After eight years, San Francisco is on the threshold of taking a major step into the public power realm.

The Board of Supervisors is set to consider legislation Tuesday that would allocate $19.5 million to secure a contract with Shell Energy North America to provide 100 percent renewable power to San Franciscans who want to pay a premium for it, with $2 million of that total allocated to studying local power-generation options.

The program, CleanPowerSF, is designed to build a customer base and revenue stream to lay the groundwork for city-owned renewable power generation while advancing San Francisco's aggressive greenhouse-gas reduction goals. It also would effectively break Pacific Gas and Electric Co.'s decades-old monopoly on the consumer power market in its headquarter city.

"This is about giving consumers a choice," said Supervisor David Campos, who is sponsoring the legislation. "And for the choice to be meaningful, it can't be dependent on one company deciding the energy future of this city."

If CleanPowerSF is approved, San Francisco will become the second municipality in the state to create a community-choice aggregation program after Marin County, which also contracts with Shell to provide renewable power. Such programs were made possible under a 2002 state law that allows municipalities to choose alternative electricity providers.

San Francisco has been trying to work out the details for implementing such a program since 2004, and officials ultimately shelved the idea of creating renewable-power-generating facilities simultaneously with a clean-power purchase agreement.

Curbing carbon emissions

San Francisco Public Utilities Commission General Manager Ed Harrington, who delayed his retirement to finish the proposal, said the program, at a cost of $19.5 million, in its first year would reduce carbon emissions by almost 10 times the amount the city has already been able to cut by spending $93.2 million on solar and other efforts.

"This is the single biggest program that is even on the horizon within the city and county of San Francisco to make any difference toward any of the goals that you have set as board members in terms of having a change in greenhouse-gas emissions and climate change in San Francisco," Harrington told the Board of Supervisors' budget committee last week. "This program can make a dramatic change."

Under the proposal, roughly half of the city's 375,000 residential power customers would be automatically enrolled in the program to receive renewable power. Those customers would be chosen based on market research the city has already conducted showing support in neighborhoods across the city - from parts of the Richmond to Potrero Hill - for paying extra for power generated through sources like wind and solar, officials said.

Customers automatically enrolled would have five months to opt out of the program at no charge. After that, they could be charged a small fee, about $5, to leave. Other residential and commercial customers could opt in.

Mayor Ed Lee and others are concerned that people who don't want to pay a premium for green power must actively opt out if they are enrolled, but public utility officials say the opt-out provision is dictated by state law.

Utility bills for many residential customers are projected to increase by about $9 a month under the program. When commercial customers are factored in, the average monthly bill increase is projected to be $18.

"We are sensitive to the fact that some people cannot afford this," Harrington said. "That is why we will not impose it on them."

Program details

About 90,000 residential customers is the target to keep the program viable, city officials said. The deal includes $13 million in public funds set aside as reserves, some of which would compensate Shell if customer demand falters. If all goes well, the city would retain that money at the end of the five-year contract.

Under the deal, the city guarantees a minimum amount of electricity will be purchased. It is liable to compensate Shell up to $15 million in actual losses if the program launches and the city is unable to enroll a sufficient number of customers, according to the Board of Supervisors' budget analyst.

All told, CleanPowerSF is estimated to cost about $32.4 million to operate in the first year and $36.2 million in subsequent years, to be paid by customer premiums, the budget analyst found.

If approved, automatic enrollment would begin next spring or summer, said Tyrone Jue, spokesman for the city's public utilities commission.

A simple majority of the 11 supervisors is needed to pass the legislation, but passage is not guaranteed. The plan is controversial - it advanced from the board's finance committee on a 2-1 vote. The mayor's spokeswoman says Lee is concerned about the opt-out provision, the risks associated with the contract and the cost to residents.

Another competitor

PG&E, which spent $46 million in 2010 on the unsuccessful statewide Proposition 16, which would have limited the ability of local governments to create programs like San Francisco's, proposed in April a competing green-power program that is expected to be cheaper than CleanPowerSF - about $6 a month for residential customers.

However, PG&E's program "would make it substantially more difficult" for San Francisco to enroll enough people to guarantee its sustainability, the board's budget analyst found.

Joe Molica, a PG&E spokesman, denied that the company's Green Option program was designed to sabotage the city's effort.

"We respect the energy choices that are available to our customers, and we'll continue to cooperate with local government," Molica said.

Harrington downplayed competition from PG&E on clean power, saying the company's program was cheaper because it relies heavily on transferable renewable-energy credits rather than sustainable-energy generation.

"We could do it for that much, too, if we weren't really providing green power and were just putting lipstick on the pig of brown power," Harrington said.

CleanPowerSF by the numbers $9 Expected average monthly increase on utility bills for residential customers. $18 Expected average monthly increase when factoring in all customers, including commercial and residential. 375,000 Number of residential customers in San Francisco. 90,000 Number of residential customers the city hopes will stay in the program during its first phase. $19.5 million Program cost to have Shell Energy provide renewable power and for other measures. $13 million Program funds set aside as reserves, including to compensate Shell if customer demand falters. $6 million Total going to solar and energy-efficiency programs and to study local power generation. $500,000 CleanPowerSF startup and related costs. 5 Length, in years, of the Shell Energy contract $100,000 Projected annual energy savings for CleanPowerSF customers collectively from new solar installations. $13 million Projected annual reduction in local consumer spending because of higher power rates. 95 Projected net number of jobs lost in the city from the program. $8 million Projected reduction in the size of the city's annual economy. 0.01% The net loss to this city's economy and total employment from the program (not including potential future public power generation). 100% Amount of power in program that will be renewable, including some transferable renewable energy credits. Sources: San Francisco Office of Economic Analysis, San Francisco Public Utilities Commission