Solana Beach city staff said Wednesday, Feb. 13 that the city is seeing favorable results in its community choice aggregation program.
Financial results through December 2018 show the Solana Energy Alliance (SEA) program, which launched in June as an alternative to San Diego Gas and Electric (SDG&E), has seen revenues 2.73 percent above projections and expenses about 9 percent lower through the first two quarters of operations, between June 1 and Dec. 31, city staff said. The net revenue is about $300,000 higher than projected.
The project — which the city established to further reach its goal of using 100 percent renewable energy by 2035 — also has about $1.1 million available to cover any debts.
In an email following the meeting, Assistant City Manager Dan King confirmed “the only outstanding debts SEA currently has are the $107,434 it owes the City for the start-up costs (which is scheduled to be repaid in July 2019), $44,605 due to TEA for their deferred start-up costs (which is on a structured payment schedule to be paid back $1,088/month until 5/2022) and finally $88,759 due to the City for ongoing internal administration costs (which SEA has already begun paying back at $10,000 per month with the final amount due on June 2019).”
“Much like our budgeting process, our financial model is very conservative and based on energy markets on a daily basis,” said City Manager Greg Wade at the meeting. “It’s encouraging to know… we’re having net positive results.”
Jeff Fuller, a consultant for The Energy Authority (TEA), said the plan’s financial outlook has improved since November, when the city last received an update. This is partially because SDG&E’s final rates weren’t available at the time, he said, also adding that SDG&E generation rates decreased “slightly more than expected.”
To date, savings for residential customers are just over $120,000, and commercial savings are slightly lower than $120,000, city staff said.
According to a city staff report, based on the current and projected rates, and as long as the three percent savings stay in effect, SEA customers are expected to realize a total of about $1 million in energy cost savings over the next five years. From June through Jan. 31, residential savings were $128,760, compared to $102,555 in savings this year. The number is projected to increase again over the next five years, with 2022 projected at $109,470.
In April, the city had forecasted that by the end of 2022, cumulative net revenues would be about $3.9 million. If there are no changes in the projection assumptions, the city now estimates the SEA will generate more than $1.5 million in net revenues by June 2022. Consultants attribute that reduction to an increase in energy costs and generation rates from SDG&E.
SDG&E exit fees also raised slightly, with the rate now set at about $.03 for residential customers, compared to $.02 last year. The exit fee — also known as a Power Charge Indifference Adjustment (PCIA) — is a charge that SEA customers pay to SDG&E obtained on behalf of customers prior to moving to SEA. This helps ensure SEA customers are receiving the full three percent savings on their energy costs, according to a city document.
Fuller said the outlook through the fiscal year, ending on June 30, looks positive.
“Despite the recent challenges facing SEA, the program is currently meeting the goals set out by the city council of local control and providing cleaner energy at a reduced rate,” the staff report reads. “While the next few years look to be more challenging than originally forecasted, SEA is well positioned to meet the challenges and continue to provide value to its customers while assisting the city in reaching its CAP goals.”
Solana Beach Mayor David Zito acknowledged customers’ energy rates are going down but “technically the policy is three percent below SDG&E.” He questioned how many residents are being or will be impacted by rising rates.
Wade said it’s “safe to say” the rates will decrease for a “vast majority” of users.
The council decided to form a subcommittee that would focus on the SEA, appointing Zito and Council member Judy Hegenauer to the group.
Solana Energy Alliance seeing higher revenues, lower expenses, by Brittany Woolsey, The San Diego Union-Tribune, February 20, 2019.