The cities of Carlsbad, Del Mar and Solana Beach are working together on a new approach to providing electric power in their communities. This new approach is called Community Choice Energy (CCE). Through partnership in a new community choice energy joint powers authority, the cities will provide an option for local customers to purchase power from more renewable sources starting in 2021.
What is Community Choice Energy?
Community Choice Energy is a model that allows communities to purchase power to meet their electricity needs, offering an alternative to the traditional SDG&E model. Community Choice Energy can provide the communities they serve with competitively priced, clean energy choices while reinvesting revenues into projects and programs, supporting the local economy.
How does Community Choice Energy Work?
Community Choice Energy models are established by local communities, either through the creation of a multiple agency partnership or new city or county department. While Community Choice Energy programs are locally operated, they work in partnership with the region’s existing investor owned utility, SDG&E. Through this partnership, Community Choice Energy programs determine the source and procure the electricity while the existing utility company, SDG&E, continues delivering the energy, maintaining the grid and providing billing services.
Who’s in Charge?
Community Choice Energy programs are governed by a Joint Powers Authority made up of local elected officials who oversee decisions regarding power purchasing, programs, and rate setting, and are directly accountable to the people who elected them. Each member city has equal voting power and meetings are conducted in an open, transparent manner, ensuring the public has a voice in the Community Choice Energy decision-making process. The CEA Program will be operated under the direction of a CEO appointed by the Board, with legal and regulatory support provided by a Board appointed General Counsel.
When Does the Clean Energy Alliance Launch?
The Clean Energy Alliance plans to roll out its service offering to all eligible customers in a single phase at start-up. There are approximately 58,000 eligible customer accounts within the Alliance’s boundaries, resulting in a singlephase roll-out being reasonable and the most efficient way for CEA to serve customers beginning in May 2021.
What Happens to Solana Beach Customers Already Enrolled in the Solana Energy Alliance?
Solana Beach intends to transition its customers from the Solana Energy Alliance to the Clean Energy Alliance during CEA’s launch month of May 2021. Customers will be provided a notice notifying them of the transition from SEA service to CEA service and any rate or service impacts. Once its customers are fully transferred to CEA, Solana Beach will no longer operate SEA. Solana Beach will submit an amended Implementation Plan, concurrent with this CEA Implementation Plan, that reflects its customers transitioning to CEA.
Is participation in the Clean Energy Alliance mandatory?
Participation in the CEA Program is completely voluntary, however, as provided by law, customers will be automatically enrolled according to the anticipated schedule. All current SDG&E customers within the Del Mar, Carlsbad and Solana Beach service area will receive information describing the CEA Program and will have multiple opportunities to opt out and choose to remain full requirement (“bundled”) customers of SDG&E.
What Happens to the Revenues?
Because Community Choice Energy programs are locally managed, not-for-profit entities, any excess revenue is reinvested into the community through on-bill savings and innovative energy projects and programs, including rebates and other incentives, low-cost energy programs, job training and more.
What Are Some Benefits to Community Choice Energy?
Community Choice Energy programs are committed to providing clean, renewable energy choices at competitive rates and creating innovative programs that benefit people, the environment and the economy.
Here are some of the ways they empower local communities:
Cost-saving or competitive rates
Local control and increased transparency
Cleaner power supply – reduced greenhouse gas emissions
Local power, local jobs – revenues stay local
More competition, better service
Is the CCE model economically feasible? What would the potential ratepayer savings be?
A feasibility study shows that the CCE model is financially feasible and would save residents and businesses at least 2% a year compared to SDG&E. In addition, discretionary net proceeds of roughly $15 million could be generated annually. This net income could be used for further rate savings, investment in local distributed energy generation, enhanced energy efficiency programs, additional support for low-income customers, energy storage, electric vehicle charging and any other program related to the CCE business model. The decisions regarding utilization of discretionary net income will rest with the CCE Board of Directors.
What assumptions were made about purchasing renewable energy?
The feasibility study assumes and evaluates three different CCE power supply portfolios:
Option 1 – This is SDG&E equivalent. Same renewable portfolio used by SDG&E – increases from 46% renewable energy in 2021 to 60% in 2030.
Option 2 – 100% renewable energy by 2030 – increases from 50% renewable energy in 2021 to 100% in 2030.
Option 3 – 100% renewable energy throughout the study period (2021-2030).
CCEs face the same requirements for renewable energy purchases as the investor-owned utilities (such as SDG&E) and public utilities and are required to comply with all applicable state laws (including SB 350 and SB 100). The feasibility study also assumes all renewable resources are located in California, and no unbundled renewable energy credit utilization.
Would the CCE model help reduce greenhouse gas emissions?
Yes, all three options evaluated in the feasibility study would reduce greenhouse gas emissions at various levels during the study period (2021-2030).
The Option 1 portfolio is 80% greenhouse gas free throughout the study period.
The Option 2 portfolio is 80% greenhouse gas free in 2021, ramping up to 100% greenhouse gas free in 2030.
The Option 3 portfolio is 100% greenhouse gas free throughout the study period.
For comparison, SDG&E’s portfolio is expected to be 46% greenhouse gas free in 2021, ramping up to 60% greenhouse gas free in 2030.
Renewable Energy Purchase Scenarios Compared to the RPS Requirement
Will this CCE power supply strategy encourage development of new renewable energy resources?
Yes, the greater percentage of renewable energy purchases reflected in each option would encourage and expedite the construction of new renewable energy sources.
Have other existing California CCE programs developed new renewable resources?
Yes, to date, the 18 existing CCE programs (currently serving more than 100 California cities and counties) have developed 1,360 megawatts of new solar energy, 741 megawatts of new wind energy, 12 megawatts of energy from biogas generation and 360 Megawatt Hours of new energy storage.
What technical data was used for the feasibility study?
The feasibility study data included the most recent SDG&E retail rates, the power charge indifference adjustment pursuant to the California Public Utility Commission Alternate Proposed Decision, dated Oct. 11, 2018, and wholesale market prices for energy as of February 2019.
What assumptions were made by the feasibility study regarding SDG&E utility rate increases over time?
The feasibility study assumed a 1% increase in the SDG&E generation rate and a 2% increase for the delivery charge annually. This escalation rate is conservative considering SDG&E generation rates have increased as much as 2 to 9% from2006 to 2015. If the SDG&E generation rate increases at a rate greater than 1% annually, the CCEs financial position would improve.
Does the feasibility study assess the risk of a potential increase in customers buying their electricity directly from electric service providers (Direct Access)?
California Senate Bill 237, Electricity: direct transactions (adopted in 2018) provides for a 16% increase in the amount of nonresidential load that can move to direct access schedules. For commercial and industrial accounts, the feasibility study assumes a participation rate of 85%, which adjusts historic participation rates to account for the newly expanded cap on direct access.
Will grid reliability change under the CCE business model?
Maintaining grid reliability is the function and responsibility of the California Independent System Operator. The California Independent System Operator will continue to perform this function under the CCE business model, therefore grid reliability will remain unchanged.
Will the growth in CCEs adversely impact the financial stability of the incumbent investor-owned utilities?
The power charge indifference adjustment was implemented to ensure that the investor-owned utilities were held harmless from load loss resulting from the growth in CCE programs or direct access.
SDG&E pays local, state and federal taxes. Will the recipients of these tax payments be negatively impacted?
The primary taxes that SDG&E pays are property, state and federal income taxes. Under the CCE business model, all SDG&E tax recipients will not be impacted. SDG&E will maintain the same asset base if a CCE is formed so property tax payments will be unchanged. Income tax is paid based upon profitability. SDG&E makes its profits on delivery facilities which will remain with SDG&E so profitability and income taxes payable will remain unchanged. The only function the CCE will assume from SDG&E is power procurement. SD&GE is prohibited by law from earning a profit on the power procurement function.
How will the formation of a CCE program for the cities impact the local economy?
A CCE program could save customers in Carlsbad, Del Mar and Solana Beach approximately $9 million annually in electricity costs. This increase in disposable income could result in the creation of approximately 100 new local jobs and $13 million in new annual local economic activity.
The CCEs economic impact could be greater if the CCE invests in local distributed energy resources. Through incentive programs and direct investments CCEs can create new demand for manufacturing, construction and installation of local distributed energy resources, leading to an increase in employment in those sectors. Decisions concerning investments in distributed energy resources, such as the construction of new community solar or battery storage projects, would be made by the CCE Board of Directors.
What are the next steps?
At its December 19, 2019 meeting, the CEA Board approved the Community Choice Aggregation (CCA) Implementation Plan and Statement of Intent. The document was submitted to the California Public Utilities Commission (CPUC) for review and certification on December 23, 2019. This date starts the 90-day clock for the CCA registration process. The Implementation Plan was also served on the appropriate CPUC proceeding service lists. The next step will be to develop a draft customer notice to submit to the CPUC Public Advisors Office, which is due by February 21, 2020.
Staff will be developing administrative policies and bringing them forward for Board consideration, over the next several meetings. These policies include customer confidentiality and privacy, non-energy contracting/procurement policy, as well as policies to ensure appropriate procedures and controls are in place for a new organization.