Community Choice Energy clears hurdle in San Diego

San Diego on Thursday (November 16th) took another step in the lengthy process of establishing a community choice aggregation market for city residents and businesses, as the city's Sustainable Energy Advisory Board voted to send a feasibility study completed in July to the city council with a recommendation to move forward on its action points.

Under community choice, a city government or nonprofit takes over the role of buying and selling power, while the local utility maintains control and maintenance responsibility for transmission of that power, collecting a fee for doing so. Residents who wish to opt out of the program and continue buying power directly from the utility have an option to do so. Advocates say that such a choice puts downward pressure on electric costs while increasing the amount of renewable power on the grid at a rate faster than utilities are currently ramping up reliance on solar, wind, and geothermal generation.

Despite using an anticipated electricity cost that critics say is twice the cost of solar power currently available for purchase, the study still finds that rates would likely be cheaper in a community-choice scheme than under a continued SDG&E monopoly. The utility, which has already asked for an 11 percent rate hike in 2019, has long fought against consumer choice, arguing competition would be unfair, given that consumers already have the option of purchasing private solar systems or buying green energy direct from SDG&E. The company also expects to reap guaranteed returns from investments made in infrastructure, such as controversial new gas-fired power plants.

"Of course everyone wants what's fair," said Joyce Lane, an environmental activist with San Diego 350 and one of 23 speakers who signed up to address the advisory board on Thursday. "But for Sempra and SDG&E, unfortunately, what's fair and equitable is that they keep their monopoly and the highest rates in the continental U.S. in order to protect their profits and line the pockets of their executives.

"For our alliance, what's equitable is to restore power and profits to the community. Because we're fundamentally fighting for different people, for a different purpose, a claim of interest in equity is misleading at best."

Community choice is still far from a done deal in San Diego (Solana Beach is much closer). The study recommended for approval by the city council has four recommendations that will move the process forward: developing a business plan and engaging with the California Public Utilities Commission and SDG&E to address power-procurement issues, join the California Community Choice Association (a group that lobbies for community-choice providers at the state-government level), establish a staff of industry veterans to oversee the program's creation, and explore development opportunities that impact local job creation such as partnering with local clean-tech firms.

"The next step is to move forward with a business plan. It's not the same as committing to the program," says Mikey Knab, a restaurateur who manages eateries in San Diego and Portland, Oregon and has his own in Chula Vista. "It's a matter of gathering information, forecasting, considering costs and benefits. For me it's an excellent step forward, as it will allow city officials and policy-makers to consider the viability, and this third-party report proves that it's certainly viable."

Knab, who also advocates for community choice through the Business for Good San Diego organization, believes beyond the benefit for consumers, lower energy costs for businesses would free up capital that could otherwise be reinvested in the local economy.

"At my restaurant in Portland, electricity cost is about 1.5 percent of sales – that's pretty common across the country. All of my other costs up there are about the same as here in San Diego, but here my utility costs are about 3 percent, literally double."

A vote to recommend approval of the study and its suggestions fell two shy of unanimous approval – advisory boardmember and San Diego Regional Chamber of Commerce public policy vice president Sean Karafin expressed concern, recommending the city join the statewide advocacy group that has pushed for lower cash payouts to utilities losing customers to community choice. An SDG&E rep abstained.

"By lobbying for an exit fee that's beneficial to those that are leaving [SDG&E], inherently that will come at the cost of ratepayers that are not leaving," Karafin said before casting the lone dissenting vote. "I don't think it's appropriate that we lobby for that."