News Article

December 31, 2006
New power authority set to buy electricity for Valley
By Marc Benjamin / The Fresno Bee

A new Valley-based power authority will begin buying electricity next year that could end up going to more than 300,000 Valley customers.

Customers may see a 5% savings on a portion of their electric bills when the San Joaquin Valley Power Authority starts its purchases. The authority meets for the first time next month.

The authority will buy power through the Kings River Conservation District. It expects to pay less than investor-owned utilities and will pass on the savings to residential and business customers. Because it's a public agency, the conservation district has no profit motive, said David Orth, the district's general manager.

The ability for local organizations to band together to buy power and build generation plants is possible under a state program known as Community Choice.

The authority will cover 307,000 home and business customers. The Valley group consists of the city of Fresno, Kings County, Clovis, Hanford, Lemoore, Corcoran, Dinuba, Reedley, Sanger, Selma, Kerman, Parlier and Kingsburg. Tulare County supervisors also recently approved joining and may be the authority's 14th member. Tulare County could add more than 40,000 customers.

The district will be the first group statewide to file a plan with the California Public Utilities Commission and form a power authority, said Susan Carothers, a CPUC spokeswoman.

In three years, the district plans to build a 500-megawatt, natural gas-fired cogeneration plant in Parlier where it can generate power. A megawatt serves 1,000 homes with electricity.

Power generation makes up 35% of an electric bill. An average homeowner with a $200 monthly electric bill will save about $3.50 a month, Orth said.

Electric transmission and distribution will remain the responsibility of Pacific Gas & Electric Co. and Southern California Edison. The district will buy electricity from suppliers, which will be sent through the investor-owned utilities' transmission and distribution lines. The only change an electric utility user will see is in price and a separate line on the bill showing a generation price charged by the district.

Home or business owners who don't want to be in the program can opt out and stay on as generation customers of utilities.

Next month, the newly formed San Joaquin Valley Power Authority will begin meeting, and by summer the agency should be buying electricity, Orth said.

By summer 2008, local governments, business, industrial and residential customers will be enrolled unless they opt out. By 2010, the $650million cogeneration plant is expected to begin providing power, Orth said.

Lower costs are expected because the district, as a government agency, has access to low-interest financing, does not pay taxes and does not need to earn profits for stockholders, he said.

The conservation district already is in the energy business, operating a 97-megawatt natural gas-fired plant near Malaga. The plant runs when energy demand peaks — the Valley's warmest days. It began operating in 2005. The district has run a hydroelectric plant at Pine Flat Lake for 22 years.

Savings for power authority customers are estimated to be $780million between 2007 and 2025, according to a study done for the conservation district.

Equally important to discounts is the added electricity reliability supplied by a local agency, Orth said. For Valley communities, power generation often comes from other parts of California and the western United States.

The district's study, by Navigant Consulting of Rancho Cordova, points to PG&E documents showing the utility is having difficulty meeting the growing power needs in the Valley. The study suggests a local program may be better than one originating from a utility's corporate offices.

The authority's board will be made up of representatives from each participating community. The board will decide the types of electricity generation it wants, such as wind, geothermal or biomass.

Electricity savings for the city of Fresno, nearly 57% of the authority's power load, are expected to be about $600,000 annually, said Rene Ramirez, the city's director of public utilities.

He said the city's savings will come from such things as water-well pumping costs, lighting and other basic electrical usage.

"The citizens and other power users stand to reduce their power bills $450million in Fresno" the first 18 years, Ramirez said.

Even though homeowners may not see large savings on electric bills, there could be a ripple effect.

"If the city of Fresno saves 5% on its water-pumping costs, that also translates back to the customers," Orth said.

Clovis will make up about 9.5% of the authority's electricity supply.

Robert Ford, Clovis general services director, said the program's discounts to the city and residents is attractive, but that reliability and having a say about providing power to the region also is a compelling aspect of the plan.

Reliability is key even if there is no savings or if power is a little more costly, said Larry Spikes, Kings County administrative officer. Kings County is the second-largest user, with 11.6% of generation.

"Our analysis is that we are looking to achieve cheaper power and also more reliability than what we have had," Spikes said. "Assuming everything works out the way we think it will, there will be some [cost] break. It's not a huge savings for residential users, but industrial customers can see some huge benefits."

If Tulare County is allowed to join the authority, it would take Kings County's place as the second-largest user and likely increase the number of customers to more than 350,000.

County Administrative Officer Brian Haddix said he is waiting for PG&E and Southern California Edison to provide customer numbers and electricity load information.

"We saw that this could bring in conservatively 2% to 5% savings for power and maybe even greater than that," Haddix said. "We are an ag-based county and our businesses in the county are pretty energy intensive."

Because packinghouses and cold-storage facilities consume large amounts of electricity, the county needs to offer energy prices similar to its economic development competitors in Kings and Fresno counties.

"Were Tulare County not in this, any business would look at Kings [County] or other incorporated communities in Fresno County and see it would cost more for power in Tulare County," Haddix said.

Tulare County also has a large number of lower socioeconomic residents who will save money, he said, and if the county pays less for electricity, supervisors will have more money to spend on services for citizens.

Tulare County's participation will depend on how fast utility companies can get information to the county, which will pass it on to the power authority, and whether authority members see a financial advantage in including the county, Orth said.

Visalia officials also recently inquired about joining, but they may be too late, he said. If Tulare County is not added, Orth said, the district could offer the county or Visalia leaders advice on how to start a Community Choice program.

The reporter can be reached at mbenjamin@fresnobee.com or (559) 441-6166.