CPA Still Violating Troublesome Rate Pledge | Temporarily Lowers Most Rates

The board of the Clean Power Alliance, the new community choice aggregator now serving about a million former Southern California Edison customers in Los Angeles and Ventura Counties, on Sept. 5 approved resolutions lowering rates for most of its residential and commercial customers. The adjustments came only three months after CPA approved significant rate increases for those customers and a small group of 2,000 others who did not see relief this month.

The resolutions came as a welcome piece of business for the board which, under a marketing commitment to keep its rates tied to those of Edison, has in less than a year been asked to approve six rate adjustments, most of them increases. On the downside, at least two more adjustments are due by April and that doesn’t include the 32 percent general rate increase Edison announced this month that CPA will also have to eventually pass through.

Under its rate comparison policy, CPA guarantees rates for its 36 percent renewable “lean” energy product will be 1 to 2 percent less than the comparable Edison rate, while its mid-range 50 percent renewable “clean” product will be on par with SCE’s and its 100 percent renewable “green” product, no more than 9 percent above Edison’s comparable service. But to maintain its commitment those ranges, CPA has to adjust its rates anytime Edison does, and of late that’s been a lot.

The situation has raised the specter of the viability of the rate comparison guarantee, a matter the CPA board has been reluctant to deal with.

CPA Executive Director Ted Bardacke described the adjustments as a “rate roller coaster. I feel the rushes from being on that rates roller coaster and I think many of you do too,” he told board members June 6 before imploring them to vote for one more.

Also at that meeting, Chief Operating Office Mathew Langer said the resulting “rate fatigue” is frustrating to all involved. “Most customers have no idea these (adjustments) are happening,” he said, but “our long term vision is to not be changing rates every single month.”

With last week’s adjustment, rates are now back to roughly where they were in January, CPA officials said.

But the board did not give its customers as much relief as it could have. That’s because the most recent, 3.3 percent decrease Edison gave its customers turned out to be less than the 4 percent “exit fee” rate that Edison charges CPA customers for the sunk cost of the latter’s departure from Edison’s generation service. That meant CPA didn’t have to lower its rates as much to maintain its rate comparison ranges. By reducing rates only enough to keep up with the existing comparison levels, CPA will be able to bank an extra $4.7 million through the end of the year.

“We’ve had a run of not good luck,” Bardacke told the board Sept. 5. “This is a better position to be in–to be able to say we are lowering rates for everybody and it’s a question of how much, and we can also earn more revenue at the same time. It’s nice to get lucky for once and we need to take opportunities when we have good luck.”

But in fact, rates were not lowered for “everybody.” Staff elected to recommend a small subset of customers whose rates went up much more than others in June not get any relief. Some 1,800 of CPA’s largest energy users—who began taking service in May–are still slated to begin paying much larger winter rates starting next month while another small group of 200 customers with “outdoor lighting” accounts (sidewalks, streets, golf courses, parking lots etc.) will see even larger increases.

CPA would not supply average percentages for the amount of these customers’ rates increased, but at least some were known to be in the high 40 percent range.

The rates for these customers were increased because CPA determined that under its rate comparison pledge, not doing so would force its residential customers to subsidize large customers, a feature of Edison’s rate structure that CPA does not wish to emulate.

Delivering on the comparison guarantee “is important to CPA’s core value proposition,” CPA has said. But the indexing to SCE rates “has necessitated multiple rate changes throughout the course of 2019 to maintain these bill comparisons, exposed CPA to unanticipated cost shifts, and led to a situation where certain customers do not cover the cost to serve them,” staff frankly acknowledged in material prepared for CPA’s June 28 board retreat.

Importantly, the large increases affected not only large industrial customers, but also municipal customers, many of whom are represented on CPA’s board. The huge lighting rate increase, which for CPA members like Ventura and Oxnard amounted to hundreds of thousands of dollar per month, came with little notice and only days after some cities had finalized their budgets. That upset some members.

At least five of CPA’s eight municipal members in Ventura County—the cities of Ventura, Camarillo, Moorpark, Oxnard and Thousand Oaks–acted within weeks to opt out some or all of their CPA accounts, meaning they will have to stay with SCE for at least the next year. Ventura kept accounts not affected by the increase with CPA, but took a separate vote to shift remaining accounts from CPA’s 100 percent renewable product to the 36 percent “lean” renewable offering.

“I really didn’t want to have to opt out,” said Moorpark Mayor Janice Parvin.

“I don’t want anyone to think this is CPA’s mistake, or our mistake,” added Moorpark Councilwoman Roseann Mikos. “This is Edison’s fault.”

She was referring to a recent proceeding in which state regulators approved SCE’s application for a rate adjustment to make up for an $825 million “under collection” that was unusual both for its size and timing. SCE said it followed the rules, but the regulators did not agree and are now considering what kind of penalty to impose on impose on Edison

Moreover, Mayor Parvin added, Edison was required to share data that CPA relied on, but the data it shared turned out to be “very, very inaccurate.”

Both Parvin and Mikos complained they couldn’t be more specific about Edison’s actions because the information was provided by CPA in a closed session. Parvin said of all the boards she’s served on, CPA is “very frustrating” because when “we go into closed session there is always a big surprise. Not a little surprise, but a big, big, big surprise.”

The subset customer increases also had impact on industrial customer opt-outs but CPA would not release any information about how much load it lost or how many large customers opted out or reduced their level of renewable service. Nor are the large customers anxious to talk about it.

Perhaps even more important, the increases for the subset customers “violate the rate promises we made” CPA board chair and South Pasadena city councilwoman Diana Mahmud acknowledged. “It’s really unfortunate and we so regret being in this position, but it is the result of a confluence of factors that hopefully we will not see next year.”

Meantime the future of the rate comparison pledge remains unresolved. Earlier this summer, Mahmud told the South Pasadenan News that at their June retreat, board members discussed “whether CPA’s rates should always be indexed to SCE’s.” But she indicated the matter was left unresolved. “While members recognized that indexing to SCE’s rates was an implicit acceptance of any policy objectives embedded in that rate structure, the consensus was that any changes to CPA’s rate structure should be made with caution.” She said the question could be the subject of a “deeper dive” the board may take later.

After its Aug. 20 executive meeting, Mahmud said the board would consider taking “a more relaxed” approach to the indexing, where changes would be made only if Edison rate adjustments require adjustments to stay in the comparison pledge ranges. But no consideration has been given as yet to changing the ranges themselves. “I don’t see us deviating from that, as we don’t want to deviate from what we told our customers.”

 

CPA Still Violating Troublesome Rate Pledge | Temporarily Lowers Most Rates, By Ben Tansey, South Pasadena News, September 20, 2019.

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