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CC - Adoption of a Resolution Authorizing the City to Participate in a Community Choice Aggregation Technical Feasibility Study Led by the County of Los Angeles.
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Contact Person/Dept: Joe Susca / Public Works
Phone Number: (310) 253-5636
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [] Attachments: Yes [X] No []
Commission Action Required: Yes [] No [X] Date:
Commission Name:
Public Notification: (E-Mail) Meetings and Agendas - City Council (09/23/15); Southern California Edison (09/16/15); South Bay Clean Power (09/16/15); The County of Los Angeles -- Internal Services Department -- Office of Sustainability (09/16/15)
Department Approval: Charles D. Herbertson, Director of Public Works/City Engineer (09/21/15)
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RECOMMENDATION
Staff recommends the City Council adopt a resolution authorizing the City’s desire to participate in a Community Choice Aggregation Technical Feasibility Study that is overseen and funded by the County of Los Angeles.
BACKGROUND
Investor Owned Utilities (IOU’s) such as Southern California Edison (SCE) are regulated by the California Public Utilities Commission (CPUC). The CPUC establishes the SCE shareholder rate of return on their equity, which averages from 9% to 11%.
In California, the generation and distribution of electricity was partially separated and deregulated in 1996 by passage of Assembly Bill 1890 (AB 1890), allowing a competitive market to set wholesale rates. However, AB 1890 established a predetermined cap on retail electricity charges. Due to delays in approval of new power plants and market manipulation, California experienced an electricity supply crisis in 2000 and 2001. As a result of the crisis and market manipulation, Assembly Bill 117 was passed in 2002, which established the ability for local governments to form a non-profit Community Choice Aggregation (CCA) organization to purchase electricity from power producers for sale to their constituents. In addition to negotiating competitive and often lower electricity rates for their constituents, a CCA may also:
• Enable the transition to a cleaner, more efficient energy supply.
• Increase consumer choice, consumer protection, and local control.
• Spur development of new energy projects to augment contracted power.
Renewable Electricity Generation Requirements in California
Currently, by 2020 IOU’s are required to have 33% of their electricity produced by renewable sources (Renewable Portfolio Standard or “RPS”). The CPUC 2015 First Quarterly Report on RPS revealed that the State’s IOU’s have taken measures to comply with the RPS and are poised to achieve their 33% target by 2020. Passage of Senate Bill 350 increased the RPS to 50% by 2030. In addition to negotiating wholesale rates for electricity through contracts with power producers, a CCA is able to take control of decision making regarding sources of electrical power to achieve its sustainability goals such as the reduction of greenhouse gas emissions.
DISCUSSION
The following steps are required to establish a CCA:
1. Preparation of a Technical Feasibility Study;
2. Gauge the level of community support for a CCA;
3. Determine which of the three types of CCA to form [Joint Powers Authority (JPA), individual city, or commercial managed service];
4. Develop a CCA Implementation Plan that is reviewed and certified by the CPUC.
If sufficient community support exists and the CCA Implementation Plan is approved by the CPUC, the City Council may form a CCA by adopting a resolution. After formation, SCE would continue to distribute the electricity and maintain the infrastructure to deliver it, meter use and invoice customers. Individual customers may opt-out of the CCA program and remain with the IOU.
The CCA would then adopt energy policies and programs and periodically release a Request for Proposals to power producers to secure electricity for its constituents along with establishing retail usage rates that are approved by the CPUC.
Existing CCAs in California:
Currently, four CCAs exist in California including Sonoma County (2014) and Marin County (2010) and the City and County of San Francisco all of which were formed through a JPA; and the City of Lancaster (2015) through an individual city agreement. The two largest, Marin Clean Energy and Sonoma Clean Power, which provide 33%, 50%, and 100% RPS options to their customers already exceed the State’s RPS standard at lower retail prices to their customers than IOUs. In Sonoma and Marin Counties, customer participation in the CCA ranges from 75% to 80%.
South Bay Clean Power is an ad hoc citizens group that is actively evaluating the possibility of creating a CCA for the South Bay and surrounding cities. In conjunction with South Bay Clean Power, on June 24, 2015 the County of Los Angeles -- Internal Services Department -- Office of Sustainability (County) presented a preliminary report to the County Board of Supervisors (Board) that evaluated three of the existing CCAs’ experiences; the cost, benefit, and risk associated with formation of a CCA, financing options and formation types in addition to reaching out to cities in the South Bay and Westside to gauge their level of interest in forming a CCA. On September 15, 2015 the Board directed County staff to move forward with preparation of a $300,000 Technical Feasibility Study that includes a detailed investigation for development of a CCA within incorporated and unincorporated cities within the County, to form a task force that includes a representative from each of the participating cities, and to prepare a final report on CCA costs/benefits, risks, and key decision points for the Board to consider (Study). The County anticipates it will complete the Study by February, 2016.
South Bay Clean Energy and the County have invited other cities (including Culver City) to participate in the Study provided their governing bodies adopt a resolution agreeing to participate. Participation is at no cost to the participating cities (other than the costs of obtaining load data from SCE - please see below), and participation by individual cities provides the County with access to SCE load data statistics necessary for inclusion in the Study without the participating cities being obligated to become a member of any CCA formed. Currently the cities of Hermosa Beach, Manhattan Beach, Santa Monica, Redondo Beach, Torrance, Carson, Beverly Hills, Malibu, Palos Verdes Estates, Lomita, and West Hollywood have adopted such resolutions authorizing their participation in the Study.
Formation of a CCA will not affect the collection or customer payment of Utility Users Taxes. SCE has indicated there is a charge of approximately $1,000 to the City to provide the City’s load data, which is necessary to participate in the Study.
During their meeting of September 16, 2015, the City Council Sustainability Subcommittee recommended the City Council adopt a non-binding resolution to participate in the Study. Therefore, this item is presented this evening for City Council consideration.
FISCAL ANALYSIS
Should the City Council adopt the proposed resolution, the City will participate in the Study. The Study will include an analysis of the operations of the proposed CCA. Additionally, the City would incur the SCE administrative fee for the City’s load data, which is necessary to participate in the Study. Sufficient funds are available in the City Council Adopted Budget for Fiscal Year 2015/2016 to pay for the estimated $1,000 fee to obtain the load data from SCE (Account Number 10160100.619800 - Other Contractual Services).
ATTACHMENTS
Proposed Resolution
RECOMMENDED MOTIONS
That the City Council:
1. Adopt a resolution authorizing the City’s participation in a Community Choice Aggregation Technical Feasibility Study lead by the County of Los Angeles; and,
2. Authorize the City Attorney to review/prepare the necessary documents; and
3. Authorize the City Manager to execute such documents on behalf of the City.
NOTES:
1 As stated on Wikipedia, deregulating the producers of electricity in California did not lower the cost of electricity production. Deregulation did not encourage new producers to create more power and drive down prices. Instead, with increasing demand for electricity, the producers of energy charged more for electricity. The producers used moments of spike energy production to inflate the price of energy. In January 2001, energy producers began shutting down plants to increase prices. When electricity wholesale prices exceeded retail prices, end user demand was unaffected, but the incumbent utility companies still had to purchase power, albeit at a loss. This allowed independent producers to manipulate prices in the electricity market by withholding electricity generation, arbitraging the price between internal generation and imported (interstate) power, and causing artificial transmission constraints.
2 For example, a CCA may develop a program that offers to purchase electricity from individual property owners who generate an amount in excess of their needs from rooftop solar panels.
3 The Los Angeles Department of Water and Power (LADWP) is not an IOU; rather it is a Publicly Owned Utility (POU) and is not subject to the State RPS requirement. On June 29, 2004 however, the Los Angeles City Council adopted Resolution 03-2064-S1 requesting that the LADWP Board adopt an RPS policy of 20% renewable energy by 2017 and set applicable milestones to achieve this goal. On April 11, 2007, the LADWP Board amended their RPS policy by accelerating the goal of requiring that 20% of energy sales to retail customers be generated from renewable resources by December 31, 2010. In addition, the amended policy established a Renewable Resource Surcharge and also established renewable energy procurement ownership targets. The LADWP Board subsequently approved an RPS policy in April 2008, which included an additional RPS goal of requiring that 35% of energy sales to retail customers be generated from renewable resources by December 31, 2020.
4 According to the CPUC, the top two sources of RPS production in California are wind (36%) and geothermal (25%).
5 Regardless of its origin, electricity in California is distributed through a grid overseen by the California Independent System Operator.
6 In California, Alameda County, Santa Clara County, San Diego County and San Mateo County have each announced plans to implement CCAs as well.