In a dramatic sign of California’s changing energy market, San Diego Gas & Electric wants to stop buying and selling electricity.
In recent days, the company has asked lawmakers to introduce legislation that would let SDG&E reduce its role – while also pushing the state to enter the energy market in a big way.
The company’s vision could eventually require the state to buy out its long-term power contracts and possibly pay the company for several natural gas-fired power plants it owns.
SDG&E is pitching this idea as the company prepares to lose about half of its power customers within the next few years.
Last month, San Diego Mayor Kevin Faulconer said he wants to form a “community choice” agency, known as a CCA, to buy and sell power on behalf of the city’s 1.4 million people. Other smaller cities across the county are likely to join that effort, creating an electricity buyer’s club that will compete with SDG&E and leave the company with more power than it can sell.
“We think it makes better sense for SDG&E to eventually move out of the commodity role,” said Kendall Helm, the company’s vice president of energy supply. “But it’s important to always provide clean, safe and reliable delivery to all customers in our service territory.”
That may sound like it’s bad for business, but it may be more of an opportunity. A well-run utility can make a steady profit from delivering power.
SDG&E – one of the region’s largest employers – makes most of its money that way, which is why its bottom line won’t be at much at risk if it stops selling power. The company already gets guaranteed revenue from the sprawling system of power lines and cables it’s built over the last century to each home and business in the region. It also delivers natural gas.
Instead, the company is looking to shed the risk it now faces trying to buy power for a customer base that is looking to jump ship.
“Signing contracts that are 10 and 20 years in length while the cities are discussing the possibility of joining together to buy their energy from a CCA provider will be tricky to say the least and thus we are looking at what the best options are for the near future related to our efforts,” SDG&E’s vice president for government affairs, Mitch Mitchell, said in a Nov. 14 letter to state Sen. Ben Hueso. (Disclosure: Mitchell sits on Voice of San Diego’s board of directors.)
For years, most California power companies did it all – they owned both the power and the lines that delivered it to customers.
Now, following years of deregulation and changes in the industry, the state’s three big energy utilities – Southern California Edison, Pacific Gas & Electric and SDG&E – no longer own all of the power they deliver. Much of their power comes from long-term contracts they signed with other companies.
Even that market is eroding as governments enter the energy market.
SDG&E’s parent company, Sempra Energy, sees that and recently paid just under $9.5 billion to control Texas’ largest utility, Oncor, which only delivers electricity.
In the future, SDG&E could look more like Oncor.
The question is how to get there.
A draft bill, which Hueso’s office provided, shows what SDG&E is asking lawmakers to consider. The company urges the state to create a way for the company to sell off its long-term power contracts to a “state-level electrical procurement entity.” The first step would be a state-level task force to sort through all the issues involved, which would be many.
Matthew Freedman, a staff attorney for The Utility Reform Network, said there are already discussions about the state stepping in to help develop renewable power resources. But those discussions are about developing new power – like geothermal projects in Imperial County – not paying companies for existing contracts.
“That is the legitimate part of what SDG&E is teeing up, but I don’t think they are the right messenger,” he said. “Their motives are not pure on this, and what they have put on the table now is more of a manifesto than an actual proposal.”
For one thing, it’s not clear what state agency would step up to pay for all of this.
One power-buying entity already exists at the state level, a small division within the state Department of Water Resources known as California Energy Resources Scheduling. The division – known as CERS by the few people who know about it – was created in 2001, during the energy crisis, to buy and sell power to avoid rolling blackouts across the state. But in the nearly two decades since the crisis, only a skeleton crew now runs the division, mostly to ensure the state is fully compensated for the power it bought years ago.
There’s also the matter of the power plants SDG&E does own – four plants that generate power by burning natural gas. The draft bill would make sure the company is “fully compensated” for those plants in certain scenarios. This could put the state in the awkward position of paying for fossil fuel-fired power even though California lawmakers this year set a goal of having all electricity sold in the state come from renewable resources by 2045.
Helm said SDG&E has worked out a deal with Calpine that would not require SDG&E to buy the plant.
SDG&E gets the rest of its power – roughly three-fourths of the electricity it sells – from other sources, largely long-term contracts it signed with wind and solar farms across the southwestern United States and northern Mexico. It cannot make money on the power it buys and then resells from customers.
https://cleanpowerexchange.org/wp-content/uploads/2016/06/Screen_Shot_2015-11-13_at_4.06.45_PM_t800.png353740News Article Reposthttps://cleanpowerexchange.org/wp-content/uploads/2016/03/cpx-logo-1.pngNews Article Repost2018-11-19 16:39:182018-11-19 16:39:18SDG&E Is Looking to Leave the Power-Buying Business
Community choice aggregation (CCA) has become quite the hot topic in California. CCAs happen when local governments, either municipalities or counties, form an entity to procure electricity for their communities. In the Golden State they have allowed communities procure renewable energy even more rapidly than the statewide 60% by 2030 mandate.
Last week, atop the city’s Alvarado Water Treatment Plant, San Diego Mayor Kevin L. Faulconer (R) announced that the city of 1.4 million would be forming its own CCA. The decision comes as critical action toward’s the city’s Climate Action Plan, which sets an even more ambitious renewable mandate than California’s already-aggressive state one, at 100% by 2035. So, not only is San Diego the largest city in the U.S. to have set an 100% renewable energy mandate, but it is the largest single city in the world to form a CCA.
“I want San Diego to lead this region into a cleaner future,” Faulconer said in a release announcing the CCA. “This gives consumers a real choice, lowers energy costs for all San Diegans, and keeps our city on the cutting edge of environmental protection. We are a city where our environment is central to our quality of life and Community Choice will ensure we leave behind a better and cleaner San Diego than the one we inherited.”
This decision comes just weeks after the California Public Utilities Commission (CPUC) voted to increase the “exit fees” that customers have to pay when opting out of utility procurement and into a CCA. Furthermore, CPUC chair Michael Picker has previously expressed concerns over the implementation of CCAs and their affect on utilities.
The raise on exit fees is especially important, as CCAs are already responsible for complying with local capacity requirements and ensuring that remaining utility customers do not see cost increases. However, these concerns do not seem to be an issue in San Diego, as the mayor’s office expects the city to see “a cost reduction of 5 percent or more compared to the utility’s energy generation rates residents and businesses are currently paying,” according to the mayor’s office.
Now, with the announcement in the past, comes the process of procuring power for the city of San Diego. Under the proposed CCA’s business plan, a Joint Powers Authority (JPA) would be formed in 2019, along with the appointment of a board of directors. From there on, the board would hire an executive leadership team, a chief executive and a chief financial officer. These executive positions would guide the JPA through the CCA implementation process, in hopes of delivering power to customers by the plan’s target date of 2021.
“San Diegans deserve to have a choice in where their energy comes from,” said City Councilmember Lorie Zapf. “This is an opportunity to reach our climate goals while at the same time lowering costs for everyone, especially families struggling to make ends meet. With this decision, Mayor Faulconer is ensuring that San Diego continues to set an example for other cities to follow when it comes to protecting our environment.”
https://cleanpowerexchange.org/wp-content/uploads/2018/06/Cruise_Ships_Visit_Port_of_San_Diego_003.jpg19123520News Article Reposthttps://cleanpowerexchange.org/wp-content/uploads/2016/03/cpx-logo-1.pngNews Article Repost2018-10-29 14:33:392018-10-30 14:42:11San Diego to form world’s largest single city CCA
When San Diego Mayor Kevin Faulconer announced his support for a government-run alternative to San Diego Gas & Electric this week, many political insiders were somewhat stunned that the momentous decision had come to pass.
Many in the know had long guessed that the investor-owned utility and its powerful parent company Sempra Energy would somehow prevent the mayor from siding with a small band of environmentalists led by local advocate Nicole Capretz.
Green groups had argued that having the city purchase energy for its residents under a so-called community choice aggregation was the only way to meet its Climate Action Plan goal of using 100 percent clean energy by 2035. But for nearly a year, the mayor had also considered letting SDG&E craft a plan to run the city on all renewable power.
“This is unquestionably the most striking David vs. Goliath stories in recent SD history,” Rachel Laing wrote on Twitter. The longtime political strategist is married to the mayor’s chief spokesman Greg Block, and has worked for everyone in town from the San Diego Regional Chamber of Commerce to Sempra to former Mayor Jerry Sanders.
Since Faulconer approved the city’s Climate Action Plan in 2015, he has repeatedly touted progress on the blueprint as far ahead of schedule, claiming the city has made bold moves to reign in greenhouse gases.
“I for one am very proud of our city’s leadership on climate action and believe that it should be the source of pride for all San Diegans,” he said at a press event on Thursday to announce his support for community choice.
The report shows that since the plan was approved in 2015, the city has made only marginal progress on reducing greenhouse gases — thanks largely to California’s recent drought restrictions on water use, its low-carbon fuel standard and requirements on utilities to buy increasingly more renewable power over time.
In fact, more than 80 percent of all greenhouse gas reductions envisioned through 2020 in the climate plan come from state and federal actions.
The rest of the emissions cuts come from a small suite of local programs, such as efforts to boost recycling and composting, expanding the urban tree canopy and, most notably, getting commuters onto transit, bikes and sidewalks in lieu of driving.
According the city’s 2018 progress report such programs are lagging considerably.
The climate plan, for example, calls for roughly 20 percent of commuters to bike, walk or ride transit by 2020. Today, that number is roughly 12 percent, according to the update. On its current track, the city isn’t projected to get to 19 percent until 2035.
“We’ve asked for a transportation master plan,” said Capretz, executive director of the Climate Action Campaign. “We have no idea how we’re going to get to the transportation goals. This is not a top priority for the city.”
Complicating the issue, transit ridership is down all over the country, including in the city of San Diego. But the mayor has also not delivered a long-promised transportation master plan, as well as millions of dollars of bike lanes throughout the city.
Recently, Faulconer acknowledged the challenge and importance of limiting tailpipe emissions from driving.
“We’re going to quickly turn our attention to transportation, knowing that’s the big next hill that we have to tackle,” he said, “and we are going to make sure that we have a plan and strategy for that.”
The city has also called for diverting 75 percent of all the solid waste from its landfills by 2020 by ramping up recycling and introducing a compositing program.
In 2015, San Diegans sent about 1.6 million tons of garbage to the landfill, diverting about 64 percent of total refuse. With a composting program yet to be introduced, the city still tosses about 1.6 million tons into the landfill, with a diversion rate last year of 66 percent, according to the progress report.
The tree canopy program has also yet to bloom, although efforts to catalog the city’s inventory of trees have started.
The climate plan calls for 15 percent of the city to be covered in trees, up from 13 percent today. However, to meet that target the city would need to plant roughly 150,000 new trees. Last year, it planted 307, according to the progress report.
“Nothing’s changed really,” said Anne Fege, chair of the Community Forest Advisory Board. “They have a small staff, and I’m working to try to make sure we have some funding. It continues, but it’s awfully slow. Really slow.”
Since approving the climate plan in 2015, the city has cut annual emissions by about 5 percent from about 10.8 million to 10.2 million metric tons of greenhouse gas.
The city’s progress report does not outline how many of these reductions came from local as opposed to state and federal programs, but it acknowledges that most of the heavy lifting has come from programs outside of its jurisdiction.
Despite limited progress, the city has already met its greenhouse gas reduction goals through the end of Mayor Faulconer’s term in 2020.
In fact, the city met that benchmark before the plan was approved three years ago.
Specifically, the plan calls for a 15 percent reduction in climate emissions below 2010 levels by 2020 — a metric similar to the state’s target of reducing emissions to 1990 level by 2020.
When the climate plan was inked, the city had already experienced a 19 percent reduction in emissions below the 2010 benchmark, according to calculations in the document.
While that’s due in part to California’s tough environmental laws, it’s also because of inaccurate projections from the San Diego Association of Governments that were used in the climate plan.
As a result the city has taken credit for what appears on paper to be a massive reduction in driving, while in fact the number of cars and trucks on the road have actually increased dramatically.
Faulconer’s team said the city relied on the best available data when it adopted the plan, and they don’t plan to change the accounting flaw.
Still, this may not matter for Faulconer, once considered as a possible Republican candidate for governor.
The recently called for creation of a community choice program could help refurbish his image as environmentally conscious conservative in the vein of former Governor Arnold Schwarzenegger. In fact, Faulconer joined the famous Hollywood actor in Los Angeles on Thursday for a discussion of efforts to combat climate change before returning to San Diego to announce his support for the government-run energy program.
“Mayor Faulconer has put this plan into action by adopting it, making it legally enforceable and keeping San Diego at the forefront of global climate action leadership,” said Assemblyman and former City Councilman Todd Gloria at the mayor’s press event on Thursday.
https://cleanpowerexchange.org/wp-content/uploads/2017/12/san-diego.jpg6831024News Article Reposthttps://cleanpowerexchange.org/wp-content/uploads/2016/03/cpx-logo-1.pngNews Article Repost2018-10-27 15:54:012018-10-29 16:03:22San Diego's Climate Action Plan is years ahead of schedule despite few efforts to cut emissions
The name may sound clunky, but Community Choice Aggregation, or CCA, is one of the hottest energy topics in California and may upend the long-time relationship between utilities and customers.
But while the growth of CCAs has led to heated debates across the state within the energy and political spheres, many local utility customers are either unclear or unaware of the subject — even as the City of San Diego slowly deliberates whether to hop on the CCA bandwagon to help it meet its Climate Action Plan that calls for 100 percent of the city’s electricity coming from renewable sources by 2035.
It’s a complicated story but an important one because adopting a CCA affects what consumers pay, what kinds of energy sources a community purchases and who makes those acquisitions.
It also tests the relative levels of trust and mistrust ratepayers have in their local power companies and local governments while raising questions about making decisions affecting an energy sector with a history of volatility, in a state where dramatic transformations are already underway.
Here’s an overview.
What are they?
Community Choice Aggregation allows any city, county or combination thereof to form an entity to take over the responsibility for purchasing power for their community.
How are they different?
About 75 percent of electricity supply in California comes from three investor-owned utilities — Pacific Gas & Electric in Northern California, Southern California Edison in the Los Angeles metropolitan area and San Diego Gas & Electric, which covers San Diego County and a small portion of Orange County.
Under the traditional model, investor-owned utilities:
1) Purchase sources of electricity (natural gas, solar, wind, etc.) to meet the energy needs of their customers and make sure the electric grid runs smoothly.
2) Maintain the transmission and distribution lines (poles, wires, etc.) needed to deliver the electricity.
3) Handle billing and customer service issues.
How do CCAs work?
Should a CCA be established, one big thing changes and two big things remain the same.
The utility still maintains the transmission and customer service responsibilities, but the purchasing of power is done by municipal governments.
Since elected officials often don’t have expertise in energy markets, many CCAs hire third-parties with experience in energy markets to perform all sorts of complex scheduling and marketing transactions. They are paid by the CCAs, using rates charged to their customers.
CCAs typically offer customers three different energy programs — a default program, a program for solar and a more expensive program advertising use of 100 percent renewable sources.
Once elected officials vote to form a CCA, all the electric customers in their jurisdiction are automatically signed up. Customers can remain with the investor-owned utility if they want to, but it’s up to them to contact the CCA and go through the opt-out process.
Opting out is free, provided it is done within the first few billing cycles (usually within 60 days). After that, a small fee may be charged, although some CCAs don’t impose opt-out fees.
Who does the billing?
The utility still does. A consolidated monthly statement will include a line-item for the CCA so customers would not receive two separate bills. The customer pays the entire bill and the utility then pays the CCA its share.
Are the number of CCAs growing?
Yes. There were fewer than 10 CCAs in the state last year but there are now 18, with a 19thexpected to come online by September.
Rapid CCA growth is expected to continue. In 2010, investor-owned utilities had 78 percent of the statewide market share but it dropped to 70 percent last year and the Luskin Center report predicts it falling to 57 percent within two years.
The City of San Diego is considering whether to create a CCA to reach the goal of the city’s Climate Action Plan that mandates 100 percent of the city’s electric needs coming from renewable energy sources by 2035.
SDG&E is putting together a counter proposal that promises to get the city to 100 percent renewables by 2035.
The city council is expected to make a decision by the end of this year.
Why do some communities adopt CCAs?
Some want more clean sources in their energy portfolios. Others want more local control, working on the premise that community choice can deliver lower rates for customers than utilities. Boosters of CCAs say community choice delivers on both fronts.
CCAs tend to be “much smaller and more nimble” than investor-owned utilities “and they’re not paying for these exorbitant salaries and they don’t have bonuses and shares of stocks” to concern themselves with, Capretz said.
Who makes the calls?
Leaving the final say on energy procurement to elected officials is a concern, said Tony Manolatos, spokesman for the Clear the Air Coalition.
“A lot of people don’t believe the city should be in the energy business — it’s very volatile,” Manolatos said. “The city would be better off focusing on core services like police, fire, parks, fixing our roads, helping solve the homeless problem … Not on launching a billion-dollar energy program.”
The Clear The Air Coalition includes representatives of the San Diego Regional Chamber of Commerce, the San Diego County Taxpayers Association, two faith groups, the Downtown San Diego Partnership and lobbyists for Sempra Energy — the parent company of San Diego Gas & Electric.
City officials making energy decisions is “like any other public agency accountability,” Capretz said. “You want to make sure they hire the right people who are experts in the field … Yes, ultimately the elected officials make the final decisions, but all the leg work and ground work is done by the professional staff.”
In Marin County, MCE has a staff of 60 but officials say that represents less than 3 percent of its budget.
The Clean Power Alliance expects to grow its current customer base of 36,000 to just under 1.04 million by the end of May 2019. By then, its CEO said from an energy load perspective, the L.A. County CCA would be the fifth-largest load serving entity in the state, trailing only Southern California Edison, PG&E, Los Angeles Department of Water and Power and SDG&E.
“L.A. County is just starting implementation and like them, we would do the same thing,” Capretz said. “You do it in phases, you get your sea legs, set up best practices and move on.”
What about cities outside San Diego but still in the county?
Since a City of San Diego CCA — at least in its initial iteration — would not include other cities and communities in the county, Haney Hong, CEO of the San Diego County Taxpayers Association, worries that cities like Imperial Beach or Chula Vista could be exposed to higher costs.
SDG&E in recent years signed power purchase agreements with energy providers under long-term contracts for renewables. But the price of renewable energy is lower today. That means a CCA can procure green energy sources at a lower price. That’s good news for customers in a proposed City of San Diego CCA but Hong sees a potential problem for communities in the county not in the CCA.
“If things are not properly accounted, then you have one taxpayer benefiting over another,” Hong said. “I remind folks we’re the San Diego County Taxpayers Association. We’re not just looking at San Diego city taxpayers; we’re also looking at National City taxpayers and Imperial Beach taxpayers.”
Capretz said such cost-shifting concerns can be addressed by properly accounting for the exit fees CCAs pay utilities each month.
What exit fees?
Among the acronyms thrown around, there’s another inelegant set of initials to keep in mind — PCIA, which stands for Power Charge Indifference Adjustment.
Once a CCA is created, the state’s Public Utilities Commission requires the community choice customers pay an exit fee, the PCIA.
Why? Because of those long-term power contracts utilities signed to secure energy for their customers. The utilities commission mandates that customers going to a CCA do not burden the remaining utility customers with costs paid to procure those energy purchases and investments.
Power companies have also built infrastructure, such as natural gas and solar power plants, all with CPUC approval. The utilities procured many of the clean energy sources in order to meet the state’s aggressive climate goals via the Renewable Portfolio Standard.
The exit fee is applied to each kilowatt-hour of electricity consumed by the customer and it shows up as a separate charge on every monthly bill.
The size of the fee is critical. Utilities want to make sure it compensates them for the generation they have procured while CCAs want to ensure the exit fee doesn’t raise their customers’ bills too high.
The utilities commission determines the fee, which involves a complicated formula. The exit fee is different in each of the service territories of the state’s three investor-owned utilities because each power company has a different mix of resources. In very general terms, the exit fee runs about 2.5 cents per kilowatt-hour for SDG&E residential rates.
CPUC commissioner Carla Peterman responded with an alternate proposal that is more favorable to the remaining customers of power companies. As one would expect, the CCAs don’t like Peterman’s proposal. The Clear The Air Coalition liked the alternate decision better but didn’t like the fact that both proposals include caps from one year to the next, saying they would create “uncertainty, risk and debt.”
The full five-members of the commission are scheduled to make a decision on a new exit fee on Sept. 13 but CPUC watchers say they would not be surprised if a vote is delayed, given the details and debate.
“If I were a community considering a CCA, I would want to know the resolution of the PCIA debate before committing to provide service to local residents,” said Matthew Freedman, staff attorney at The Utility Reform Network .
Are CCAs really cleaner?
One of the raps on CCAs centers on what is called “resource shuffling” — that the power being purchased from existing resources really doesn’t result in more sources of clean energy but simply moves them around to appear to reduce greenhouse gas emissions.
Earlier this year, Voice of San Diego reported that Marin County’s MCE and another CCA in Sonoma purchased power from a utility in Washington state that operates two hydropower facilities, a clean source of power.
But the Washington utility increased its own amount of coal and natural gas, indicating it may have replaced the hydropower it sold off to MCE and Sonoma with dirtier energy sources.
“We have under contract more than 900-megawatts of new California based renewables,” Weisz said. “We ventured into long-term power supply agreements for wind, solar, geothermal, biomass in California, and that’s not resource shuffling. That’s building new power supply.”
Relatively few CCAs have entered into long-term supply commitments for substantial volumes of new clean energy infrastructure but community choice advocates say that will change as CCAs mature.
What do regulators think?
CCAs are part of a much larger change in the way customers in California receive their energy — whether from community choice, rooftop solar panels or private groups called Direct Access providers who re-sell electricity.
The changes are coming so fast it makes regulators nervous.
“If we don’t have a better plan than we currently have, then I worry we could end up in the same pickle,” said Picker, who also voiced his concerns in an extensive CPUC report released last month on the evolving electricity market. “If you’re a smaller provider, you don’t always get what you need.”
CPUC rules have been established making sure entities have purchased sufficient capacity, or resource adequacy.
“I find that not all CCAs are created equal,” Picker said, with some better run than others. “I’m not trying to judge them; I just know that there’s potential for failure there and we have to think that through and take steps.”
Some critics worry if there are big shifts in the market, CCAs in their development stages won’t have amassed the capital needed to withstand a financial shock.
CCAs have bristled at any comparisons to the energy crisis. The trade group representing community choice, CalCCA, challenged the CPUC report, saying in comments filed in Junethat safeguards are in effect to prevent a replay of what happened 18 years ago.
“The deregulated market was a free-for-all and this is completely different,” Capretz said. “Community choice programs are part of the long-term resource planning processes. They have to have resource adequacy. They have to prove that they have enough power for everybody … It’s not like the lights are going out.”
All eyes are on the upcoming decision by the CPUC on the exit fee/PCIA.
San Diego’s city council is not expected to make a decision until that’s resolved.
A feasibility study released last year predicted a CCA has the potential to deliver cheaper rates over time than SDG&E’s current service, while providing as much as 50 percent renewable energy by 2023 and 80 percent by 2027.
SDG&E’s counter proposal to get to 100 percent renewables by 2035 has so far produced a rough outline for a “tariff” program that would charge ratepayers the cost of delivering more clean sources of energy over time.
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The Clean Power Exchange is a project of the Center for Climate Protection.