It was a debate that pitted the city’s aggressive carbon neutral goals against financial viability on Tuesday night, as the Hermosa Beach City Council considered whether to continue researching Community Choice Aggregation (CCA) as an alternative energy provider.
CCA is a state-governed policy that allows municipalities to purchase alternative energy supplies such as solar, wind and natural gas power. Residents would all be CCA customers, but are given the option to opt-out within 60 days or later for a fee to be determined by the city.
Hermosa Beach started exploring CCAs in June 2013 as a way to meet carbon neutral goals, which City Manager Tom Bakaly called some of the most aggressive in the country.
After some residents accused the council of not being transparent in their intent to form a CCA, Councilmember Jeff Duclos pointed to 10 public meetings, including the one Tuesday night, at which the CCA option has been discussed.
“This is not a concept that dropped out of the sky that landed upon us today,” said Duclos.
Before opening public comment on CCA options, Bakaly assured the council that passing an investigative ordinance would not commit the council to forming a CCA. Rather, it would give them the power to dive into the different options for more information on set-up and maintenance costs, and power costs to consumers.
Those options would include forming a Hermosa Beach CCA, joining into a CCA with Los Angeles or other surrounding municipalities, or creating a hybrid option: a Hermosa Beach CCA that has a purchasing power agreement with larger CCAs. Each option would involve its own level of risk, autonomy, timing and financial investment.
Due to a lack of a public hearing—which was not required to pass the ordinance—and many letters to the council and social media dialogue, City Attorney Michael Jenkins advised council read through a draft ordinance, but take a vote in August.
Bakaly also told council that while they would not be committed to form a CCA per the ordinance, alternative energy would be the only way for the city to meet its carbon neutral goals.
“If for some reason there’s concern or hesitancy about … some way to purchase renewables or allow the people to choose renewables, if we don’t do a CCA, we’re not going to be meeting our carbon neutral goals,” said Bakaly. “We’re not going to be meeting them at the municipal level and we’re not going to be meeting them at the community level. People may want to have a debate about that, but if we’re not able to make an impact in a key area, which is energy, we’re going to have trouble meeting our goals.”
The concept of aggressive carbon neutrality was one idea that CCA opponents took issue with.
“The first thing you need to do is to change your policy on this carbon neutrality and move it down the road,” said former councilman George Barks, one of eight residents who spoke out against a CCA. “It’s not realistic for this city. This city doesn’t have the staff. It doesn’t have the resources… the most aggressive carbon neutrality policy in the United States? I mean, come on. We have a great little beach city, but let’s keep it in perspective.”
Councilmember Carolyn Petty, whose professional background is in business finance, wasn’t convinced. While not opposed to the idea of carbon neutrality per se, she looked at a $1 million dollar investment to set up the CCA as irresponsible, when compared to the city’s needs for things like street repair, a new firehouse and parks.
If a CCA could generate city income, that would be one thing, she said. But she looked at Lancaster CCA’s finances, the city that is mentoring Hermosa Beach on carbon neutrality, and said that the numbers don’t add up. According to Lancaster’s June financial reports, Petty said the CCA was projected to close out the 2016 fiscal year at a $3.6 million dollar loss. When she reached out to them, Petty said Lancaster officials submitted new numbers that showed a $4 million dollar swing in the opposite direction, with nearly half a million in profit.
But the numbers in the report, which was not audited, did not make sense. She said the revenue from clients went up $2.2 million from one report to the next, while the delivery costs went down by $1.7 million. More customers, and more revenue, she argued, should result in higher delivery costs.
“I think many people say, we should do this, because if we don’t do this, we’re not leaders,” said Petty. “To that, what I will say is this: We have a responsibility to be practical.”
Petty said the city’s initial carbon neutral goals were “based on flawed information,” which prevented the council from making a sound decision. As an example, she pointed to energy savings linked to electric vehicles extended out over a 30-year period, longer than the useful life of the vehicle.
Councilmember Justin Massey came down on the opposite end of the financial spectrum. He looked at Marin Choice Energy and Sonoma Clean Power CCAs and said that both are experiencing significant net positive revenue after five years—as high as $13 million in Marin. Early Hermosa estimates showed a net positive after 30 years, which Massey felt was inaccurate and understated.
“In order to be opposed to moving forward with this, you would have to discount a mountain of actual real-world data that supports it,” said Massey.
He said there is simply no comparison between for-profit overhead for companies such as Southern California Edison with high executive compensation and dividends to investors, and not-for-profit CCAs.
Read More: Hermosa Beach Council Discusses Alternate Energy Providers, by Alana Garrigues, The Beach Reporter, July 28, 2016.