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HomeMy WebLinkAboutItem 2a - Joint Powers Agreement for Los Angeles Community Choice EnergyIntroduce Ordinance No. 2353 - LACCE December 19, 2017 Page 1 of 5 DATE: December 19, 2017 TO: Honorable Mayor and City Council FROM: Tom Tait, Public Works Services Director By: Carmen Masud, Senior Management Analyst SUBJECT: ORDINANCE NO. 2353 APPROVING THE JOINT POWERS AGREEMENT FOR LOS ANGELES COMMUNITY CHOICE ENERGY AND AUTHORIZING THE IMPLEMENTATION OF A COMMUNITY CHOICE AGGREGATION PROGRAM Recommendation: Introduce 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 investor owned utilities, and offer options to purchase renewable energy. 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 to join LACCE. It is recommended that the City Council introduce Ordinance No. 2353 approving the Joint Powers Agreement for Los Angeles Community Choice Energy and authorizing the implementation of a Community Choice Aggregation Program. 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. There are currently seven operational CCAs in California. The State of California estimates that by the year 2025, more than 80% of investor owned utility customers will receive their power from CCAs. Almost every city that is in a CCA has reduced its residents’ utility bills. However, some CCAs in California offer rates equal to or slightly Introduce Ordinance No. 2353 - LACCE December 19, 2017 Page 2 of 5 greater than those offered by their existing utility. In these cases, the CCAs power is significantly greener than the power offered by the existing utility company. 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. The County of Los Angeles completed a Business Plan (“Plan”) (See attached Business 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 drafted a JPA and invited cities interested in a CCA to join LACCE. At the December 5, 2017, Study Session, City Council members heard a presentation on LACCE. The City Council directed staff to prepare necessary documents to join LACCE JPA. 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: Introduce Ordinance No. 2353 - LACCE December 19, 2017 Page 3 of 5 • 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. 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 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. Should the City choose to join LACCE, it will be overseen by elected officials from cities and the county who will serve on the Board of Directors of the LACCE Authority, a nonprofit agency. The Board will be advised by a public Community Advisory Committee. LACCE will be entirely self-funded by revenues it receives from the sale of electricity to customers. None of its expenses are paid by taxes, and its revenues cannot be diverted to pay non-LACCE uses. 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. Before automatic enrollment into the program begins, Arcadia residents and businesses will receive two written notices in the mail from the LACCE Authority that will explain the program’s goals, terms, and conditions and how costumers can opt-out of the program if desired. These notices will be sent 60 days and 30 days prior to automatic enrollment. After transfer of service, two additional notices will be sent to Arcadia residents and businesses notifying them again of the shift to LACCE. Customers can opt out of LACCE at no cost during the first 60 days of the program. After that, a small processing fee (around $1.50) may be charged. 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. Introduce Ordinance No. 2353 - LACCE December 19, 2017 Page 4 of 5 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. There is virtually no risk to the City for joining LACCE. The City and its residents are protected because LACCE is a separate legal entity as defined in California State law. Its liabilities and obligations are its own, not those of the individual cities that are members. Further, by adding LACCE as an option, residents and businesses will have choice over who provides their power and even the mix of power generation, where today they are forced to accept SCE’s standard delivery. There is no cost to the City regardless of which option the bulk of the rate payers choose. 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 and City owned facilities. 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. It is recommended that the City Council introduce Ordinance No. 2353 approving the Joint Powers Agreement for Los Angeles Community Choice Energy and authorizing the implementation of a Community Choice Aggregation Program. 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. FISCAL IMPACT The County of Los Angeles has provided $10 million to fund the initial costs of establishing and implementing LACCE’s program. LACCE has instituted a 180-day period for eligible cities to opt-in to the program at no cost. The 180-day period began the first week of July 2017 and will end in late December 2017. It is anticipated that the City would default residents and business in to the standard equivalent to SCE’s current Introduce Ordinance No. 2353 - LACCE December 19, 2017 Page 5 of 5 power mix (28% renewable energy) that will result in a savings of approximately 5% on their power costs. The City could opt to choose a 50% renewable power package and still receive a savings on energy costs for City owned facilities. RECOMMENDATION It is recommended that the City Council introduce Ordinance No. 2353 approving the Joint Powers Agreement for Los Angeles Community Choice Energy and authorizing the implementation of a Community Choice Aggregation Program. Attachment: Ordinance No. 2353