Finance Commission Recommends a Joint Option for Energy Choice in Irvine
“Community Choice Energy (CCE) [also know as Community Choice Aggregation (CCA)] programs serve as an alternative to the traditional Investor Owned Utility power procurement process, allowing local governments to purchase electricity and sell it to consumers at competitive rates. CCE programs have successfully lowered electricity rates to their business, residential, and municipal customers, and generally repay the initial capital investment within the first few years of operation. CCE programs are not considered municipal utilities and will operate in partnership with the utility.”
–Irvine Public Works Community Choice Energy Feasibility Study; August, 19, 2019*
At the 8-19-2019 Finance Commission meeting, the commissioners readily agreed on the value of Irvine pursuing formation of a CCE, sometimes referred to as a CCA, to serve Irvine’s energy needs. However, the commissioners had a lengthy discussion before they could decide if they should recommend a standalone or Joint Powers Authority (JPA) version of a CCE to the Irvine city council.
CCE/CCA graphic courtesy San Diego Union Tribune
The Options: Standalone vs Joint Powers Authority (JPA)
The standalone option involves Irvine forming its own CCE. The JPA option involves cities/agencies banding together to form a CCE organization. Various versions of the JPA model exist,** but, in general, the standalone CCE would give Irvine more control in determining policies and structure. In the JPA model, Irvine would give up some control, but any financial risk would be shared by all participating cities and entities.
In addition, the standalone option could be operational by 2021; the City must file the paperwork by December 2019 to meet this operational date. However, the JPA model could not be operational until 2022; the City must file the paperwork by December 2020 to meet this operational date. Therefore, Irvine would realize anticipated revenue from the CCE sooner with the standalone option. In either option, upfront costs will exist.***
Commissioner and Staff Comments
Commissioner Sievers (Councilmember Fox’s appointee) had a good understanding of CCE, perhaps due, in part, to his conversations with the CEO of a CCE in San Mateo County. The other three commissioners that were present are on a learning curve regarding CCEs. (Commissioner Dale Cheema, Councilmember Khan’s appointee, was absent.)
Support for the Standalone Model
Commissioner Sievers was enthusiastic about pursuing the standalone CCE option due to the possible revenue returns and innovative programs that could be seen sooner rather than later.*** Sievers put forth a motion to pursue a standalone CCE that could be operational by 2021. In addition, Sievers motion stated that the City could pursue a two-prong approach: File the paperwork necessary for a standalone CCE that could be in operation by 2021 while also looking into forming a JPA that could be operational by 2022. Irvine would be the lead agency in this CCE. This motion failed for lack of a second.
Support for the JPA Model
The other three commissioners were adverse to any financial risk that the standalone option could have for Irvine due to not sharing the risk with other cities or agencies. Chair Shute (Mayor Shea’s appointee) was particularly concerned about the additional financial risk that a standalone option might involve. In addition, Shute was not comfortable with the upfront costs not being in the current budget.*** The staff report did state their were risks. However, the staff report also stated risk mitigation strategies exist. Staff also stated that financing options were available and did not seem to think that would be a problem. However, Mark Steuer of the Public Works Department did state staff’s preference for the JPA option.
Shute put forth a motion to recommend the city council direct a study of the JPA model for Irvine that could be operational by 2022. Shute also wanted the upfront costs to be included in Irvine’s next budget. Shute’s motion passed, 4 to 0 with Cheema absent.
Note: Due to Irvine’s two year budget cycle, the logistics of meeting a filing deadline for an operational CCE in 2022 while also including the upfront costs in Irvine’s next budget could be problematic.
Sylvia Walker spoke during the public comments and mentioned the JPA and standalone options. She urged the Finance Commission to recommend the standalone option to the city council. Margo Finlayson read a letter from Irvine resident Patty Yoo. The letter was in support of pursuing a CCE for Irvine.
Now or Later? The City of Innovation Must Make a Decision
“As a ‘City of Innovation,’ Irvine is attractive to both residents and businesses. Irvine’s strategic approach to planning has made it one of America s premier cities, with the City well positioned to embrace future opportunities.”— Irvine Strategic Plan for Economic Development, December 2014
Any endeavor involves a certain amount of risk combined with the possibility of rewards. The trick is to find that sweet spot of taking on the right amount of risk to receive the maximum rewards. That will be the issue that Irvine, The City of Innovation, will consider when it decides whether to go with the standalone CCE model or some version of the JPA model. This item is schedule for the September 24, 2019 Irvine city council meeting.
**The following JPA governance options are available for City consideration:
- City forms a JPA with other Orange County cities or agencies with Irvine as the lead.
- City joins an existing CCE program. The existing CCE bylaws would determine the terms for Irvine entering that CCE. For example, the existing CCE would likely require the City of Irvine to pay an entrance fee. In addition, then the existing CCE would determine the level of input that Irvine would have.
- City forms an individual CCE and joins or creates a JPA of other individual CCEs. The JPA members would jointly decide the governance policies. Costa Mesa and Huntington Beach are currently considering CCEs for their communities; however, Irvine is farther along in the process.
- City could form other models of CCEs such as a few other entities have done; however, this required special legislation.
***The following slides from the 8-19-2019 Finance Commission meeting show the projected revenue, potential savings to residents and businesses, and projected upfront costs for the standalone option. Note that the $10.05 million in upfront costs can be financed; however, a funding source for the $600,000 has not been identified yet. Also, note that in addition to the potential energy cost savings for residents and businesses, the City of Irvine could use the anticipated $10.6 million in net income to create energy saving programs that benefit the public.
8-19-2019 Finance Commission slides courtesy Nancy Frye
Additional CCE information: “CCA 101: How does Community Choice Aggregation work? What you need to know,” Rob Nikolewski, September 9, 2018, San Diego Union Tribune