The California Public Utilities Commission voted Thursday to raise the cost of leaving an investor-owned electric utility, in a move critics said would stifle the growth of locally run energy programs and make it harder for communities to invest in renewable energy.
The commission’s vote will increase the monthly “exit fees” that homes and businesses must pay to Southern California Edison, Pacific Gas & Electric or San Diego Gas & Electric after switching to a local energy program. Such “community choice” programs, known as CCAs, allow local governments to make their own energy purchases and set electricity rates for customers. Community choice is an increasingly popular option for cities and counties looking to lower utility bills and provide cleaner power options.
Nineteen CCAs are now operating in California, including one in Rancho Mirage, and there are more in the works, including one that would cover Palm Springs, Cathedral City and Palm Desert.
Community choice advocates said Thursday’s decision to change the formula for calculating exit fees poses a threat to the viability of new and existing CCAs. Critics urged the California Public Utilities Commission to reject the proposed changes, saying they would make it harder for the state to meet its clean energy and climate goals.
“Community choice energy programs are the single most powerful tool to reduce our city’s greenhouse gas emissions,” said Ruth Merino, who has been a leading advocate for a planned community choice program in San Jose.
The appropriate size of the exit fees has been debated by community choice supporters and the incumbent electric utilities for years. Under state law, customers who leave an investor-owned utility are required to pay exit fees to help cover the costs of energy contracts signed by their old utility to provide them with power. The goal is to prevent the costs from falling entirely on customers who remain with the utility, who could be stuck with ever-rising power bills as more people leave for local energy programs. But community choice providers and the investor-owned utilities have never agreed on how best to calculate the fees, which led the public utilities commission to take up the issue.
Commission staff released a proposal in August that was embraced by community choice advocates and panned by the big utilities, even though it may have increased exit fees slightly. But then Commissioner Carla Peterman released an alternate proposal. Peterman’s plan didn’t give the utilities much of what they wanted, and it retained several aspects of the original proposal supported by the CCAs, including a cap on how much exit fees can rise each year. But it hewed closer to the utilities’ desired outcome.
All five commissioners voted for Peterman’s proposal. They expressed several reasons for their support, including what they saw as a legal error in the original proposal and a need to make sure the exit fees are fair to all Californians, including customers who stick with the big utilities. Several commissioners emphasized that higher exit fees won’t line the pockets of utility shareholders — they’ll actually lead to lower rates for utility customers.
“Nothing in this decision increases utility profits,” Commissioner Martha Guzman Aceves said.
For some community choice skeptics, neither proposal considered by the commission Thursday does enough to limit the so-called “cost shift” from CCA customers to investor-owned utility customers. Ruben Barrales, co-chair of the San Diego-based Clear the Air Coalition, told commissioners that both proposals “continue to force hardworking families to pick up the tab as cities around them go into the energy industry, forcing those families to subsidize others.” The Clear the Air Coalition’s members include representatives of Sempra Energy, parent company of San Diego Gas & Electric.
The vast majority of public commenters at Thursday’s meeting urged the commission to oppose Peterman’s proposal, which was backed by the invest-owned utilities. Those commenters included city council members and CCA customers. They said Peterman’s plan would make it harder for new CCAs to get started and would limit the ability of existing CCAs to fund clean energy programs that support rooftop solar or electric cars.
Jessica Tovar, a coordinator for the Oakland-based East Bay Clean Power Alliance, said higher exit fees would disproportionately affect low-income communities, which she said have borne the brunt of the pollution from California’s fossil-fueled power plants for years, and now have the ability to choose cleaner energy options through CCAs.
“You have the opportunity to stand up for us,” Tovar told the commission. “This is affecting people throughout the state, and namely vulnerable communities like mine.”
Thursday’s decision may have less of an impact in Southern California than in Northern California. Southern California Edison predicted that under Peterman’s proposal, the exit fee would average 1.98 cents per kilowatt-hour for residential customers in 2019, compared to 1.63 cents per kilowatt-hour under the plan favored by community choice advocates. For an average residential customer in the Coachella Valley, the difference translates to a $5 monthly increase during the summer and $2 in the winter.
It’s not yet clear how the higher exit fees might affect the Coachella Valley Association of Governments’ plan for a CCA covering Palm Springs, Cathedral City and Palm Desert. A separate community choice program launched this year in Rancho Mirage, where officials say the viability of their program won’t be affected by higher exit fees.
“Even under the worst-case scenario, we’re still saving our customers money,” Rancho Mirage city manager Isaiah Hagerman told The Desert Sun before Thursday’s vote.
Imperial Irrigation District customers in the eastern Coachella Valley aren’t affected by the public utilities commission’s decision, since CCAs can only be formed as alternatives to investor-owned utility companies. The Imperial Irrigation District is publicly owned.
Sammy Roth writes about energy and the environment for The Desert Sun. He can be reached at firstname.lastname@example.org, (760) 778-4622 and @Sammy_Roth.
California just made it more expensive to leave Southern California Edison, PG&E and SDG&E, by Sammy Roth, Desert Sun, October 11, 2018.