SOLANA BEACH — The first of its kind in the county, Solana Beach’s Community Choice Aggregation program is anticipating a decline in projected revenue over the next few years, a hurdle one council member referred to as “growing pains.”
The outcome is largely attributed to increases in the cost of energy and a modified “exit fee.”
Community Choice Aggregation, or CCA, is a method by which cities can procure and provide renewable energy to their residents. The program is becoming increasingly popular in the state of California, particularly among cities vying for more local control of their energy.
Solana Beach is the first city in San Diego Gas & Electric territory to embark on the program — called Solana Energy Alliance, or SEA — which took off in June of2018.
Except for residents who chose to opt out and stick with SDG&E, the energy funneled into local homes is now 50 percent renewable and 75 percent greenhouse gas-free, with the option to opt-up to 100 percent renewable. The cost to customers is 3 percent below that of SDG&E’s.
About 45 percent of the energy SDG&E provides is renewable. The state has mandated that energy providers serve 33 percent renewable energy by 2020.
SEA harnesses its energy from predominantly wind, geothermal and hydroelectric sources.
The energy is still delivered by SDG&E, making the provider both SEA’s collaborator and competitor.
City staff and consultants provided a quarterly update to council at a Nov. 28 meeting, reflecting revenues for 2018 which are 7 percent higher than estimates from April. However, the projected cumulative net revenues for the next five years have seen a notable decline — from $3.9 million to just under $1 million.
According to the program’s consultants, increases in the price of natural gas have had a sizeable impact on wholesale electricity prices. However, projected numbers are also taking a hit from a change to the Power Charge Indifference Adjustment.
The Power Charge Indifference Adjustment is an exit fee which is charged to customers who leave an investor-owned utility — like SDG&E — for a Community Choice Energy provider such as SEA. It is meant to compensate investor-owned utilities for the energy previously procured on behalf of now former customers, energy they then have to sell on the open market.
The California Public Utilities Commission ruled in early October to change the methodology by which the exit fee is calculated — a decision that has negatively impacted the near-term projected numbers of SEA and delayed a CCA feasibility study undertaken by several NorthCounty cities.
Utilities Commissioner Carla Peterson proposed the new formula, asserting that it will ensure customers who decide to stay with the investor-owned utility are not saddled with excess costs.
The new exit fee is expected to go into place in January 2019, and staff currently estimate the rate will average 2.8 cents per kilowatt-hour overall, with a 3.2 cents per kilowatt-hour average for residents. It is currently 1 to 2 cents per kilowatt-hour.
However, Solana Beach and several other CCAs are pushing back. On Nov. 19, SEA, in conjunction with CalCCA and CleanPowerSF, filed an application for rehearing with the Public Utilities Commission.
Regardless of the outcome, council members expressed confidence that the effects of the PowerCharge Indifference Adjustment would not pose a long-term threat to the program.
The idea of starting a CCA in the county’s second smallest city has been gaining slow and steady traction over the past seven years. North County resident and former member of the city’s Clean and Green Committee, Lane Sharman, introduced the concept to the Solana Beach City Council in October 2011, about a year after Marin County launched the first CCA in the state.
Sharman called the CCA option a “low-hanging fruit” that offers “low risk and high reward” for the city.
“Community Choice Energy was very attractive to a large number of people in Solana Beach who view climate change and global warming as an existential threat,” Sharman said.
The city outlined four principal goals for the program: providing cleaner energy, obtaining local control, increasing rate savings and meeting the city’s climate action plan.
By partnering with The Energy Authority — which currently purchases renewable energy on the city’s behalf — and taking out a loan from the city’s general fund to tackle upfront costs, the city is now meeting those goals. SEA currently serves 92 percent of the city’s residents and 99 percent of its businesses.
According to Assistant City Manager Dan King, the city will be able to pay off its initial loans by August 2019, making it a self-funded enterprise.
However, for the time being, the city will fall short of its final goal: to use the excess revenue from the program to fund other sustainability efforts in the city. Mayor Dave Zito envisions options such as providing more electric car charging stations in the city, or incentivizing residents to install solar panels on their rooftops.
This isn’t the first time Solana Beach has paved the way in the realm of environmental sustainability — the city was also the first in the county to ban single-use carryout plastic bags in 2012, and the first to ban the use of polystyrene at local restaurants. Council members point to the Clean and Green Committee as an active entity at the forefront of the CCA effort.
“We prioritized it, and we had a very active community that was asking for this, and that’s why it happened sooner than in other communities,” Zito said.
Neighboring cities are now following in Solana Beach’s footsteps — Del Mar, Encinitas, Oceanside and Carlsbad are currently awaiting the results of a feasibility study regarding the possibility of pursuing a CCA.
In October, San Diego Mayor Kevin Faulconer announced his support of CCAs, anticipating a CCA program could take off in San Diego as soon as 2021.
Now that the city is finding its footing with SEA, staff and council are looking outward to see how they can collaborate with other cities interested in pursuing Community Choice Aggregation.
According to city staff, SEA is open to “all potential governing structures,” including a Joint Powers Agreement, which would allow the city to potentially scale up energy procurement by jointly administering a CCA with other area cities. Representatives from the interested cities, including San Diego, will be meeting to explore options in the coming weeks.
“When we launched, this council was clear — do not turn our back on our neighbors,” City Manager Greg Wade said.