Friends of Mill Valley

February 11, 2010Dear Mayor Moulton-Peters and Members of the Council;The Marin Clean Energy (“MCE”) project proposed by the Marin Energy Agency poses unprecedented and potentially major financial hazards for Mill Valley and local taxpayers, and it is disturbingly unfair to the City’s residents. For these reasons, we are collectively urging you formally to notify the Agency and its member municipalities that, despite the Agency going forward with the contract with Shell, Mill Valley will be opting out of the MCE project and withdrawing from the Agency at the soonest permissible date.Unacceptable Financial Risks and Uncertain BenefitsThe Marin Clean Energy project involves numerous financial risks. These remain largely unquantified. Many are potentially very large and few of these have been faced realistically and head-on. At the same time, the project’s benefits are very uncertain, especially in view of the volatility of energy market prices and the mostly unknown costs of actually producing clean energy. There are many comparatively less financially risky actions the City can pursue without putting Mill Valley residents in potential jeopardy. We all want clean energy and we can realize that goal without jeopardizing our fiscal health.In the words of the Marin Civic Grand Jury:“. . . the costs of the Marin Clean Energy (MCE) program remain undefined and the benefits are likely to be minimal. . . . Citizens of Marin are being led down a costly and extremely risky path . . . All costs incurred by MCE must be borne by the ratepayers as they are the sole source of revenue . . . . MCE could present unforeseen legal and financial risks to participating cities. . .”The Grand Jury also stated that the report of MRW and Associates which was commissioned by the County Administrator and participating city managers “highlights significant risks to MCE customers.”It should come as no surprise that the Marin County Treasurer (as quoted in the IJ) has concluded: “At this time, the program doesn’t make sense from a fiscal perspective and the program’s benefits are uncertain.”The strong financial position (i.e. reserves) that the City enjoys is a direct product of the restraint exercised by current and past Councils in conserving the City’s resources for the long term against multiple competing demands. We’re known as a County leader in this area. As the State faces recurring budget crises and our sources of revenue are increasingly siphoned off in Sacramento, the need for the City to practice prudence in financial matters is more urgent than ever. We find it hard to believe that the City would willingly and knowingly expose itself and its taxpayers to the possibility of sharing the responsibility for repaying the multi-million dollar debt that the Marin Energy Agency plans to take on, to name just one example of the City’s exposure.Moreover, by supporting the MCE project, the Council would, by its own action, actively be exposing Mill Valley residents individually to financial risks—many of them still not disclosed or calculated—in the residents’ capacity as Marin Clean Energy ratepayers. For example, should the project’s cost projections turn out to be too low, Mill Valley residents, as ratepayers, will bear the higher cost through higher rates. If prices for clean energy are higher than anticipated, again, Mill Valley’s residents/ratepayers will be subjected to higher rates. If fewer than projected businesses and residents in Marin subscribe for clean energy-thus reducing revenues, again, remaining MCE ratepayers in Mill Valley will pay higher rates. None of you were elected with the anticipation that, as Council members, you would expose our residents to direct financial risks and burdens such as those that might occur with the MCE project—particularly when there is another choice available. The Unfair “Opt Out” FeatureWe accept that the Council has the power to require every Mill Valley resident to switch service from PG&E to the MCE project if that resident fails to affirmatively, specifically and actively elect to “opt out”. However, the opt out feature is unfair and contrary to the “spirit of Mill Valley” that has long been a prominent feature of our discourse, local political campaigns and the way we all view life in our community.As others have pointed out, there is no vital health and safety reason that sufficiently justifies placing the burden on Mill Valley residents to affirmatively opt out of a project that embodies personal financial hazards, is filled with uncertainties and complexities, and is likely to be confusing to the average citizen and might not be fully understood by many. Mill Valley’s residents shouldn’t have to bear the risk of incurring fees or penalties for opting out later, and perhaps additional fees payable to PG&E for resuming service directly from that company. Some have argued that by staying in the Marin Energy Agency, the City has offered a “choice” to its residents—letting them choose between MCE and PG&E, whereas this choice would not be available if the City withdraws from the Agency. We submit that this is faulty reasoning: Certainly, local residents and taxpayers will never be directly asked by the City during the opt out process to “choose” to undertake the risk of higher taxes, burdensome municipal debt and/or reduced municipal services inherent in the uncertain economics of the MCE plan. It is naïve to assume that most residents will make informed choices to go with the MCE project when the opt out feature is presented to them. This is why the enabling State law underlying the MCE project specified an “opt out”, rather than an “opt in” mechanism—were residents required to “op in” if they wished to switch over to MCE, the number who would do so would be insufficient to sustain the project. Postponing the City’s Decision is Risky and UntenableSome Council members have indicated that although they may vote for the City (in its capacity as an energy consumer, and consequently, an MCE ratepayer) to opt out of the MCE project at a later date, Mill Valley should nonetheless remain in the Marin Energy Agency itself, arguing that apart from the MCE project, the Agency serves a legitimate purpose. There are two serious flaws with this reasoning: First, even if the City were to exercise its option to get out of the MCE project in the future, the City will remain liable for the financial hazards inherent in the project so long as the City remains a member of the Agency and for all the liabilities that arise during the time of the City’s membership.Second, Mill Valley’s residents won’t be covered by the City’s opt out so long as the Mill Valley remains in the Marin Energy Agency. Thus, the City would be subjecting our residents to the very same fundamentally unfair opt out mechanism and exposing them to the very same financial risks that the City, itself, will have walked away from. Consequently, it is imperative that the City withdraw from both the MCE plan and the Marin Energy Agency itself if the Agency persists in its contract with Shell.At this point, it will take leadership and political courage to back away from the MCE project and withdraw from the Marin Energy Agency—especially in the face of assertions by proponents of the MCE project that those who raise concerns are in PG&E’s pocket, or are ignorant, or perhaps both. We hope that the Council will exercise such courage and leadership. Sincerely, Former Mill Valley MayorsJoan BoesseneckerBetsey CutlerDennis FiscoKathleen FooteJohn JaegerWarren LevinsonIvan PoutiatineChris RakerDavid RaubAnne SolemDick Swanson