Redondo Beach Mayor Bill Brand had a change of heart about the city joining a Los Angeles County effort aimed at bringing lower energy costs from more alternative sources.
The City Council voted 3-2 at its final meeting of the year on Dec. 16 to join Los Angeles Community Choice Energy (LACCE), a joint powers authority created by the county to aggregate the buying power of individual municipalities to procure energy.
On Dec. 21, however, Brand vetoed the decision, drawing a stern rebuke from Gary Gero, the county’s chief sustainability officer.
“I am deeply disappointed that the residents and businesses of Redondo Beach will not be joining nearly 3 million others across Southern California in having a choice in their energy provider, but will remain subject to the monopoly of SCE (Southern California Edison),” Gero wrote in a letter to Brand and other councilmembers.
Risk not worth reward
Known as Community Choice Aggregation programs, nonprofits such as the one forming in Los Angeles County have been sprouting up throughout the country as an alternative to investor-owned utility companies.
The arrangements allow local governments to secure energy at lower costs to consumers and from greater sources of alternative fuels than currently being offered. In addition, profits can be plowed back into lower rates or local power generating projects such as subsidies for solar panels, according to supporters.
But Brand, along with Councilmembers Laura Emdee and Nils Nehrenheim, who voted against the plan, saw drawbacks such as the potential costs for getting out of the deal if it doesn’t work out.
“While I am a strong proponent of renewable energy and support the aggressive goal setting that has put California at the forefront of implementation of new technologies … I am concerned about exposing Redondo Beach to unnecessary financial risk associated with joining this particular Joint Powers Authority at this time,” Brand wrote in explaining his veto.
Brand suggested the risk was not worth the reward given the projected single-digit percentage savings. He also cited potential exit fees of more than $1 million.
But Gero, in responding to Brand’s veto, said the mayor was misinformed.
“Cities that seek to withdraw from the JPA may do so at no cost,” Gero wrote. “This can be achieved by providing notice of your intent to withdraw so that LACCE no longer purchases power on behalf of your residents and businesses and waiting until any contracts for previously purchased power have expired.”
Exit fees questioned
Gero further explained that the LACCE board amended its agreement at the request of Redondo Beach to indicate that if a city wanted to withdraw, LACCE would use its best efforts to sell any power procured on behalf of the city.
“The withdrawing city would then only be liable for the marginal difference between the purchase and sale prices which is likely to be minimal and may in fact be zero,” Gero wrote.
Another issue Brand mentioned to explain his veto stemmed from a proposed rule change by the California Public Utilities Commission designed to undermine the formation of CCAs by reducing the financial incentive to join.
“These requirements should be finalized before Redondo Beach joins one,” Brand wrote.
In Manhattan Beach, where city councilmembers decided to join the county CCA in November, the council unanimously voted to sign onto a letter in December urging the CPUC not to go forward with its proposed rules. In Hermosa Beach, city officials are still discussing the matter.
Gero argued the county CCA has built into its business plan any potential increase in costs that could come out of the CPUC and that hundreds of other municipalities that have CCAs are at the table and can help steer the public utility commission.
“Waiting to join a community choice energy program until the increase has occurred is not a financially sound strategy,” Gero wrote.
But in a separate letter to area cities including one to Manhattan Beach, Gero writes that the rules would “significantly harm CCA formation and have serious economic impacts on CCA programs.”
The proposed CPUC action would essentially attempt to slow down CCA growth in California and enact a de facto “CCA freeze,” according to an analysis by California Community Choice Association. The rules would also delay new communities from joining or forming CCAs, increasing exit fees on customers, potentially imposing financial burdens on local governments and circumventing standard public input processes, the group reported.
Councilmember Christian Horvath said he was shocked and dismayed by Brand’s veto. Horvath has supported the idea of creating a CCA for the past three to four years as it was being discussed on a regional basis with 14 cities under the proposed South Bay Clean Energy CCA. That effort, which required greater buy-in costs, has since gone on hiatus while the county CCA gained momentum.
“CCAs are a newer way to look at energy procurement,” Horvath said. “As more and more people are concerned about climate change and renewable energy I think that’s why you are seeing more CCAs pop up around the country. It’s clearly working.”
Horvath points to Marin Clean Energy and Sonoma Clean Power as CCAs that are successful, both saving ratepayers money and supporting more alternative energy sources.
How does it work?
Every day as electricity arrives at your home or business, that power is coming from a multitude of sources, each procured by Southern California Edison.
If the city decides eventually to join a CCA for ratepayers, your electric bill will still look the same. Only instead of receiving energy from SCE, ratepayers would be receiving power from sources that were procured by the nonprofit CCA.
Rather than needing to opt in to the program, such as those currently available for green energy incentives, ratepayers would be automatically enrolled with the choice to opt out. Ratepayers can currently decide to consumer power from a greater share of alternative sources, but they need to seek those programs out.
“In the CCA, the revenue that comes in goes back out,” Horvath said. “Because it’s a nonprofit scenario, any money the CCA makes can be used to reinvest back into the CCA to afford customers lower rates or incentives to create generation or storage on their own properties or any other type of green initiative that people are interested in locally.”
SCE publicly has no problem with this idea because the company no longer focuses on power generation. But for those utilities that do still generate electricity to a large degree, CCAs represent a threat.
“You have to ask yourself and especially Mayor Brand who is against a lot of big business, why he would even shutter,” Horvath said. “When utilities are trying to shut down CCAs, that should send up red flags.”
1/4/18: This article was corrected to reflect that Councilmember Laura Emdee voted against joining LACCE and not Todd Lowenstein.
Redondo Beach mayor vetoes clean energy commitment, drawing rebuke, by David Rosenfeld, The Beach Reporter, January 4, 2018.