Community Choice Aggregation – Change Could Prove Risky

Commentary

The city of San Diego jumped to the forefront of the fight against climate change in late 2015 with adoption of its Climate Action Plan. This commitment earned the city much praise, and we at the San Diego County Taxpayers Association supported it with the caveat that we must achieve these goals cost effectively. Let’s maximize our greenhouse gas reduction with as few dollars as possible; we have many public problems, like homelessness, to tackle with finite resources.

Community Choice Aggregation (CCA) is one option in the Climate Action Plan to achieve 100 percent renewable energy by 2035, and because San Diegans have trusted us for three-quarters of a century to do our homework, we have several questions about the CCA proposal before the mayor and City Council. We hope city leaders are searching for the same answers we are — basic fiduciary management demands it.

Under CCA, the city would enter into the energy business, buying and selling power to local customers while committing to supplying power generated from renewable sources. A draft CCA report the city recently released indicates that in some scenarios CCA could be feasible or even beneficial. By the report’s own assumptions, however, many unquantified risks would accompany CCA. In fact, the report highlights this concern as one of its primary conclusions.

How much would CCA cost to implement and operate, and what would ratepayers pay?

The city’s draft report demonstrates some positive and some negative scenarios, and the cost uncertainty is about $3 billion. In other words, we don’t know if this would be a gain of $257 million or a loss of $2.77 billion, according to the draft report. It is absolutely reasonable to demand more certainty. All of us have seen what projection errors have meant for our regional transportation agency. We don’t want to repeat the same mistake.

The city’s draft report shows scenarios where customers under a CCA would pay lower rates. But the report also points out that under the desired scenario of 100 percent renewable energy, SDG&E’s rates would actually be cheaper than CCA’s rates. With this much uncertainty on a key point, is there really enough information to justify a decision?

Would it force non-CCA customers in surrounding communities to pay more for their electricity?

One important unknown is the Power Charge Indifference Adjustment (PCIA) — an “exit fee” charged to customers who leave a utility for a CCA to recoup the difference for long-term production contracts it entered into to serve a specific number of customers. Low exit fees could force ratepayers from across the region to subsidize the city for opting out of SDG&E service. The California Public Utilities Commission has 18 months to establish exit fees.

Does it make sense to pursue CCA if pending state legislation would achieve the same renewable goals without any of the financial risk the city would incur under CCA?

SB 100 is a bill progressing through Sacramento that would establish a policy goal requiring California to use zero carbon energy sources by 2045. If passed, this law could reduce the future price of renewable energy, undercutting the ability of CCAs to lower costs and reduce greenhouse gas emissions.

Would the CCA be able to build new renewable energy sources (wind farms, etc.) locally? What would they cost to construct and what would the taxpayer liabilities be?

If a CCA is unable to generate positive returns, as indicated by almost half the scenarios in the draft report, investment in renewable generation could decline. Reducing greenhouse gas production through the energy supply can only be done by increasing renewable energy generation. A failure to do so defeats the primary purpose of CCA.

Are our elected leaders asking these questions, or are they leading us down a path without doing their homework?

The draft report is a good starting point, but it also highlights the fact that we need more information to determine if this is the most cost effective approach to reducing greenhouse gasses. At a minimum, city leaders owe taxpayers answers to questions like ours before deciding whether CCA makes sense for San Diego.

The city set a positive goal with the Climate Action Plan, and San Diegans should support its aims. But city leaders willing to bet they can provide greener and cheaper power for homes and business need to determine if CCA is worth the risk before they commit to plugging in.

Hong is president and CEO of the San Diego County Taxpayers Association, where Gyorffy is a policy analyst.

Community Choice Aggregation – Change Could Prove Risky, by Haney Hong & Cameron Gyorffy, The San Diego Union-Tribune, August 25, 2017.

1 reply
  1. Tyson Siegele
    Tyson Siegele says:

    The San Diego Taxpayers Association is a de facto arm of SDG&E. SDG&E and its parent company, Sempra Energy, both have board seats on the SDCTA board of directors. Additionally, SDCTA is partially funded by SDG&E. This op-ed focuses on the risks to San Diego and ignores CCA benefits. If we are going to look at risks, we should consider that according to the Sacramento Municipal Utility District’s 2016 report, SDG&E customers pay 77% more for electricity than SMUD customers. The risk of not adopting a CCA is that we continue to pay exorbitant prices for electricity indefinitely.

    Reply

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *