Report to Mayor and City Council
Tuesday, February 20, 2018
Discussion
SUBJECT:
Title
CONSIDER SELECTION OF DEFAULT RENEWABLE RATE TIER FOR RESIDENTIAL, BUSINESS, AND MUNICIPAL ELECTRIC ACCOUNTS WITHIN THE CITY OF CARSON FOR THE CLEAN POWER ALLIANCE / LOS ANGELES COMMUNITY CHOICE ENERGY AUTHORITY (CITY COUNCIL)
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I. SUMMARY
The City of Carson joined the Los Angeles Community Choice Energy (LACCE) Joint Powers Authority (JPA) following the November 21, 2017 City Council meeting, Item No. 35, Second Reading of Ordinance No. 17-1633.
The City Council appointed Mayor Pro Tem Jawane Hilton as the main Director, Councilmember Cedric Hicks as Alternate Director No. 1, and staff member Reata Kulcsar as Alternate Director No. 2. At the February 1, 2018 JPA regular Board Meeting, the JPA Board adopted “Clean Power Alliance of Southern California” as the new legal name for the Los Angeles Community Choice Energy Authority and the use of “Clean Power Alliance” (CPA) in public communications.
Within the CPA structure, each individual City and County member has the authority to set the default renewable energy tier that will be offered to residents and businesses within their jurisdiction. The method by which each CPA member makes this determination is entirely within their own city’s purview, as there are no legal requirements governing this selection.
The three renewable rate product tiers originally presented to the CPA Board were set at 33%, 50%, and 100%. However, CPA staff has learned that Southern California Edison (SCE) estimates its base renewable energy percentage for 2018 to be 34%. Therefore, CPA staff intends to ask the JPA Board to approve that the base product for 2018 be 36% instead of the 33% previously approved. When deciding on Carson’s default product offering, therefore, the three tiers would be 36%, 50%, or 100%.
As part of the process towards a timely launch of the CPA’s Phases 2 and 3, CPA staff is requesting final binding commitments from each CPA member by March 1, 2018. The Phase 2 planned launch is June 2018 and includes all non-residential accounts. The Phase 3 planned launch is December 2018 and includes all accounts from previous phases and residential accounts. Having this information will allow CPA staff to understand the overall program profile and begin procuring energy resources so that the CPA Board can set rates at its April meeting.
II. RECOMMENDATION
Recommendation
Consider selecting the 50% renewable rate tier as the default product for residential, business, and municipal electric accounts within the City of Carson.
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III. ALTERNATIVES
TAKE another action the City Council deems appropriate.
IV. BACKGROUND
There are currently 28 members in the CPA including the counties of Los Angeles and Ventura, and the cities of Agoura Hills, Alhambra, Arcadia, Beverly Hills, Calabasas, Camarillo, Carson, Claremont, Culver City, Downey, Hawaiian Gardens, Hawthorne, Malibu, Manhattan Beach, Moorpark, Ojai, Paramount, Rolling Hills Estates, Santa Monica, Sierra Madre, Simi Valley, South Pasadena, Temple City, Thousand Oaks, West Hollywood, and Whittier.
Each CPA member will need to select one of three renewable rate tiers as the default product into which their residents and businesses will automatically be enrolled. This default product is the product that customers will receive if they do not make any opt-out, opt-up, or opt-down selections. The three CPA products are 36% Renewable, 50% Renewable and 100% Renewable.
|
Clean Power Alliance (CPA) Plan |
|
Southern California Edison (SCE) Standard Plan |
Net Bill Discount if CPA Plan Chosen |
Results |
|
36% Renewable |
v. |
34% Renewable |
-4% |
CPA plan cheaper and cleaner than SCE plan |
|
50% Renewable |
v. |
34% Renewable |
-3% |
CPA plan cheaper and cleaner than SCE plan |
|
100% Renewable |
v. |
34% Renewable |
7% |
CPA plan is 100% clean renewable energy, however 7% more expensive than SCE’s 34% renewable plan |
|
Note: The table above compares the CPA products (36%, 50%, & 100%) to SCE’s current standard product (34%). Most accounts are on SCE’s standard plan, and this table shows that by switching to a 36% or 50% CPA plan, the account holder would save money and get cleaner power when compared to SCE’s standard plan. |
|
Clean Power Alliance (CPA) Plan |
|
Southern California Edison (SCE) Comparable Plan |
Net Bill Discount if CPA Plan Chosen |
Results |
|
36% Renewable |
v. |
34% Renewable |
-4% |
CPA plan cheaper and cleaner than SCE plan |
|
50% Renewable |
v. |
50% Renewable |
-12% |
CPA plan cheaper |
|
100% Renewable |
v. |
100% Renewable |
-10% |
CPA plan cheaper |
|
Note: The table above compares the CPA products (36%, 50%, & 100%) to SCE’s current comparable products (34%, 50%,100%). This table shows that by selecting a 36% , 50% or 100% CPA plan, the account holder would save money when compared to SCE’s comparable products. |
If Carson selects the 36% renewable as its default tier, then the customer would automatically be enrolled in the 36% renewable product unless the customer opts-up to either the 50% renewable or 100% renewable products, or the customer opts-out and elects to stay with SCE.
On the other hand, if the default product is set to 50% renewable, then the customer would automatically be enrolled in the 50% renewable product unless the customer opts-up to the 100% renewable product, opts-down to the 36% renewable product, or the customer opts-out and elects to stay with SCE.
Finally, if the default product is set to 100% renewable, then the customer would automatically be enrolled in the 100% renewable product unless the customer opts-down to either the 36% renewable or the 50% renewable products, or the customer opts-out and elects to stay with SCE.
It is important to note that the base 36% renewable product, and the rates necessary to support it, will increase each year to stay ahead of SCE’s percentage of renewable energy (see Figure 1) so that CPA’s lowest offering is always slightly greener than SCE’s. For instance, in 2019 it may be 38% and in 2020 it may be 42%, since the comparable SCE renewable percentage for those years is expected to be 36% in 2019 and 40% in 2020. As such, the rate will similarly adjust slightly upwards each year to reflect the increasing level of renewable energy provided. On the other hand, the 50% and 100% renewable will allow the CPA members to keep the initial default renewable percentage constant for several years, which will mean that these customers will have greater rate stability.
Figure 1: SCE Annual Percentage of Renewable Energy
V. FISCAL IMPACT
If the default product selected for Carson’s residential, business, and municipal accounts is 50% renewable, the projections show that an account holder will see a net bill discount of approximately 3% when compared to SCE standard plan. It should be noted, however, that when you compare CPA’s 50% renewable rate to SCE’s 50% renewable rate, an account holder would see a 12% net bill discount.
Assuming a 3% savings on an account holder’s electricity bill, the City would see a decrease in the amount of money the City collects from the Utility Users Tax (UUT). The UUT is calculated based on a percentage of the customers’ utility bills. If utility bills are reduced because electricity rates are lower, then the total tax collected will decline. In FY 2016/17, Carson collected approximately $7,600,000 from the UUT. Electricity drives about 35% of the City’s UUT revenue (natural gas is the other component). Therefore, if rates were to decrease by 3%, the City’s revenue may be impacted by about $79,800 ($7,600,000 x 35% x 3% decrease). It should be noted, however, that the City’s own utility costs will also be reduced as the City’s utility rates will be lower, and this will offset a portion of the UUT losses. The City’s budget for electricity is approximately $1,300,000. A 3% decrease in the City’s expenditure is $39,000. Therefore, the City’s net impact may be a loss of $40,800 ($79,800 - $39,000).
VI. EXHIBITS
1. Frequently Asked Questions. (pgs. 5-7 )
2. Product offerings by other community choice aggregators in the State of California. (pg. 8)
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Prepared by: Reata Kulcsar, Civil Engineering Assistant