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.
Public Comments
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.
Notes
*Irvine Community Choice Energy Feasibility Study, August 19, 2019
**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
7 Comments
mhoskinson
August 28, 2019 at 12:39 pmCCAs are not competitive, nor can they provide “Green Power” to customers. They purchase the same old fossil fuel generated energy and are able to call it “green” or “renewable” through a process called “greenwashing”. Greenwashing happens when a renewable energy provider like a solar farm produces energy. When 1 megawatt of clean energy is produced the solar farm operator can issue a REC (renewable energy certificate), they can then sell the REC to a CCA which purchases fossil fuel energy and applies the REC to the purchase, thereby “greenwashing” that megawatt of power into “renewable”, or “green” energy. The concept and pricing are a scam and will only continue to be viable as long as renewable energy is subsidized. After that the game is over and taxpayers will be stuck with wildly escalating energy bills. Think of RECs as a taxpayer subsidized “discount coupon” allowing CCAs to purchase cheaper fossil fuel and pass it off to ratepayers as “Green” energy.
Also, electrical power is delivered in bulk; the grid can’t determine what is “green” or not. Again, the scam of Greenwashing allows the CCAs and the politicians behind it to claim they’re delivering renewable power in definable amounts…the reality of physics says differently.
Sylvia Walker
August 28, 2019 at 6:26 pmCCEs can buy energy from whatever source they chose. Many of us hope it will include green energy, but in any case, the CCE would be an alternative to the monopoly that the investor-owned utilities now have, and the CCEs have more ability to customize the energy choices to the needs and desires of the residents they serve.
Also, the following 2019 Forbes article contradicts mhoskinson’s comment about the viability of renewable energy: “As the prices associated with fossil-fuel power generation continue to increase and become harder for utility companies to justify, the price of renewable energy has also plummeted. Along with the IMF report, the International Renewable Energy Agency (IRENA) released its own study looking into how the renewable energy industry has grown over a similar time period. The cost of onshore wind power generation has dropped 23% since 2010, while solar electricity saw a decrease of 73%.” In addition, keep in mind that fossil fuels are still heavily subsidized: “The [IMF] report explains that fossil fuels account for 85% of all global subsidies and that they remain largely attached to domestic policy. ”
https://www.forbes.com/sites/jamesellsmoor/2019/06/15/united-states-spend-ten-times-more-on-fossil-fuel-subsidies-than-education/
mhoskinson
September 3, 2019 at 2:26 pmRenewables are more expensive than fossil fuel energy, by far. The only way a CCA/CCE can offer energy at close to the current rates is by taxpayer subsidy and the unethical process called “Greenwashing”. Further, the grid is not made to handle the type of load that solar and wind force on it, until grid-scale battery systems are available to store the massive amounts of energy that hit the grid during the day adding more capacity will only bring more problems.
And, i’m not sure what “choice” a consumer has with CCA/CCE ? the JPA or council makes all the purchasing decisions, choices they have no business making because none of them have experience in the power business. Consumers are opted in without their approval, the only actual choice a consumer has is to opt-out.
Pretty bad deal overall and one that will have the real possibility of causing bankruptcy for cities. It’s not worth it.
pattyyoo
August 30, 2019 at 12:27 pmCurrently, there are 17 cites/counties that have established a CCE. MCE (Marin County) has been operating since 2010 and have estimated savings to their residents between 2%-5%. There are at least 14 other cities exploring CCE’s. The leaders of these cities are from both sides of the aisle with Lancaster and San Diego having Republican Mayors. In addition to the cities having the option to buy a greener mix of energy, it introduces choice and local control.
Most CCE programs do not use Renewable Energy Credits as their man source of power, but rather purchase power from existing renewable power plants and/or build new power plants. The city, or cities, would totally control what kind of power is on the grid. That is the beauty of a CCE. There is also a period where people can opt-out if they choose and stay with Edison. That CCE’s relies on subsidies is a common misconception. Renewable energy technology has been getting cheaper and more efficient. For example, look how much the cost of solar panels have gone down in the last decade.
I like the idea of choices being introduced to the energy market as competition tends to drive down prices. Currently, my energy rates are going up every year so I like the idea of cities taking this on and being accountable to their residence instead of utility companies operating and being accountable to their shareholders.
mhoskinson
September 3, 2019 at 2:28 pmIf CCAs don’t use RECs to purchase power then why did Clean Power alliance just admit they have to use them ? and why won’t they share their purchasing data with the public ? it’s because they’re using RECs.
Sylvia Walker
September 3, 2019 at 3:22 pm“California’s first CCA, Marin Clean Energy, was launched in 2010 to serve customers in parts of Marin County. The program that was once branded as a ‘risky scheme’ has proven to be economically viable and has expanded its service territory and its roster of programs and services.” AND..As stated, CCEs in California do use RECs, as do the investor-owned utilities. However, in most cases, CCEs do not use RECs as the main energy source. “Unbundled Renewable Energy Credits (RECs) are not widely used by California CCAs…”–quotes are from LEAN ENERGY U.S.
mhoskinson
September 3, 2019 at 4:46 pmSylvia, please tell me you’re not using quotes from Lean Energy ? they’re a company that makes its money implementing CCAs, they’re a very biased source of information https://leanenergyus.org
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