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HomeMy WebLinkAbout06-07-2023_Open Session_General Comment_Titus, Dan_Redacted The American Coalition for Sustainable Communities 1 ACSC Date: June 6, 2023 To: San Bernardino, Mayor and City Council Members CC: City Manager and Director of Engineering Services/Utilities One Copy for the Public Record C/O: Clerk of the Board: sbcityclerk@sbcity.org From: Dan Titus, ACSC, Email: Subject: Community Choice Aggregation (CCA) Resurfaces in the Inland Empire: Promoters Target Jurisdictions for Reprise of Attempt in 2017 The American Coalition for Sustainable Communities (ACSC) is a national network that opposes The United Nations 2030 Agenda for Sustainable Development and international influence in local government and public policy. CCA Promoters: Energy Summit Meeting A workshop about CCA, was held at the Hilton Doubletree, Ontario, on Friday, June 2, 2023. Promoters, John Valdivia, with AAdvantage Communications and Howard Choy, with EES Consulting, presented to small group of invited elected officials and observers. San Bernardino County Supervisor, Dawn Rowe, endorsed the meeting and promoted CCAs in a short opening speech at the event. The brochure pitched the formation of a CCA through a regional Joint Powers Authority in San Bernardino, which failed in San Bernardino County in 2017 (See special message for elected officials and staff in the attached report). Other “benefits” were touted. However, pitfalls of CCAs were glazed over. It appears that promotors are trying to reignite a failed proposition in San Bernardino County. Community Choice Aggregation: A False Choice Community Choice Aggregation (CCA) is being promoted as one of the many quick fixes to tackle the consensus of man-made climate change, arbitrary greenhouse emission reductions, and at the same time offering a way for jurisdictions to make money by reselling electricity. Claims are made that CCAs can buy power more cheaply than Investor Owned Utilities (IOUs), resell it more cheaply and then, appropriate the savings The American Coalition for Sustainable Communities 2 back to community social programs. CCAs can market themselves as “green”, claiming that they buy electricity produced from renewable sources. CCAs claim that they are a completive alternative to conventional energy providers like SCE and PG&E, and that they can save ratepayer customers money on their electric bills. History of CCAs in the Inland Empire ACSC published a critique a joint CCA business plan for San Bernardino County and Riverside County, authored by EES Consulting. In May 2017, jurisdictions meeting at the county council of governments failed to muster a vote and the plan failed; this, after activists argued the many flawed attributes presented in the plan. Though the CCA plan was defeated in San Bernardino, EES Consulting took the plan to the council of governments in Riverside and moved forward in assisting with the development of a CCA: Western Community Energy (WCE) - They, also, used this plan as a template for the LA CCE study, which exhibited errors found in the Inland Choice Power plan. (See comments about this on page 4). ACSC’s report, Community Choice Aggregation: A False Choice, (See attached) was sent to all jurisdictions in Riverside County in 2017. The report informed and warned city staffs in the county about the pitfalls of CCAs. Armed with knowledge from the report, activists interfaced with their elected representatives in the county. Activists received emails from elected officials in the county thanking them for their efforts and saving jurisdictions millions of dollars when WCE went bankrupt. Rob Nikolewski of the San Diego Union-Tribune reports, Riverside County community choice energy program closes its doors for good after bankruptcy (see page 6). CCA Problems in Orange County, California EES Consulting assisted the city of Irvine with a feasibility study for a CCA. This grew into a CCA called, Orange County Power Authority (OCPA), which launched at the end of 2020. The CCA instituted rate hikes a couple of months after opening its doors. Problems ensued and in December 2022, the Orange County Board of Supervisors vot ed to leave the OCPA. Subsequently, the City of Huntington Beach elected to leave OCPA in May 2023. (See page 5 for comments). The American Coalition for Sustainable Communities 3 CCA is Not a Free Market Solution Unsuspecting electricity customers have zero choice weather or not they want to be a CCA customer. When a CCA is formed, they are automatically switched into the new entity. CCA promoters and consultants state that California Assembly Bill 117 requires automatic enrollment, meaning that customers moved to a CCA without their permission. The bill requires CCAs to notify customers to opt-out back in after they have already been transferred to the CCA. Forcing unsuspecting ratepayers into a CCA startup is deceptive. This practice is an indirect subsidy to CCA startups; it skirts the competitive free market. It exhibits attributes of crony capitalism, corporatism and corporate welfare where profits are privatized and losses are socialized on the backs of jurisdictions and ratepayer customers. Price Setting Every three years there is an appeal for a rate adjustment, called a General Rate Case (GRC). Following every GRC decision there is a rate design decision. SCE, SDG&E, and PG&E each have GRC hearings identifying total revenue requirements. The rate design sets who pays for it and the rollout of those rates. CCAs hire lawyers to follow these rate design proceedings at the California Public Utilities Commission. The CCAs know before the public what their competitor-IOU’s prices (and exit fees) are going to be. Then, the CCAs design their own prices accordingly. Then, when the IOU raises its prices, the CCA raises its prices, too. With a majority of its energy contracts locked in place, each time the CCA raises its prices — to JUST under the IOU prices — it syphons extra money from the community, it claimed to serve, while still advertising “Lower prices than SCE!” The community suffers while the CCA acts as a landlord, regularly increasing “rents.” CCAs Ignoring Statuary Obligation to Keep the Grid Safe Many CCAs purposely circumvent their statutory obligation to procure and supply emergency back-up power to the electric grid’s operators. That emergency energy, called “resource adequacy” is needed to stabilize the electric grid during difficult situations, including very high temperatures and demand periods. CCAs pay relatively small fines The American Coalition for Sustainable Communities 4 compared to the cost of procuring their resource adequacy, and then advertise “low prices,” achieved by shirking their obligation. They take the savings and artificially boost their balance sheets. The problem is that the grid does not discriminate and blackouts can ensue – when a CCA fails to delivery its resource adequacy everyone suffers, including SCE customers who have nothing to do with CCAs. The American Coalition for Sustainable Communities 5 *EES Consulting Comments: Jim Phelps Conflict of Interest at Orange County Power Authority, CCA: EES authored the original business plan for OCPA (City of Irvine) in June 2019. Then, in December 2020 EES circled back to OCPA for a not-to-exceed $150,000 CCA Implementation Services contract. Barbara Spoonhour (formerly of now-bankrupt Western Community Energy) was on EES payroll. In March 2023 EES Consulting authored an Operation Review of OCPA for City of Irvine. Business Plan errors: LA CCE Business Plan (June 30, 2016), page 21, Exhibit 15, EES claims LA CCE can meet its renewable portfolio standard (RPS) energy by using 100% PCC 2 (Bucket 2) for years 2024 through 2030. Inland Choice Power CCA Business Plan (12/08/2016), page 26, Exhibit 14, EES duplicates the same error contained in LA’s Business Plan, erroneously claiming Inland Choice (CVAG, SANBAG, and WRCOG) RPS energy can be 100% PCC 2 (Bucket 2) for years 2024 through 2030. In both cases, California allows only a maximum of 25%. EES does not understand the core of what is used by CCAs – RPS energy. The American Coalition for Sustainable Communities 6 Riverside County community choice energy program closes its doors for good after bankruptcy BY ROB NIKOLEWSKI, JUNE 16, 2021 5:40 AM PT After little more than one year in business, a community choice energy program serving about 113,000 customers in Riverside County has closed its doors for good in the wake of mounting debt obligations. The board of directors for Western Community Energy has sent a notice to the California Public Utilities Commission to de-register as a state energy provider, just weeks after declaring a “fiscal emergency” and filing for Chapter 9 bankruptcy protection. In a resolution passed unanimously last week, the board said the power authority “does not have sufficient financial resources” to continue serving customers. The website for Western Community Energy, or WCE for short, said the move was “its own decision due its financial insolvency.” Effective Tuesday, WCE’s customers move back to Southern California Edison, the investor-owned utility whose service territory includes Riverside County and the six towns that made up Western Community Energy — Perris, Hemet, Wildomar, Norco, Jurupa Valley and Eastvale. The board originally hoped WCE could reorganize but after consulting with the utilities commission and Edison, “it became apparent that WCE would not have sufficient financial resources to continue to purchase power for its customers going into July.” Financially strapped, WCE faced the prospect of buying energy on the spot market this summer — a time when prices run high because electricity demand increases when the weather is hot. “The deregistration process is the best solution that ensures little to no impact to WCE customers, which is the top priority of WCE and SCE (Southern The American Coalition for Sustainable Communities 7 California Edison),” board chairman Todd Rigby said in a statement Friday. “We are working closely with SCE on an orderly and efficient transfer, and both organizations are committed to making certain that there will be minimal impacts and no service disruptions to customers.” WCE was one of a growing number of community choice aggregation, or CCA, programs that aim to provide an alternative to traditional utilities when it comes to buying power for communities that join them. WCE’s demise marks the first time a CCA in California has closed due to financial pressure. More than 20 CCAs are in operation across the state and two in San Diego County launched earlier this year — San Diego Community Power, serving San Diego, Chula Vista, La Mesa, Encinitas and Imperial Beach; and the Clean Energy Alliance, serving Carlsbad, Del Mar and Solana Beach. Both entities say they are following prudent fiscal policies that will keep a situation like WCE’s from affecting their customers. WCE has blamed the timing of its rollout for its financial problems. The CCA began servicing customers in April and May 2020, just weeks after California implemented lockdown measures to stem the spread of COVID-19. WCE said the number of its customers who fell behind on their utility bills “surged five to 10 times higher than industry standards” because of the financial effects of the pandemic. Orders by Gov. Gavin Newsom and the utilities commission prohibiting power companies from disconnecting customers for nonpayment resulted in losses of about $6 million for WCE. An extreme heat wave in August 2020 led to $12 million in costs WCE did not anticipate and subsequent increases in renewable energy procurements that the utilities commission mandated for energy providers added more stress to the bottom line. WCE raised its rates earlier this year but it didn’t generate enough revenue to meet its scheduled payments. “Without the benefit of cash reserves built up over years of operation, WCE was unable to buffer the impact of increased pressure on cash flow,” Fitch The American Coalition for Sustainable Communities 8 Ratings, a credit ratings agency, said in a commentary after WCE filed for bankruptcy protection. A spokeswoman for WCE said it will proceed with its Chapter 9 filing and it “will continue to work with its creditors” to pay what it owes, adding, “these debts are not the responsibility of the customers.” However, under Public Utilities Commission rules, Edison has the right to have WCE pay for the costs associated with taking back WCE’s customers. And if WCE does not eventually pay those re-entry fees “in full or part,” Edison has the right to seek recovery from WCE’s customers. The size of the fee is not known yet. In a statement, WCE said it will work with Edison to mitigate those additional costs.