August 11, 2019 – Jim Phelps
The city of Irvine wants to get into the electricity business and provide clean energy at low prices. The program, known as Community Choice Energy (CCE), would compete with Southern California Edison (SCE). SCE would deliver Irvine’s energy over its wires and would continue billing consumers while Irvine siphons money from the “Generation” line item of your SCE bill. All residents and businesses within Irvine would automatically be enrolled unless they opt out.
Everyone should consider that all is not as it appears. These government CCE programs are far from risk-free.
Irvine residents will not receive greener energy just because they are told it is clean. Green electrons flow to the consumers who are closest to a wind farm or solar farm, or other renewable resource. In fact, Irvine CCE participants would receive the exact same electric mix as consumers who opt to remain with SCE.
Irvine’s Feasibility Study claims its CCE would, after spending $10 million for start-up costs, save ratepayers 2% off the “Generation” line item of their monthly SCE bill, or 88¢ per month for an average home and $9,300 for Irvine’s municipal load. Those savings vanish if costs increase by just a half-cent per kilowatt-hour (KWh), a rounding error in the energy market.
Irvine needs to be aware just who is operating CCE. The Study refers to these entities as “a third party.” In practice, municipal staff, unsophisticated in electricity, is given a toy steering wheel while consultants and Enron-type energy traders feather their nests. Royal Dutch Shell is also behind several “clean energy” CCEs.
Trouble is brewing.
Irvine’s Feasibility Study suggests its CCE can amass a $50 million reserve fund over ten years and use that money as a buffer for emergencies. Not so fast.
California’s longest operating CCE, Marin Clean Energy, amassed $85 million since 2010 by employing a lucrative relabeling scheme where two billion pounds of greenhouse gas emissions magically vanished from low-cost fossil-fired energy that it rebranded and sold as green. CCEs jumped on the bandwagon and adopted Marin’s style of clean energy.
However, California regulators are now closing the loopholes that CCEs exploited while amassing cash reserves.
The electricity market continues to squeeze CCEs, some which have little, if any, debt-free reserve. Southern California’s giant Clean Power Alliance (CPA) disclosed opt out problems when cities across Ventura County returned to SCE to avoid paying higher prices, all while CPA adopted Marin-style green power. Irvine’s Feasibility Study is loaded with “could” qualifying language. When average-price factors are applied for wind and solar power, rather than the consultant’s low-price projections, Irvine’s CCE doesn’t look so promising. Homes lose twice the projected dollar savings, and Irvine’s aggregated municipal electric meters lose $9,300 per month rather than save that amount.
These losses do not include monthly exit fees SCE assesses against each kilowatt-hour of CCE sales, collected as reimbursement for energy contracts SCE executed before Irvine switched customers into its CCE program. No one knows how much those fees will increase.
Irvine must also weigh the irony of “choice” and its impact on its CCE’s projected finances. Choice is the rallying cry of proponents who push for CCEs as an alternate to SCE. However, Direct Access energy providers will also launch, citing choice as they offer special deals and strand Irvine with higher-priced energy contracts. In a declining market, who would buy expensive power?
Considering that state legislation now requires all energy providers, including Direct Access and SCE, be 50% renewable by 2030 and 100% renewable fifteen years later, everyone should ask: What is the actual value of launching CCE?
Irvine may temporarily brand itself green, but a mountain of CCE debt piled alongside several hundred million dollars of unfunded CalPERS pension liability will leave the city in a costly hole.
Jim Phelps is a power engineer and coauthor of the explosive report, Community Choice Aggregation: A False Choice, which outlines the flaws and pitfalls off CCAs.