The San Joaquin Valley Power Authority said it also will halt plans to build a gas-fired power plant between Selma and Parlier that was opposed by nearby residents. The plant was part of the authority's plan to supply electricity.
The authority, comprised of local officials, will stay intact to promote other energy projects. One plan is to install rooftop solar equipment on local government buildings to cut energy costs, said David Orth, the authority's general manager.
The authority, created in 2002, was trying to become the first public agency in California to supply electricity under the state's Community Choice program. The law allows cities and counties to buy electricity in bulk for delivery to residents and businesses.
The authority's goal was to sell electricity to Valley residents at 5% below Pacific Gas & Electric Co.'s generation rates and save an average household about $3.50 a month. The authority hoped to limit rate increases to a maximum of 2% a year through 2015.
Kings County, Clovis, Hanford, Reedley, Sanger, Selma, Parlier, Kingsburg, Corcoran, Lemoore and Dinuba were lined up as customers.
In addition to making plans to build a power plant, the authority had an agreement with a CitiGroup energy subsidiary to supply electricity for 5% less than PG&E. But, after the economy collapsed, CitiGroup backed out of the deal. The authority sought other partners but could do no better than a three-year deal that would be open to renegotiation, Orth said.
"It's a different world than the world we designed our plan around," he said.
As a result, authority officials decided to postpone for now efforts to supply electricity to regional customers, said Kerman city manager Ron Manfredi, the authority's chairman.
"We said if we couldn't give our customers a better deal, why make the deal," Manfredi said.
In 2002, investor-owned utilities pledged to remain neutral if Community Choice programs started in their service areas. Five years later, PG&E officials decided to end their neutrality by mounting marketing efforts opposing the Valley project.
PG&E's campaign resulted in delays and legal battles, and also convinced Fresno city and Tulare County officials to quit the authority.
Jeff Smith, a Fresno-based PG&E spokesman, said the company supports Community Choice but didn't think the Valley program would work.
For example, PG&E disputed the rate projections that the authority had devised for comparison purposes, Smith said.
"We didn't view their program as a prudent economic decision for our customers," he said.
PG&E's marketing efforts led the authority to file a complaint with the state Public Utilities Commission in 2007, claiming PG&E broke state rules.
"We probably somewhat naively felt neutral meant neutral and expected something far different from them," Orth said of PG&E.
In a settlement of the PUC complaint, PG&E agreed to reveal the costs of its marketing efforts to oppose the authority's program: about $2.5 million from May 2007 to January 2009.
Orth said the authority spent $2.86 million in seven years to get the program under way. The bulk of the costs were paid by the Kings River Conservation District, which manages the authority.