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MCE's and Kate Sears' $500 million deal with Shell Oil -- Part 3 of 3 Parts
In 2009 Marin Energy Authority, dba Marin Clean Energy, identified Shell Oil as the favored vendor on its short list of wholesale energy providers. Two electricity companies were also on the shortlist, but MCE’s leadership was looking for the deepest pockets. The “full requirements” contract meant that whatever MCE needed, Shell would provide.
In essence, MCE would be a front for Shell.
MCE was scheduled to launch seven months later under the banner of local, clean, renewable energy amid promises of “local transparency and public engagement” by MCE forefather Charles McGlashan.
MCE’s pre-selection of the oil giant created an immediate backlash. Citizens hated the option that its homegrown energy agency presented before launching into business -- PG&E or Shell. For activists and environmentalists it was the worst choice possible.
Smartest guys in the room
Shell, which never attended any of MCE’s public meetings, made no secret about its desire to penetrate California’s electricity market. It had already gamed California’s wholesale market ten years earlier alongside Enron, and remained intent on capturing as much of California's retail electricity market as possible.
Community Choice Aggregation (CCA) was a perfect Trojan Horse.
Local CCAs, such as MCE, could sweep "Generation" revenue from California’s investor-owned utilities onto the balance sheet of Royal Dutch Shell under the guise of clean energy. And with CCAs’ opt out mechanism, the oil giant could simply wait in the wings as millions of California customers were automatically swept into CCA and brought to its door.
Because the traditional utilities such as PG&E would continue billing consumers for all of the numerous items that rolled into their total monthly bills, including the line item for "Generation" that was siphoned off by CCAs, most ratepayers wouldn't realize MCE had inserted itself into their electric service. Everything would appear as it always had and if MCE was discovered, most consumers wouldn't know Shell was behind the scenes.
If Shell played its cards right, it could ride the coattails of the CCA movement from Eureka to San Diego and very few would be the wiser.
Ginned numbers
For Dawn Weisz, MCE’s future CEO, the selection of Shell was critical to her economic future. She worked as a County Planner making $54,000 per year, but knew she might earn several times that amount if she could land MCE’s executive position. She served as MCE's part-time interim leader, but she needed to learn the electricity business. To achieve her goals she required the backing of a company whose infrastructure could readily complete energy transactions in California’s complex electricity market, and tutor her in the process. Shell could bring that sort of muscle and possibility to the energy neophyte.
The main barrier to unleashing MCE throughout Marin were the elected officials at each municipality. This obstacle was critical because Weisz and her MCE colleagues could not switch residences and businesses into MCE unless the municipality in which they were located first joined the MCE Joint Powers Authority (formerly known as Marin Energy Authority, or "MEA.").
Many city and town leaders were sour on Shell Oil, due in large part to Sandy LeonVest and the SolarTimes who went to great expense sounding the alarm bell.
Weisz went to work creating a compelling, albeit fictitious, event for joining MCE.
In addition to MCE’s commitment to “unhook from dirty and dangerous fossil fuels,” Weisz pointed Marin County Supervisors to AB 32 greenhouse gas compliance costs of nearly $400 million for Marin, as determined by economists at Varshney & Associates (see attached 1/12/2010 letter and MCE's presentation slide to Marin municipalities).
Weisz told County Supervisors and elected officials throughout Marin that Varshney represented the California Air Resources Board (CARB), and that MCE was the ticket to avoiding looming compliance costs.
To close the deal for munis that might remain on the fence, MCE’s Joint Powers Authority membership agreement stated that CARB was “promulgating regulations” that would require them to reduce their carbon emissions.
However, CARB rejects Varshney as schlock science and daydreams of disaster. Further, CARB’s Chair states that her agency is not promulgating regulations for municipalities.
After Weisz was appointed MCE CEO she received an annual starting salary of $247,500 per year, among the highest in Marin’s public sector.
MCE's then-Vice Chair and Mill Valley councilmember Shawn Marshall heralded the $350 million contract with Netherlands-based Shell for "redirecting" revenues and shareholder profits from PG&E shareholders to MCE for the benefit of Marin. Marshall neglected to note that Shell employed few, if any Marin residents, and that Shell's shareholders would take profits out of Marin and the Bay Area.
Marshall now heads LEAN Energy U.S. (Local Energy Aggregation Network), which focuses on spreading and pre-selling CCA throughout California and the rest of the country. One of LEAN’s benefactors is Shell Oil (see bottom of page).
Kate Sears ramps up Shell
MCE’s original 5-year contract was supposed to expire May 2015. Shell would provide MCE’s entire energy portfolio of gas-fired energy, renewable energy, and the generic mix of coal and gas-fired energy known as "system power." The contract also included RECs (renewable energy certificates).
With Sears' approval, the base contract with Shell was extended through 2017. (MCE continues to regularly execute additional contracts with Shell that are outside of its base contract).
As the newly extended finish line with Shell approached, MCE sounded as if it would finally break free of the oil company. Environmentalists exhaled a sigh of hydrocarbons. But the fine print in MCE's board meeting agenda said MCE expected that 87% of its renewable energy content would be sourced independently of the oil giant by 2017.
What about the remaining 13 percent? What about 2017?
Sears’ $5.1 million coal deal?
During MCE’s pre-launch public workshops then-Chair of MCE, Charles McGlashan, voiced concerns about large hydroelectric dams -- those dams with generators larger than 30 megawatts.
McGlashan called them "habitat killers" that emitted carbon and destroyed entire ecosystems. To be competitive with PG&E, he said "(large hydro) is cheap and hence it will end up in this early contract with Shell... but I have major reservations about large hydro as a habit to get into."
But under Sears’ leadership, MCE’s appetite for Shell’s large hydro accelerated.
MCE twice renewed its purchases with Shell for large hydro, then sent money to Montana for the expansion of the giant Noxon hydro project. MCE claimed that its Noxon expenditure went to “support” an environmentally friendly renewable project. However, Noxon is nearly 4x California's maximum allowable size to be considered a renewable hydroelectric resource.
Sears then executed a $5.1 million contract with Shell for power from Washington’s Priest Rapids large hydroelectric project, beginning 2015.
Aside from the dam's inherent safety concerns, the contract itself exposes MCE to troubling possibilities with Shell, which is on record at the state utilities commission saying its would use a "container of gasoline" to burn records if regulators asked about gaming California’s electricity market (go to page 7 of the transcript, "1/26/2001" in upper-right corner of page).
Sears’ contract allows Shell to declare Priest Rapids “unavailable,” and to provide substitute energy.
Priest Rapids is not registered in WREGIS, the computer system in western U.S. and Canada that tracks renewable energy through carefully controlled reconciliation, as well as many large hydro transactions. It’s concerning enough that Portland-based utility giant Pacific Power won't buy energy from Priest Rapids.
Since Priest Rapids isn’t “renewable” or applied to the Renewable Portfolio Standard, this portion of MCE’s advertised energy is not scrutinized or carefully reconciled by regulators. Shell can (legally) substitute coal, nuclear, or gas, and MCE reports it as "large hydro," as noted at the end of Part 2 under "Coal and nuclear 'clean' energy."
Oil, nukes, gas-fired
MCE’s $191 million contract with the world’s largest nuclear company Paris-based Électricité de France was difficult to square after running afoul with environmentalists about Shell. Sears then approved a multi-million dollar contract with Exelon, the largest U.S. nuclear power company and the owner of Three Mile Island.
MCE executed contracts for landfill-gas-to energy in excess of $190 million. These plants claim to reduce methane emissions, but the Sierra Club task force says they actually increase global warming.
Contrary to McGlashan’s promises of local transparency, Kate Sears declines to talk (frankly) about MCE's problems.
To compound matters, MCE now trumpets a gas-fired energy deal with Houston-based Calpine. MCE boasts that the deal will reduce its greenhouse gas emissions and support 25 full-time jobs at the generating facilities.
That’s the same claim MCE used to make about renewable energy.
By the time the Shell contract fully expires in 2017, assuming it does expire, Sears will have approved three contract restatements and MCE will have exported more than one-third billion dollars to Royal Dutch Shell, plus add-on contracts after 2017.
Rudderless leadership
MCE no longer listens to Marin, which was promised:
- local clean energy that markedly improves Marin’s economy;
- many full-time, long-term jobs for Marin residents;
- lowest energy prices;
- reduction of greenhouse gas (GHG) emissions.
Outsourcing pollution to other communities and exporting hundreds of millions of dollars to Europe is not what MCE committed to Marin nor what MCE advertises when soliciting consumers and new municipalities to join its program.
Through 2015, the last data available, MCE has increased net GHG emissions 858 million pounds compared to PG&E for the same energy volume.
MCE merely advertises its local solar farms (that will produce one percent of its total electric load) when it comes under public scrutiny.
Wary Marin residents once called “MEA” Misrepresented Emission Accounting. Today, many refer to MCE as Misleading Consumers Everywhere.
Sears continues to disregard repeated calls for the dismissal of MCE’s CEO Dawn Weisz, her lieutenant consultants at Pacific Energy Advisors, and MCE’s legal and public relations staff.
Despite the silence, MCE has succeeded in providing "choice" to Marin -- a choice of referring to MCE as a junior version of Shell Oil or a mutation of PG&E.
Author bio and background:
Jim Phelps has served the power, petrochemical, and geothermal industries for nearly 35 years as a power contractor and utility rate analyst. He is not now, nor has he ever been, employed by PG&E. He sued PG&E (and won) for breach of contract issues at one of their power plants. He has not received any money from PG&E for his work tracking Marin Clean Energy’s activities. He has also completed consulting and thermal performance test work for Shell Oil at one of its Gulf Coast refineries.
Mr. Phelps operates one of Marin's largest residential solar electric systems at his home in Novato. Several years ago he initiated contact with PG&E about its carbon emission practices and about MCE’s emission practices. He also requested clarification from MCE about several business conduct issues, however, MCE declined to provide help. To this time, MCE’s only input about its business is to respond to Public Records Act requests identifying the costs for copies of public documents.