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HomeMy WebLinkAboutItem A - Study SessionLos Angeles County Community Choice Energy December 5, 2017 Page 1 of 4 DATE: December 5, 2017 TO: Honorable Mayor and City Council FROM: Tom Tait, Public Works Services Director By: Carmen Masud, Senior Management Analyst SUBJECT: COUNTY OF LOS ANGELES COMMUNITY CHOICE ENERGY JPA Recommendation: Direct Staff to Prepare Necessary Documents to Join the Los Angeles County Community Choice Energy JPA SUMMARY In 2002, California Assembly Bill 117 passed which allows local governments to form a non-profit Community Choice Aggregation (“CCA”) organization to purchase electricity from power producers and sell it to their residents and businesses at a lower cost than provided by the electric utilities. The County of Los Angeles has formed a CCA organization called Los Angeles County Community Choice Energy (“LACCE”) program. The LACCE program has drafted a Joint Powers Agreement (“JPA”) and has invited cities interested in a CCA organization to join LACCE. Based upon a thorough review, it is recommended that the City consider joining the LACCE to offer Arcadians a competitive alternative to Southern California Edison’s standard pricing and energy mix. BACKGROUND The California legislature passed AB 117 in 2002 (amended in 2011 by SB 790) allowing all cities, counties, or groups of cities and counties to provide an electric power supply source to customers within their jurisdiction that are currently served by Southern California Edison (“SCE”), Pacific Gas & Electric, or San Diego Gas & Electric. Through a CCA organization, a City could purchase electricity from power producers and sell it to their residents and businesses at a lower cost than an investor owned utility company like SCE. CCA programs do not own energy delivery infrastructure. A CCA organization provides power supply and behind the meter services to residents. The incumbent utility like SCE delivers the purchased power through its transmission and distribution assets and continues to handle billing, metering, and customer service. A CCA has the effect of providing customers alternatives to the traditional investor owned utility without taking on the cost, effort, and risk of establishing a complete municipal utility. Los Angeles County Community Choice Energy December 5, 2017 Page 2 of 4 The County of Los Angeles completed a Business Plan (“Plan”) that evaluated the prudency of forming a CCA organization within the County of Los Angeles. The Plan estimated LACCE’s power supply costs, administrative costs, electric loads, and future retail rates required to cover the costs. These forecast rates were compared to determine if the proposed LACCE can offer competitive rates and better products while also improving the environment and creating local jobs. The plan concluded that the formation of a CCA in Los Angeles County is financially feasible and would yield considerable benefits. The LACCE program has drafted a JPA and has invited cities interested in a CCA organization to join LACCE. DISCUSSION Community Choice Aggregation allows cities to procure electricity in wholesale markets on behalf of their residents and gives cities more control of implementing policy objectives or energy efficiency programs. Benefits of joining LACCE include the following: • Local control over energy mix • Create quality jobs and local, renewable generation assets • Meet or exceed climate action goals • Invest in local energy programs • Provide rate stability- lower costs for homeowners and businesses • Consumer choice- competition for lower rates and options for cleaner energy The Plan completed by The County of Los Angeles determined that offering residents energy choice could save the average customer 5% on electric bills. If price is not the primary factor for customers, they may also choose energy mixes that offer greater percentages of renewable energy at rates similar to, or slightly more than SCE’s. Customers also have the option of staying with SCE and opting out of the program. The Los Angeles County CCA program is an opportunity for City of Arcadia to direct and control the future sources of its energy generation. One of the major benefits of LACCE is that it is positioned to be one of the largest CCA programs in the State. LACCE’s Los Angeles County Community Choice Energy December 5, 2017 Page 3 of 4 critical mass of costumer accounts will offer the program a unique competitive advantage when negotiating energy rates and clean energy options. Other benefits of joining the County’s CCA program is that the Los Angeles County has assumed all risk, costs, and liability associated with the program’s start up and implementation. Furthermore, the County has dedicated staff resources for program administration. Other CCA programs require more human resources for start up and ongoing capital from the City for operations, and could subject the City to greater financial and legal risks. Prior to the transfer of utility accounts, a CCA program must perform the required noticing to the community regarding the options and incentives available by participating in the program and allow for members of the community to opt out if desired. The City of Arcadia would work in conjunction with LACCE to ensure that the community is well informed and up to date on the process. If at a future date the City wishes to terminate its membership with LACCE, it may do so as long as notice is provided to LACCE at least 180 days prior to departure. Any termination initiated by the City may be subject to costs or liabilities associated with any power purchased to serve the City of Arcadia customers prior to the notice of departure from the program. For example, if LACCE has purchased power as part of a five year contract to serve the City of Arcadia, the City would be responsible for any difference in the contract price and the price LACCE can resell the unused power for. If the City did not want to be responsible for the price difference, it could give a longer termination notice, and leave once the energy contracts were complete. Conversely, if the City left LACCE and the power attributed to the City was resold at a higher rate than the contract price, the City would get funds back. Based on the LACCE Plan, LACCE will launch in January 2018 with Phase 1, which will include only County owned facilities. In July 2018, Phase 2 will take place and will serve all customers located in unincorporated County. Phase 3 will take place approximately six months after (around January 2019) and will include customers from all participating cities. Launching in phases ensures a smooth transition from SCE to LACCE and a chance to work out any bugs prior to offering to cities and their residents. Based on the available information, it is recommended that the City Council consider joining the LACCE and direct staff to return with the necessary documents to enter into the JPA. ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), and it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. Los Angeles County Community Choice Energy December 5, 2017 Page 4 of 4 FISCAL IMPACT The County of Los Angeles has provided $10 million to fund the initial costs of establishing and implementing LACCE’s program, and no financial contribution will be required from member cities. However, the JPA initiating documents do include a provision that allows the LACCE board to impose general costs to participating cities at the board’s discretion. It is not anticipated that this clause will be used anytime in the near term and its use would need to be agreed upon by the board, which would be made up of the participating cities. If implemented and the least expensive costs are chosen, the City and its businesses and residents could experience electricity cost savings annually of 5% or more. RECOMMENDATION It is recommended that the City Council direct staff to prepare necessary documents to join the Los Angeles Community Choice Energy JPA.