September 17 – SDUT – Rob Nikolewski reports – The city of San Diego is about to enter the power-purchasing business.
On a 7-2 vote Tuesday afternoon, the San Diego City Council approved the formation of a community choice aggregation, or CCA, energy program. The council also approved a joint powers agreement that will see San Diego partner with Chula Vista, La Mesa, Encinitas and — by all indications — Imperial Beach to take the place of San Diego Gas & Electric when it comes to purchasing sources of electricity within their jurisdictions.
“This really is an important day for San Diego,” said Council President Pro Tem Barbara Bry. “We have an entrepreneurial culture in San Diego and I think we will be the gold star of what community choice energy should look like across the country.”
But council members Chris Cate and Scott Sherman voted no, each raising concerns about whether the city is moving into shaky financial and political territory.
“I think the risk associated with moving forward and the risk to ratepayers from a cost and liability standpoint is rather large,” Cate said after the vote.
According to a consulting group hired by the city, the still-to-be-named CCA is expected to offer rates about 5 percent lower than SDG&E for customers within the city and generate an estimated average of $110 million per year, translating into net income of about $1.75 billion over a 16-year period. As for the cities joining up with San Diego, another consulting firm has predicted ratings savings of about 2 percent compared to SDG&E.
Some critics have complained the numbers are too rosy but city staff says the projections for San Diego have been peer-reviewed twice.
The program is scheduled to be up and running by 2021.
The vote comes one week after the city councils in Chula Vista, La Mesa and Encinitas each approved a draft joint powers agreement, or JPA, spearheaded by the city of San Diego. Under the agreement, San Diego will put pick up the program’s starting costs. The city council in Imperial Beach is expected on Wednesday night to join the partnership, which would be made up of five cities.
Under the JPA, a board with representatives from each jurisdiction will govern the CCA. The board is expected to hold its first meeting by the end of next month. It must deliver the appropriate filings to the California Public Utilities Commission by the last day of the year to be approved for operations in 2021.
The five-city regional JPA would be the second-largest CCA in California, behind only the Clean Power Alliance in the Los Angeles area.
“It’s always a mini-miracle to get five cities to agree on anything,” La Mesa city Councilman Bill Baber said before the vote. “All five cities agree on the same goals: One, we want 100 percent renewable energy. Two, we will compete on price with SDG&E. Three, there is no time to waste. Now it’s time for the Fab Five to get to work.”
The council’s vote represented a big political victory for Mayor Kevin Faulconer, who has insisted that adopting a CCA is essential for the city to reach its legally binding Climate Action Plan goal of deriving 100 percent of its electricity from renewable energy sources by 2035.
“Today is a monumental step toward 100 percent renewable energy for our city, and a greener and cleaner future for our region,” Faulconer said in a statement. “This is about lower energy costs for customers, green jobs for working families and renewable energy powering homes and businesses. The future has arrived, and we proudly stand with our regional partners to lead the green energy revolution.”
Environmental groups celebrated. While California has mandated the state achieve a 100 percent renewables target by 2045, the San Diego climate plan reaches the goal 10 years earlier.
“Our communities are on the brink of a human-caused global disaster — climate change — a crisis we can see, taste and feel now,” said Matthew Vasilakis, organizer for Climate Action Campaign. “With everything on the line, we cannot wait another moment to act.”
Under the CCA model, local governments determine what type of power (natural gas, wind, solar, etc.) will be bought and sold in a jurisdiction instead of the investor-owned utility, such as SDG&E. The power company still assumes all other responsibilities it has traditionally shouldered, such as delivering power by transmission lines and handling customer service and billing, so the utilities do not go away.
CCA backers say the program can deliver greener sources of power to customers at rates equal to or less than incumbent utilities.
By taking over the purchasing of power, CCAs can generate revenue that can build up financial reserves to ensure their rates stay equal to or lower than utilities. They can also use the money to establish clean energy programs (such as building electric vehicle charging stations) and investing in renewable energy projects.
Skeptics say local governments are not well-versed in energy transactions and warn unpredictable changes in the often volatile sector open the door to risk.
“Successfully establishing a new, multi-jurisdictional, quasi-government agency to enter a non-core competitive business area requires much more true diligence than is evident in this instance,” said Bill Roper, a member of the San Diego Strategic Roundtable business group, in a letter to council members ahead of the vote. “The rush to join those who have formed CCAs should not supersede a more complete understanding of … risks and consequences.”
But advocates of CCAs say none of the 19 existing CCAs in the state have gone bankrupt and the programs often hire outside groups with expertise in energy to carry out the duties related to scheduling, contracting and marketing of transactions.
Under the provisions of a joint powers agreement, a CCA is considered a separate, distinct entity with a firewall in place to make sure any debts and obligations cannot be taken from the general funds of the members.
Supporters say providing customers a choice represents a dramatic change for the better in the traditional power model.
“We all want lower costs, more renewable (energy) commitments and competition in the energy market, just like we have,” said Mikey Knab, owner of Ponce’s Mexican Restaurant and chairman of Business for Good San Diego, a small business group.
During public comment, a representative from the International Brotherhood of Electrical Workers complained the JPA “labor and workforce language is weak” and a member of the San Diego chapter of the Sierra Club, while supporting the adoption of a CCA, said the agreement needed to make sure nuclear energy and fossil fuels would not be procured.
The council members who voted yes expressed confidence that upcoming JPA meetings would address those concerns, including an assurance that communities are treated equitably.
As per state rules, customers are automatically enrolled in the CCA. can opt out and go back to the utility if they prefer — typically, at no cost if the move is made within the first year.
“I have a real problem with saying, OK, by the flip of a switch, we’re going to go from a government-regulated monopoly to a government-run monopoly,” Sherman said before voting no. “We already have examples of utilities run by government as it is right now. Anybody seen … all the problems we’ve seen with water bills in the water department and how we run it as government?”
Created in the wake of the California energy crisis in 2000 and 2001, CCAs have grown rapidly across the state. The first, in Marin County, opened for business in 2010.
There are now 19 up and running and six more are expected to roll out by the end of next year — Desert Community Energy (Palm Springs, Palm Desert and Cathedral City), Western Community Energy (Canyon Lake, Eastvale, Hemet, Jurupa Valley, Norco, Perris and Wildomar), and the cities of Baldwin Park, Hanford, Palmdale and Pomona.
It’s been estimated that about 80 percent of the state’s load will be served by jurisdictions that have adopted CCAs.
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