Several cities are considering joining Orange County Power Authority (OCPA) amid partial or incomplete financial liability disclosures. To sweeten the pot, OCPA is offering no-charge membership feasibility studies, prepared by its consultant, to determine if cities are a “good fit.”
Conflict of interest issues persist.
Potential city members include Costa Mesa, Dana Point, Fountain Valley, Laguna Woods, and Stanton.
Despite what is represented, there’s no free lunch and cities are, contrary to OCPA assurances, financially exposed to unlimited liability with little upside benefit.
General funds are only safeguarded from energy contract debt if OCPA shuts down in its entirety – this is known as community choice’s “financial firewall.” However, closure is unlikely considering OCPA staff and consultants who shape the operational and climate narrative depend on salaries and fees from the agency.
When ratepayers cease paying their bills — due to a COVID-type economy, or recession — that debt is payable by respective cities in which those ratepayers reside. Power contracts are take-or-pay, which means energy must be purchased regardless of circumstances. That means cities are ultimately on the hook.
Finally, in the event of a city’s voluntary or involuntary departure from OCPA, its portion of energy contract debt must be paid off. General funds are liable if those contracts are resold at a loss.
That liability can easily exceed many millions of dollars. For example, City of Baldwin Park incurred nearly $10 million in power contract exit fees when its CCE program, operated by OCPA consultants, collapsed.
Huntington Beach is liable for $6.7 million – that’s just for emergency back-up power — countering OCPA’s claims to Costa Mesa that general funds are “shielded from any liability.”
It doesn’t help that OCPA’s recently released power source disclosure documents reveal a quadrupling of energy laundering activities compared to last year, greenwashing enough low-cost fossil power to run a whopping 52,000 homes for a year while emitting 336 million pounds of carbon from the “renewable” energy.
Consumers are further penalized by a lack of balanced discussion of what’s happening. Whether Southern California Edison (SCE) is supported or disliked, the California Public Utilities Commission’s gag order shutting down discussion of community choice energy only ensures Californians get one-sided information.
For instance, like SCE, OCPA’s wind and solar requires parallel deliveries of resource adequacy (RA) — gas-fired back-up power that stabilizes those intermittent resources. However, unlike SCE, OCPA disregards its RA requirement, cost-shifting upwards of $100 million of responsibilities onto SCE ratepayers while OCPA’s renewables hitch a free ride on an increasingly shaky electric grid.
That $100 million “savings” funds the purchase of OCPA’s retail energy.
Despite machinations, OCPA manages only about $1.75 savings per month for typical homes compared to SCE prices — assuming homeowners are enrolled in OCPA’s least-expensive Basic Choice product. Residences pay $6 to $10 per month extra for OCPA’s other products.
That’s not much of a bang considering each city’s general fund exposure.
When the economy slows, and it surely will, cities will pay dearly for their lack of due diligence.
Jim Phelps is a former power contractor and utility rate analyst. He served four years helping implement energy reporting legislation for the California Energy Commission, codified by the California Public Utilities Commission. Mr. Phelps is currently contributing to the Commission’s new Rulemaking for Power Source Disclosure Proposals on Hourly & Annual Accounting.
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