CARLSBAD — In less than one year, three cities are expected to launch a clean energy service.
However, the Clean Energy Alliance has a big hurdle to clear before the May 2021 date in the form of a $4.45 million loan and to quickly reimburse to Solana Beach and Del Mar $150,000 each due to those cities’ impacted budgets due to the COVID-19 pandemic.
During its July 14 meeting, the Carlsbad City Council approved, 3-1, to authorize city staff to develop and present a credit option for CEA’s Fiscal Year 2020-21 budget including the loan.
“Funds are needed to keep alliance operations for this fall,” said Jason Haber, Carlsbad’s intergovernmental affairs director. “We put into the JPA agreement that this funding was necessary.”
In October 2019, Carlsbad approved a Joint Powers Agreement with the cities of Solana Beach and Del Mar to form the first Community Choice Energy program in San Diego County. CEA’s implementation plan was certified by the California Public Utilities Commission earlier this year and CEA is targeting May 2021 to switch ratepayers from San Diego Gas & Electric.
The CEA has lofty clean energy goals and the feasibility study showed it would save ratepayers up to 2% on their bill. As part of its plan, CEA and its board, which Carlsbad Councilwoman Cori Schumacher chairs, has been vocal the energy entity would need a line of credit for start-up costs.
The loan would be paid back in three years, according to the plan, but through a Carlsbad-funded financing plan, it would be cheaper for CEA and the city would earn interest of at least $150,000, according to Haber.
CEA received financing proposals from River City Bank and JP Morgan. The interest from those loans total $469,000 and $575,000, respectively, while Carlsbad projects its plan to come in under $378,000.
“We did anticipate financing for the CCA,” Schumacher said. “We’re including an option that could be of increased benefit, not only to the CCA and ratepayers but to the city of Carlsbad.”
However, Mayor Matt Hall, who voted no, was not pleased with the city exposing itself to a $4.45 million financing deal with CEA, guaranteeing a 2% lower rate and a potential delay of the launch. He questioned why the financing aspect was not part of the city’s budget discussions in June and also expressed concerns with the delay as SDG&E, per Haber and Schumacher, said it may not be able to accommodate two CCA launches in May 2021.
San Diego Community Power is targeting May 2021 and includes the cities of San Diego, Chula Vista, Encinitas, Imperial Beach and La Mesa.
Solana Beach and Del Mar, though, budgets have been hit hard by the pandemic and are requesting repayment for each of their $150,000 initial investments by this fall. Each city, including Carlsbad, all paid $150,000 to assist with start-up costs.
Haber said there is a low risk of default and said Carlsbad, due to the structure of the plan, and $1.45 million would be exposed.
“This is a $100 million business,” Hall said. “And it was clear this entity would stand on its own. I can’t look at anybody in the eye and say we’re going to be able to do that with or without a loan. Extremely disappointed and lack of clarity over a $4.5 million loan. I think it needs far more research before it moves forward.”
The vote, though, does not bind the city to the financing plan but allows staff to develop the terms and structure, which Carlsbad would control.
If approved, it would allow for $1.45 million to be injected into CEA to meet its September or October obligations and the rest would be dispersed in December or January 2021 to cover the agency until the May launch, Haber said.
If the launch is delayed until October 2021, CEA would have the cash to cover costs until then, Haber added.
