Electricity Isn't a Commodity

PG&E can meet the competitive challenge presented by CCAs. Electricity is no longer a commodity. PG&E can offer a line of electricity products differentiated by source.

PG&E, Pacific Gas & Electric Company (NYSE: PCG) was the thinly veiled backer of Proposition 16. California voters rejected the Prop. 16 ballot initiative in the election of June 8, 2010.

In May 2010, the MCE Marin Clean Energy program began operation. MCE is an electric service consortium of local governments in Marin County. Prop. 16 would have required two-thirds voter approval for local governments to start an electric service or to expand an existing electric service.

Extensive advertising promoted Prop. 16 as the "Taxpayers Right to Vote Act". The cumbrous official name was "Imposes new two-thirds voter approval requirement for local public electricity providers. Initiative constitutional amendment." The advertised short name was easier to pronounce, spell and think. Prop. 16 was about regulating electric utility service. It wasn’t about extending voting rights. It wasn’t about taxes.

MCE is a CCA Community Choice Aggregation, a kind of local utility authority contrived by state law. A CCA contracts to receive power from some independent electricity generator. The CCA sells the power to customers in the local jurisdiction. Customers can choose to continue receiving electricity from PG&E. PG&E continues to maintain the distribution grid and to bill the customers.

PG&E can compete by appealing to the green motive. PG&E can offer customers power with a guaranteed mix of 100% from renewable sources or with a mix of 50% renewable. (The Marin CCA offers these two mixes.) PG&E can price their own offering appropriately, with regulatory concurrence. PG&E might even offer to an individual customer a predominantly geothermal mix, or a nuclear mix, or a hydro mix, or a natural gas mix, or a wind mix, or a "value" mix of whatever is left over. PG&E can brand the different mixes and promote them to customers who want them.

PG&E’s customers voted against Prop. 16. By their vote, they expressed a desire for electricity differentiated by source. PG&E, with its regulator, the CPUC California Public Utilities Commission, can satisfy that desire.

Why should a community endure the significant efforts and risks of running a CCA to get green power, when they can arrange with PG&E to the same effect?

Competing with the CCAs need not involve a difficult political struggle at the ballot box. PG&E has an opportunity to better satisfy the customers, to enjoy a prosperous future and to create substantial new goodwill in the communities the company serves.

Pacific Gas and Electric Company

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