Solana Beach first in county to form energy alternative

SOLANA BEACH — Solana Beach is again in the forefront of environmental sustainability, voting 4-1 at the Oct. 11 City Council meeting to enter the final two phases of a three-step plan to form community choice aggregation. It is the first city in the county to do so and the 14th CCA in the state.

While supportive of the program, Deputy Mayor Ginger Marshall said she was opposed “at this time” because of concerns and unanswered questions about costs and regulatory processes.

“I do think we’re moving a little quickly,” she said, adding that she would prefer to wait and partner with other cities “to take advantage of economies of scale.”

Since 2011 Solana Beach has been discussing CCA, which allows cities — either on their own as Solana Beach is doing or as part of a group or agency such as a joint powers authority — to buy or generate renewable electricity for their jurisdiction.

The city won’t own power poles or utility lines, nor would it deliver the energy. Transmission and distribution services will remain the responsibility of San Diego Gas & Electric.

CCA is considered an effective way to reach state-mandated greenhouse gas emission reductions and provide customers with potentially lower rates than investor-owned utilities such as SDG&E.

According to a technical analysis presented in May 2016, CCA is feasible in Solana Beach and could benefit rate payers, create revenue and increase the use of renewable energy.

Encinitas, Carlsbad, Oceanside and Del Mar just released a request for proposals to complete a similar feasibility study for those cities.

Mayor Mike Nichols said Solana Beach is not “closing the door” on partnering with them in the future should they decide to move forward.

“They started after us,” he said. “They’re trying to catch up and they’re willing to talk to us when that time comes.”

This past May, Solana Beach entered phase one, hiring The Energy Authority for design and operation and Calpine, which generates electricity from natural gas and geothermal resources.

Since then the two consultants completed another technical study, drafted an implementation plan and created operations, budget and staffing plans.

The next steps include finalizing the implementation plan and filing it with the California Public Utilities Commission in November, with expected certification in February or March of next year.

At that time the city will complete the initial power procurement and finalize the budget and rates. Two rounds of enrollment notices will be sent to customers between March and May, with a program launch expected in June or July.

“Community outreach will continue,” Nichols said. “This is not a done deal.”

He and City Manager Greg Wade stressed several times during the meeting that the program does not put the city’s general fund at risk.

Under the contract with the consultants, a “lockbox” account will be established and held at a commercial bank to receive customer payments. The funds will be used for operations, energy purchases and to create a reserve.

The Energy Authority will be paid up to $1 per megawatt hour, or about $80,350 annually.

Calpine will be compensated based on the number of customers in the CCA. If none of Solana Beach’s 7,800 utility users opt out, which is an option, that comes to a little more than $126,000 per year.

The city can opt out of the contracts at any time during phase two and would be required to pay the consultants the total amount of costs they have incurred up to that point, up to a maximum of $156,000.

“We made sure that there’s protections built in the contract,” City Attorney Johanna Canlas said.

Marshall said she had concerns about the power charge indifference adjustment, or PCIA, also called an exit fee, for customers who switch to the CCA.

According to the state law that established CCA, customers who opt out of the program can’t be charged for energy the investor-owned utility previously bought for them. The PCIA is a way for the utilities to recoup those costs from CCA customers.

According to the consultants the monthly fee is about 2 cents per kilowatt hour, or around $12 for a typical residential customer.

Because rules for the PCIA are still being negotiated, the consultants created best- and worse-case scenarios.

If the exit fees are somewhat higher the CCA could accrue reserves, cut costs or raise rates, but still remain competitive with SDG&E.

If the PCIA is much higher, the CCA may find it hard to remain competitive and will work with customers to determine if they are willing to pay higher rates.

While most of the 10 speakers urged council to move forward, a few still had some doubts.

Dave Clemens said he supports CCA but not right now.

“Choice is good,” he said, adding that Solana Beach should “pause the good work” and let another city “be the pathfinder.”

“To me it seemed like things are moving along here maybe a little bit too fast on this subject,” Al Evans said. “There are still a whole lot of unknowns and a lot of changes that could take place.”

He said Wade did an excellent job providing information but he hadn’t heard much about the downsides.

“There’s got to be some risks here,” Evans said. “It’s a very rosy picture. Let’s be a leader, but let’s not be a leader if our town is so small that we get into trouble in some other areas.”

Nichols said that while the city is “very forward thinking when it comes to environmental issues,” council members are also fiscally responsible.

“I just want to assure you that (we’re not) trying to be the first, first, first in that realm,” the mayor said. “We’re just trying to be responsible stewards to our community, and we would never do anything that would … put us at risk.

“The way that this has been structured is the general fund dollars are not at risk,” he added.

“This risk has been mitigated,” resident Lane Sharman said. “We understand how to do CCA. We’ve been doing it since 2010.”

Sharman, who introduced the idea of CCA to the city’s Clean and Green Committee many years ago, said the consultants and city staff have worked with and researched existing CCAs that represent “hundreds of thousands of” meters and megawatt hours.

“We appreciate Solana Beach for truly paving the way,” Nicole Capretz, executive director of the Climate Action Campaign, said. “This is a legacy issue. I think you guys will always be remembered for taking the first step on community choice.”

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