Solana Beach CCA moves to shave its discount in comparison to SDG&E to 1%

Increases in costs have hurt the bottom line of the Solana Energy Alliance, which serves 7,300 customers in the city of Solana Beach.
Increases in costs have hurt the bottom line of the Solana Energy Alliance, which serves 7,300 customers in the city of Solana Beach.
(Getty Images)

Looking to shore up the bottom line of its stand-alone community energy program, the Solana Beach City Council has taken steps to reduce the discount it offers in comparison to San Diego Gas & Electric from 3 percent cheaper to just 1 percent.

“Obviously, we need to make a shift,” said Solana Beach City Councilman David Zito prior to the council’s 5-0 vote Wednesday night, April 22, directing staff to change the rate schedule for the default plan offered by the Solana Energy Alliance, the community choice aggregation, or CCA, program that serves the town’s 7,300 customers.

The council members make up the board of directors of the Solana Energy Alliance, which has been up and running since June 2018. Under the CCA model, local governments buy the sources of power in a given jurisdiction instead of traditional investor-owned utilities such as SDG&E.

According to city staff, if the Solana Beach CCA continues offering rates 3 percent cheaper than SDG&E, its cash balance will go negative by next April. However, adjusting the rate discount to 1 percent will keep the balance in the black. An even larger net gain would occur if the CCA set its rate to zero percent, or at parity with SDG&E’s.

Acknowledging the financial uncertainty caused by the COVID-19 pandemic, Councilwoman Kelly Harless argued for taking a more fiscally conservative approach and changing the rate to parity. “One percent is more symbolic than anything else,” she said, because the numbers are small when considering their effect on a single residential customer.

With the current 3 percent discount, an average Solana Energy Alliance customer using 420 kilowatt-hours per month saves $1.50 compared to what they would pay with SDG&E.

Zito said he places more emphasis on the CCA’s mission to obtain more renewable sources of power, helping the city meet its climate targets and maintaining local control of energy choices than on a reduction on monthly bills, “but nonetheless, a lot of the story that has ended up out there has been about the rate discount. I do think that the symbolic part is important.”

Zito’s motion to move forward with a 1 percent discount carried the day. City staff will adjust the rate schedule and bring it back to the council on May 13.

The Solana Energy Alliance default plan is made up of energy sources that are 50 percent renewable and 75 percent from carbon-free sources that include hydropower. The CCA also offers a more expensive option made up of 100 percent renewable products.

The Solana Beach CCA’s bottom line needs shoring up because of a combination of things.

One of the biggest factors stemmed from a change in the exit fees that all CCAs across California have to pass on to their customers each month. The exit fees offset the costs a utility in a given region has spent over the years on things like building power plants and developing renewable energy projects — all done with the approval or direction of the California Public Utilities Commission. In a decision CCAs complained about, the commission in late 2018 adjusted the exit fees to make them higher.

Another reason for the cash crunch? While CCAs may purchase power, their customers still have to pay the transmission and distribution charges of the utility in their respective territories.

Mayor Jewel Edson complained SDG&E isn’t “playing fair ball” with the CCA, and deputy mayor Judy Hegenauer said, “SDG&E, I think, is manipulating this a lot.” A Solana Beach staff report said SDG&E’s delivery charges for summer baseline have increased 129 percent in the last three years.

But SDG&E spokeswoman Helen Gao said SDG&E customers pay for delivery charges as well and the 129 percent figure also includes utilities commission-mandated fees and costs attributed to public purpose programs that all customers across the state pay, whether they are enrolled in a CCA or not.

One such public purpose program, Gao said, is Family Electric Rate Assistance, or FERA, that offers households that meet the income requirements a reduction on their monthly power bills. The commission recently raised the discount offered by FERA from 12 percent to 18 percent.

“Unfortunately, there appears to be some confusion on the part of Solana Beach, given that the Solana Energy Alliance makes its own decisions about where and how to procure energy for its customers, independent of SDG&E,” Gao said in an email. “Its rates are a byproduct of its procurement strategy.”

Solana Beach’s vote to adjust its discount to 1 percent comes at the same time it has joined North County neighbors Del Mar and Carlsbad to create a brand new, three-city CCA called the Clean Energy Alliance. The new CCA is scheduled to begin operations in May 2021 with about 58,000 eligible customers. Customers at Solana Energy Alliance will be folded into the new coalition.

A significantly larger CCA in San Diego County is also about to launch in 2021. San Diego Community Power — made up of the cities of San Diego, Chula Vista, La Mesa, Imperial Beach and Encinitas — is expected to serve about 920,000 customers, making it the second-biggest CCA in the state.

— Rob Nikolewski is a reporter for The San Diego Union-Tribune


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