Who will own the new non-profit Bainbridge Island electric utility and how will it be managed?
The new utility will be owned by the City of Bainbridge Island. Island Power advocates it be managed by a Bainbridge Electric Board (BEB) empowered to run the utility on a day to day basis. The BEB will have significant authority and be composed of people with utility, financial and management experience. The manager of BEB will be a person with training and experience operating an electric utility. Examples of board-managed utilities are found in Tacoma, as in the Tacoma Utility Board (TUB), and Eugene Oregon, as in the Eugene Water and Electric Board (EWEB.)
Where will the BEB get its wholesale power?
As an independent not-for-profit electric utility BEB will be able to purchase electricity on contract, construct power generating facilities of its own (if desired), and develop energy efficiency resources to serve its customers. As a practical matter it will, at least in the beginning, buy all its power from the Bonneville Power Administration (BPA).
What is the Bonneville Power Administration and what right will BEB have to its power?
BPA is a federal agency based in Portland that markets the power from 31 projects, most of which are hydroelectric dams such as Grand Coulee. Not-for-profit electric utilities like BEB have a “first right” to the lowest-cost pricing tier of BPA power.
What are the types of sources of BPA’s power?
- BPA’s website (link) reports that its 2014 mix was: 84.4% hydro, 0% coal, 0% gas, 4.4% non-specified market purchases, 10.4% non-fossil-fuel nuclear, 0.7% wind, biomass and waste
- BPA’s own facilities include no coal or fossil fuel plants
- In conclusion, the electric power that BPA could supply to a Bainbridge Electric Board would be roughly 97% from renewable non-fossil-fuel sources
What are the types of sources of PSE’s power?
- PSE’s mix is 35% coal, 24% natural gas (which sometimes comes from fracking), 36% hydro, 1%nuclear, 1% other, 3% wind (link)
- PSE power is 59% fossil fuel electric power from contracts and plants; it is an owner of the coal-fired power plant in Colstrip Montana that is one of the largest polluters in the country and sends power to Bainbridge
What is BPA “Tier One” power and will it be availible to BEB?
The availability of very low cost “Tier One” power to BEB is one of the reasons for the island to act soon on creating its own utility. In 2008 BPA and its public power customers found that the agency was close to allocating all the low-cost power from its dams and other sources. New power resources would cost considerably more, so the agency and its customers agreed to allocate this low-cost power to new public utilities, and after that any additional power that utilities needed would be at a higher “new resources” rate. Fortunately for Bainbridge a small amount of this low-cost power, 250 average annual megawatts (aMW), was set aside for new public utilities. BPA did not actually “save” this power, but committed to buying more resorces when needed to meet this demand when the time came, as it had distributing all the power it had in 2008 to the existing not-for-profit utilities. Today about 190aMW of that allocation is left (Jefferson PUD, a new electric utility, took a large block of the 250aMW of power in 2013). A number of cities and counties in Oregon are creating new public power utilities in order to access this remaining “historical legacy” power.
If Bainbridge acts in time it can access the 40aMW of power it needs, which BPA would be committed to provide to our local utility at the low-cost Tier One rate. Once Bainbridge contracts for this power it has a right to renew its contracts in the future under the same Tier One conditions.
PSE maintains that if Bainbridge gets the clean BPA power, it really “won’t make any difference” in terms of climate change because it will just be a shuffling of the same mix of clean and dirty power sources.
That is not true. When Bainbridge “puts a load” on BPA the agency will very likely have to develop new clean resources (most likely wind) to meet that new 40aMW demand, it can’t just take this power away from the other public power customers. This will be clean power as BPA is committed to buying only non carbon producing power. PSE, which would then no longer need the 40aMW of power that serves Bainbridge, may choose to resell that “dirty” power into the wholesale market. One hopes however that the company would see it as an opportunity to shut down some of its carbon producing power generation. So, Bainbridge would cause BPA to produce more clean power, the island could make a permanent commitment to never in the future acquire carbon-based power, and PSE would have the option to reduce their supply of dirty power by 40aMW. The net result would, under those circumstances, significantly reduce the fossil-fuel power consumed and the climate change pollution produced.
What happens to solar incentives if we run our own public utility?
Solar customers of the new BEB will NOT be worse off than if they stay with PSE, in fact they are likely to be better off, for a number of reasons. Bainbridge islanders have done a great job, given the shade on the island, in developing home-based and community solar projects. These 180 solar systems on Bainbridge have benefited from state and federal incentives. PSE passes through to customers the state incentives. PSE does not fund those payments to solar customers with its own moneys — the rebates are funded under state law by relieving the utility from state taxes that the utility would otherwise pay. In 2015, for its customers using solar panels, PSE proportionally reduced the solar rebate payments because full rebates would have exceeded the maximum tax-relief amount that PSE was allocated for the year. So PSE prorated the rebates to allow PSE to fully recover the total rebate amount from the state. PSE has said that these prorata reductions in rebates for solar panel users will be even larger if Bainbridge has its own public electric utiity, because the island’s capped state tax credit would be lower than PSE’s, because the Bainbridge utility would be smaller than PSE.
The reasons islanders should not be concerned about this are: The current law expires in about 4 years in June 2020, and it is likely that new legislation pending in Olympia will raise the cap suffencent to meet the needs of BEB customers before BEB even gets into the electric utility business. The Bainbridge utility would therefore be operating under the new law. Furthermore, whether there is an expansion of the state law solar rebate program or not, the Bainbridge Electric Board would be free to decide to provide its own expanded incentives for solar beyond what PSE would otherwise provide under state law minimums — and that is something that the public on this environmentally oriented island is likely to favor. Finally, Island Power urges the City to include an assurance to solar panel users in the proposed ballot measure to authorize a Bainbridge utility that solar rebates will be no lower to those solar panel users than if they had continued to be customers of PSE.
Will the BEB be able to provide reliable electric service?
BEB will provide better and more reliable electrical service than PSE because:
- Local Crews: BEB would have its skilled line crews based on the island. PSE has no crews on the island and uses an outside corporate contractor (POTELCO), which is based off the island. POTELCO crews can take over an hour to get here — if they are available, and if the bridge is not blocked.
- Undergrounding of Power Lines: BEB would be able to set a long-term policy to gradually underground much of its system. Currently, Island Power has been unable to obtain documentation from PSE showing their undergrounding locations. Our impression is that PSE’s underground percentage is small, and far less than comparable nearby public power utilities like Gig Harbor’s Penlite (72% underground) and the San Juan Island’s Orcas Power (87% undergrounded). Based on reports we hear from Bainbridge Islanders about the number and duration of outages in the past year, PSE outages on the island on an annual basis were 5 times as long as most of the comparable public utilities, and three times as long in Kitsap County compared to the the poorest performing comparable public power utility. PSE claims it is too expensive to underground (using undocumented estimates of “10 times” more costly), however comparable public utilities have found that the initial cost is much less than that, and that the savings that result from fewer and shorter outages result in undergrounding being a financially viable strategy, and much more reliable for customers.
- Mutual Aid from Neighboring Public Utilities: Most of the state’s 62 public power utilities have “mutual aid agreements” that make their crews available to assist one another in times of emergencies.
How can we assure that the public power system will still work and operate well no matter who is in office?
- Your Local Control: The good news is that public utilities are democratically controlled. When PSE raised its rates 11% in December 2015, did you hear about any public meetings? A private corporate utility doesn’t ask for your input when they make decisions that affect their vital service or its pricing. By contrast, every public power system in the state has regular open public meetings of its Board, Commission or City Council. No public power rates are ever increased without well-publicized public meetings prior to the decision.
- A Professional Board Focused Solely on the Electric Utility. If Bainbridge had a board-governed public utility (a BEB) appointed for their professionalism and supported by their chosen professional utility executive with electric utility experience and expertise, then the utility leadership could focus on electric utility operations and customer needs, while the City’s leaders could focus on other city government issues. The electric utility would have its own separate and ongoing funding from its electric rates that would be determined on a not-for-profit basis based on actual costs (and would not be dependent on the politics of whether or not to raise or change City taxes).
- Excellent Track Record of Public Power in Washington: The history of public power systems (such as municipal utilities, Public Utility Districts, and cooperatives) in Washington is very good. None has ever gone bankrupt or failed to provide service. None of the communities that have opted to form a public electric utility has opted to go back to the private corporate utility, let alone opting to go back to a foreign-owned corporation.
- Lower Financial Risk than PSE’s Foreign Parent: If you are concerned about financial risks of a local utility, don’t forget that the current utility (PSE) is owned by foreign investors managed by a private equity firm (related to Macquarie bank) of Sydney Australia; its Moody’s credit rating is Baa3, which is lower than the City of Bainbridge Island’s credit rating (Aa2) and lower than the vast majority of public power utilities in Washington state or the USA.
- Other Risks that Face PSE: Furthermore, consider other risks associated with PSE: higher rates (see Rate Comparison information on this page), increases in rates without local input (e.g. the 11% increase in December 2015), and the risks of extraordinary future costs such as: (1) changes in the energy economy such as rising coal costs compared to gas or renewables, (2) potential future carbon taxes, and (3) the cost of shutting down a coal plant like Colstrip Montana that PSE probably now wishes it had never decided to purchase.
Most likely it would be financed with municipal revenue bonds. The electricity rates that customers pay to the Bainbridge Electric Board would retire the bonds over a long period of time, probably 30 years. Such revenue bonds are in no way a tax. They are the normal method for financing of operations paid for through rates. Jefferson PUD bought out PSE’s facilities in 2013 with a 30 year loan, and today its rates are 5% LOWER than PSE’s.
Issuing a revenue bond in order to buy the electric infrastructure of the island from PSE would be analogous to s family taking out a mortgage to buy a home from a seller. By contrast, the monthly payments a family now makes to PSE is like a rent payment. The experience of Jefferson County public electric is that the all-in cost of their electricity (including its “mortgage”) is now lower than the “rent” they would otherwise be paying to PSE.
How many jobs might be generated if Bainbridge ran it’s own nonprofit electric utility?
We project that BEB would have about 20-25 employees, all based on the island, compared to PSE’s one current island-based employee. These family-wage jobs would bring to our island a set of community-oriented people who are skilled at dealing with disasters large and small, and who would be on-the-spot to deal with outages.
BEB will have about 2/3rds as many customers as Jefferson PUD. From the Port Townsend Leader article, Public Power Two Years Later: “PSE’s skeletal in-county staff of two or three, bulked up temporarily as the public power movement got started, has been replaced by the PUD’s 28 new jobs, all of them paying family wages.
How do Port Townsend (Jefferson County PUD) rates compare now to PSE?
Since PSE raised its rates 11% in December 2015, the monthly charges of Jefferson PUD are currently 5% lower than PSE’s. That difference has the effect of saving Jefferson PUD customers one million dollars per year.
Equally important, a large portion of Jefferson PUD’s charges are paid locally for local staff and local supplies. By contrast, almost all of PSE’s monthly revenue dollars from Bainbridge homes and businesses is exported elsewhere: for example to PSE’s corporate headquarters in Bellevue or to its profit-takers based in Australia.
Why did we gather signatures?
The 2015 signature campaign of Island Power was successful. Last October, Island Power delivered to the City Council more than 1,200 Bainbridge Island signatures on petitions requesting that the City Council put the creation of a public power utility on the 2016 ballot. As a result of those petitions, the City Council voted to proceed.
First, the City advertised for local volunteers for Municipalization Task Force and attracted more than 20 citizens with remarkable experience and professional qualifications. The eventual 16-member appointed task group analyzed the needs and drafted a request for an expert feasibility study. The Council in March 2016 unanimously approved the RFP request for such a feasibility study proposal. The RFP response deadline was late April 2016. Next steps include: (1) the review of the feasibility study, (2) the drafting of an authorizing city ordinance to potentially create a Bainbridge Electric Board, and (3) a decision to schedule a ballot measure (hopefully in November 2016) in which citizens could ratify the ordinance to authorize the potential creation of such an electric utility. The County’s deadline for a city decision to put such a question on the November voter ballot is August 2, 2016.
If our measure is on the ballot and passes, what next?
If a ballot measure passes it just gives the city the RIGHT to run an electric utility, nothing more. Its the first step, giving COBI the authorization to purchase PSE’s infrastructure but not a mandate to purchase immediately.
If people vote for it and the city moves forward with it, we’re looking at a multiyear process of feasibility studies, discussions with the community, purchasing the infrastructure from PSE, signing up with Bonneville Power Administration (BPA) as an all-requirements customer, which means BPA fills the Bainbridge needs as they fluctuate.
The BEB would retain flexibility to respond to any dramatic change in circumstances. For example, if there were a big move in the bond markets from the current historically-low interest rates available on utility revenue bonds to a much-higher interest rate environment, BEB could proceed with negotiations and implementation at a pace that fits the changing situation.
Then, when all is ready, we flip the switch. The most recent voter approved public process and buyout of PSE is Jefferson County. There, the citizens voted yes in 2008 and Jefferson PUD went live in 2013, five years later.
Why not just buy Green Power from PSE??
There is a lot of confusion around PSE’s Green Power program. Many people think it means PSE is filling the grid, our grid, with more renewable energy. It does not. Money is used to invest in renewable energy and that’s great but it doesn’t change PSE’s energy resource mix (see the FAQ paragraph above), including fossil fuels such as 35% coal and 24% gas.
The Green Power Program is a national program, not PSE’s program. It’s a way to SUBSIDIZE renewable energy, not get off carbon based power plants.
The main reason we decided to start to urge our community to consider clean public power — by forming a nonprofit called Island Power — is that we think Bainbridge Island can benefit from a locally controlled and owned not-for-profit electric utility that has access to all of the clean power we need, and which would plow back into our local economy the benefit of electricity payments from our families, organizations and businesses.
We see a remarkable opportunity in our region to be able to buy clean renewable power from Bonneville Power Administration (BPA), which is about 97% carbon-free as compared to PSE’s coal and gas power which is about 60% carbon-based. The island uses about 40MW of power a year and could get all the power it needs from Bonneville Power Administration (BPA). As a new not-for-profit public utility we could be a preferred customer of BPA and qualify for its lowest-cost Tier 1 rates. BPA has about 190MW of Tier 1 power left. If Bainbridge Electric Board doesn’t sign up soon that power could be allocated to other new public power communities and Bainbridge would be out of luck.
Why is Island Power calling me with survey questions?
We aren’t. We don’t have any paid staff — and we don’t currently have close to the amount of money — that would be needed to send a postcard or make a robo-call to the majority of people on the island. There have been instances, however, where PSE has been using its funds (collected from customer rates) to make such calls and send such postcards.
What is now needed the most?
Our group of local volunteers needs — and we would welcome — the help of people like you, as volunteers, to ask your neighbors and island friends about these issues, and say a few words about the opportunities and potential benefits.
Please click here to go to our volunteer page.
Or click here to contact us.