Coalition wants illegal costs generated by government-controlled energy programs eliminated

CPUC to vote on proposal that would potentially save utility customers millions of dollars and eliminate an unfair and illegal cost.

SAN DIEGO (February 2, 2018) – The California Public Utilities Commission (CPUC) will soon vote on a proposal to eliminate an illegal cost shift that could potentially save California utility customers millions of dollars.

​In the San Diego region, this would protect millions of utility customers who would be forced to pay more than their fair share for electricity as government-controlled energy programs, known as Community Choice Aggregation (CCA), are adopted by some cities. Under current regulations, CCA customers are paying less than their fair share of energy reliability costs during their first year of operation, according to the CPUC. The CPUC proposal is intended to end this unfair cost shift.

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“Utilities incur short-term power purchase costs for the customers of CCAs in their launch or expansion year…such costs are borne by bundled (utility) customers, potentially resulting in millions of dollars annually,” the commission’s proposal, Resolution E-4907, says.

Proponents of government-controlled energy are trying to eliminate, or delay implementation of, the CPUC proposal because it would force CCA providers to pay for the electric reliability costs that are incurred to serve customers during their first year of operation, raising CCA costs and potentially undercutting their business model. 

“They’re arguing the way in which the CPUC is approaching this decision is wrong and that it’s going to drive up their costs,” said San Diego Taxpayers CEO Haney Hong, a member of the Clear the Air Coalition. “CCA proponents do not appear to dispute that this subsidy exists, have any argument as to why CCAs should not be paying their fair share, or why some taxpayers should have to pay higher electricity rates to subsidize CCA operations.”

Cost shifts are one of the main criticisms of CCAs. A cost shift occurs when one set of customers is forced to pay for services that are provided to another group of customers. 

​Under California law, “bundled retail customers of an electrical corporation shall not experience any cost increase as a result of the implementation of a community choice aggregator program.” These shifts routinely occur when a CCA is formed. CCA customers are subsidized by customers who remain with the utility company. If San Diego formed a CCA without adoption of the commission’s proposal, SDG&E customers in every neighboring city would see their rates increase to subsidize the new government-controlled energy provider in San Diego.

“These cost shifts are fundamentally unfair. State law requires cost neutrality, which is why the CPUC is working to resolve this issue,” said coalition member Rev. Gerald Brown of the United African American Ministerial Action Council. “Energy customers in Lemon Grove, for example, should not have to pay higher rates so energy customers in San Diego can pay lower rates.”

​Late last year, San Diego Mayor Kevin Faulconer recommended to the City Council that it not weigh in on the potential creation of a government-controlled energy program until the CPUC resolves the cost-shift issues related to CCA. The commission’s proposal would address one of these cost shift issues. Another cost shift issue is scheduled to be resolved later this year.

About: The Clear the Air Coalition is a group of business, environmental, civic and taxpayer leaders working to ensure a diverse range of voices is heard and important questions are answered before critical decisions are made about San Diego’s climate future. Learn more at: www.clearair.us Follow us at: @cleartheairco and facebook.com/cleartheairco