Del Mar considers CCA

DEL MAR — It’s been described as possibly the biggest change you’ll never notice. 

A CCA (Community Choice Aggregation) is a system that allows cities or counties to collectively buy power from an energy wholesaler rather than a conventional electric company.

“It is a national movement in which citizens … are able to form a power utility inside of an investor-owned utility,” Lane Sharman told Del Mar City Council during a presentation at the June 18 meeting.

“It does not involve owning the wires or the hardware or anything like that,” he said. “This is not a competitive threat to San Diego Gas & Electric.”

Paving the way was Massachusetts, where the first public electric cooperative was created in 1997. Ten years later California authorized its first CCA.

Formation requires city councils to adopt an ordinance. Council members make up a governing board to provide oversight and an implementation plan. They must contract with at least one wholesaler to support delivery of energy into the local CCA, Sharman said.

Since the beginning of this year Santee and Solana Beach, a city known for its proactive approach to sustainable energy and where Sharman is a resident, have been exploring CCA formation.

Should that happen, an advisory board would also be created, and a general manager and two or three people would be hired to run the CCA, Sharman said.

Once a wholesaler has been secured, all residents in the city must receive four notices in five months giving them the opportunity to opt out.

Local CCA customers would continue to receive bills from SDG&E, which by law cannot prevent the cooperatives from forming.

Because CCAs don’t have the overhead and shareholders like a traditional energy company, the operating costs are lower, energy consultant Bill Powers said. Rhode Island has saved $28 million since 1999, he said.

CCAs allow communities to design their own energy package, stabilize rates, take control of costs and eliminate the justification for building traditional infrastructure and transmission lines, Powers said.

So if customers can get greener energy for less money, why hasn’t the concept taken off?

“Fear of the unknown,” Sharman said, adding that there are financial, execution and reputation risks.

“It is a business, after all,” he said. “No one wants to be associated with a failure.”

Should that happen, however, customers would go back to SDG&E, which by law cannot retaliate, and the wholesaler would likely not be paid.

Sharman said a local CCA must be affordable, competitive and environmentally responsible. “We don’t want to lose sight of any of those three pillars,” he said.

To do that, rates must be less than what customers are currently paying SDG&E. The challenge is that while the cost of energy may go down, there are expenses associated with the CCA.

Start-up costs are estimated to be between $250,000 and $500,000. Sharman said a small city like Solana Beach could probably implement the system on the “lean” side of that.

Customers must also pay an exit fee for five years after leaving the local utility. Sharman said an implementation study would have to be conducted to determine if the CAA could better the SDG&E rate, inclusive of the start-up and exit fees.

“It won’t get off the ground in San Diego if the rate is higher,” he said. “And we’re not going to compromise environmental sustainability.”

If several cities form CCAs, they can join together to create a joint powers authority to lower costs, however, “you can set your own course if you’re not part of a JPA,” Sharman said.

“It certainly is an attractive idea,” Councilman Don Mosier said. “Producing power locally will reduce transmission costs and will improve the power mix.

“This is a starting point for greener energy but of course we’ve got a long way to go,” he said. A lot of things have to change at state level in terms of regulating fees and the energy distribution to make this model work well but I think this is an item that we need to watch very carefully.”

“This looks to be fairly viable,” Councilman Mark Filanc said. “We’d have to analyze the costs to the residents. … We should support the notion of moving forward with this.”

“I think Del Mar can take a leadership role in the future in this area,” Mosier said, adding that it could take six months to a year before a proposal comes back to the council.

“With some of the most brilliant minds living in San Diego, we’d be crazy not to tap into this,” Sharman said.

 

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