October 23, 2018 – San Diego Union Tribune – Rob Nikolewski – With a decision pending on whether the city of San Diego should adopt a government-run power program, San Diego Gas & Electric has notified city officials it is withdrawing from putting together a counterproposal to what is called Community Choice Aggregation.
For the past two years, SDG&E has worked with city officials to create a program that would contract for increasing amounts of renewable energy to reach the city’s Climate Action Plan goal of 100 percent renewable sources by 2035.
But in a letter to the city Monday, SDG&E’s vice president of energy supply, Kendall Helm, said “there is no clear scenario” to develop an all-renewables plan that would leave the city free of financial or legal liabilities when it came to procuring energy contracts.
The utility also doubted whether the California Public Utilities Commission, or CPUC, would approve such a proposal if a scenario developed in which customers who did not take part in the program saw an increase in their costs. The CPUC would have concerns about approving a program in which one set of customers bore the costs attributed to another set of customers, SDG&E officials said.
“I’m a little surprised that this is (SDG&E’s) response but not entirely shocked, given the ambitious goals of the Climate Action Plan,” said San Diego City Councilman David Alvarez. “In order to accomplish the (100 percent renewable goals), it’s going to take a lot of work … I can only assume their math led them to that decision.”
Under a Community Choice Aggregation plan, or CCA, investor-owned utilities like SDG&E still maintain transmission and distribution lines (such as poles and wires) and handle customer billing. However, local government entities make the final decisions about what kind of power is purchased for customers in their respective areas.
Should a locality adopt community choice, customers in that particular area are automatically signed up for the CCA. However, if customers want to stay with the utility, they can opt out.
Touting themselves as offering cleaner sources of power at prices less expensive than investor-owned utilities, CCAs have grown across the state. CCA boosters and many environmental groups have been clamoring for the city of San Diego to jump on board, saying a CCA is vital to make sure the city reaches the goals set by the Climate Action Plan.
SDG&E’s decision to drop its counterproposal comes 11 days after the CPUC cast a crucial vote concerning CCAs.
As per statute, CCA customers must pay an exit fee — called a power charge indifference adjustment — to the legacy utility in their area each month. The fee is required to offset the costs customers have paid for the investments utilities have made over the years for things like natural gas power plants, renewable energy facilities and infrastructure projects.
On Oct. 11, the CPUC adjusted the exit fees. The fees vary, depending on the service territories of the three investor-owned utilities across the state (SDG&E, Southern California Edison and Pacific Gas & Electric). According to estimates from the commission, the new exit fee in San Diego will be raised from 2.5 cents per kilowatt-hour to about 4.25 cents.
For a prospective CCA residential customer who uses 500 kilowatt-hours per month, that works out to about $21.25 per month.
Many CCAs across the state complained the new, adjusted exit fees would hurt them because the additional costs could act as a financial disincentive for potential community choice customers.
SDG&E spokeswoman Helen Gao said the exit fee adjustment “was not the driving force in why we made the decision,” pointing to the fact the CPUC has indicated it will open another phase of the exit fee proceeding and the commission is considering “large-scale changes” to rules for procuring sources of energy.
In addition, Gao said the potential effects of recently passed bills by the California Legislature and signed by Gov. Jerry Brown affected SDG&E’s decision.
Senate Bill 100, for example, requires utilities reach 60 percent of the state’s renewable portfolio standard by 2030 and sets a 100 percent renewable and clean energy target for California by 2045.
“SB 100 essentially eliminates the need for a CCA because it will deliver the environmental benefits a CCA promises without saddling the city with any of the taxpayer risks,” said Tony Manolatos, spokesman for the Clear the Air Coalition, a San Diego group critical of CCAs. The coalition includes the San Diego Regional Chamber of Commerce, the Downtown San Diego Partnership and lobbyists for Sempra Energy, the parent company of SDG&E.
CCA supporters counter by saying community choice can deliver power that is greener than SDG&E and reach the state’s climate goals faster in the process.
“Consumers and families deserve choice,” said Nicole Capretz, executive director of the Climate Action Campaign and a major advocate for CCAs. “We need competition in this market. We need a downward pressure on price … We know if we stick with this monopoly utility, history has proven we just have a continuous upward trend.”
A feasibility study released last year predicted a CCA in San Diego has the potential to deliver cheaper rates over time versus SDG&E’s current service and provide as much as 50 percent renewable energy by 2023 and 80 percent by 2027.
Mayor Kevin Faulconer is expected to make a decision to bring a CCA proposal before the San Diego City Council soon.
In an email Tuesday, a spokesman for Faulconer would not say when the mayor will announce his decision.
Alvarez said he expects Faulconer to put forth a proposal before the City Council’s environment committee, which Alvarez chairs. The committee is scheduled to vote on the issue Nov. 29. The full council is required to approve a CCA for it to go into effect.
Some council members complained earlier this year that SDG&E was dragging its feet when it came to putting together the specifics of its counterproposal. “We cannot wait around forever,” Alvarez said at a meeting of the city’s environment committee in July.
City Council President Pro Tem Barbara Bry supports establishing a CCA.
“Residents and businesses will have the opportunity to buy cleaner energy while simultaneously saving on their energy bills,” Bry said in an email. A CCA “is not anti-SDG&E. It is intended to be a public-private partnership where the city will procure clean energy from renewable sources and SDG&E will be in charge of distribution and billing.”
SDG&E has long insisted it is not against CCAs and in his letter to the city, Helm said if the city forms one, “we will be your partner to empower that.”
The first CCA in California was established in Marin County in 2010. The 19th CAA began operations last month.
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