economic theory holds, in essence, that people are lazy and fearful of change. As part of the research that led to his 2002 Nobel Prize in economics, psychologist Daniel Kahneman documented consumers' tendency, through sheer inertia, to remain with their default providers of goods and services. (Kahneman's larger subject was the irrationality of people's financial choices.) "The literature is fairly robust on this: A large number of the people don't switch," said David Gamage, an expert in consumer issues and assistant law professor at UC Berkeley's Boalt Hall School of Law.

This universal human tendency has a lot to do with the design of CCA. Prior to the 2002 law, California customers were free to drop their accounts with big utilities like PG&E and switch to alternative power providers. But very few did so.

CCA turns the equation on its head. The burden is on individual power users to put a stop to the city's overhaul of their service; silence signals consent. Customers are not, strictly speaking, forced to buy into the program. They are allowed to opt out and remain with their previous power provider — which, in the case of San Francisco, is PG&E — and state law requires that adequate notice be provided of their right to do so. Nevertheless, Gamage says, such scenarios have a predictable result: "Whatever the default option is becomes the default."

Supervisor Sean Elsbernd, who opposes CleanPowerSF, is skeptical of the mechanism through which San Franciscans will be allowed to "choose" their energy providers. "Power users all over the city are going to be sent a little card that says, 'You're in CCA unless you fill this out and send it back,'" he said. "Well, if you're anything like me, that card goes straight to the recycling bin. I think the supporters of CCA realize that they need to dupe people. They need people to throw those cards away so they have a customer base."

The threat posed by Community Choice to unwitting residents was the central point of a San Francisco city controller's report, little noticed at the time of its May 2007 publication, that assessed CleanPowerSF's potential economic impacts. The 16-page report sketched a bleak outlook. Analysts found that residential power rates would be 24 percent higher under CCA than under PG&E, and concluded that meeting the plan's dual goals of 51 percent renewable-energy use and "meeting or beating" PG&E rates was "unlikely."

Ted Egan, chief economist in the controller's office, noted dryly that CleanPowerSF is required to meet or beat PG&E rates for only the first 60 days of service. After that, it must "intend" to offer competitive rates. "It's certainly not much of a value to the customer to only have 60 days of guaranteed rates," he told SF Weekly. In a rather suspicious coincidence, the meet-or-beat mandate expires at the same time customers' free opt-out period does; if they want to leave after that, they must pay a fine of an as-yet-undetermined amount. "It's going to be an issue," he said. "People could feel like, 'Well, my rates were the same as PG&E's during the opt-out period, and after the opt-out period they went through the roof.'"

The controller's office also warned that the financial burdens of implementing the plan's ambitious renewable energy goals could fall most heavily on the city's poorest residents. The report forecasts a situation in which more-savvy energy users, such as affluent homeowners and large businesses, opt out of CleanPowerSF because of its higher rates, leaving the cost of the program to be borne disproportionately by the poor — who, according to the controller's office, as a group pay less attention to the details of their energy bills.

This "double impact," as the report called it — poorer ratepayers devoting larger portions of their income toward the ideological prize of a green city — could be especially severe if CleanPowerSF fails to enroll large industrial and commercial customers (for example, proprietors of the big office buildings clustered in the Financial District). This is not a far-fetched scenario. A summer 2007 survey of 111 S.F. business executives by the city's Chamber of Commerce found that 74 percent would prefer PG&E to the City and County of San Francisco as an energy provider. If the fate of Proposition H is any indication, that sentiment is mirrored, albeit on a less dramatic scale, among the city's voters.

Barbara Hale, the senior San Francisco Public Utilities Commission staffer who for years has been the commission's point person on CleanPowerSF, said the answer to such concerns lies in a diligent public-information campaign, including not only direct mail to customers but also advertisements such as billboards and bus panels. "As a public entity, we certainly don't want any 'gotchas,'" she said.

The SFPUC has already produced a brochure for CleanPowerSF that will be circulated among neighborhood associations in the coming months. At the request of Supervisor Chris Daly, who until a few weeks ago sat on LAFCo, the pamphlet is an eerily vibrant green. "Make the green more green," he insisted at the September meeting where the first draft of the brochure was reviewed.

About The Author

Peter Jamison

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