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HomeMy WebLinkAboutDCE-CCA Program - 100% Carbon-Free Option -7_ 9 STAFF REPORT CITY OF PALM DESERT COMMUNITY DEVELOPMENT DEPARTMENT MEETING DATE: July 12, 2018 PREPARED BY: Ryan Stendell, Director of Community Development REQUEST: Upon the commencement of the Desert Community Energy - Community Choice Aggregation program, that the City of Palm Desert select the 100% Carbon-Free option for the electricity consumed at the City's facilities and for other metered uses. Recommendation By Minute Motion, that the City Council, upon the commencement of the Desert Community Energy- Community Choice Aggregation program, select the 100% Carbon- Free option for the electricity consumed at the City's facilities and for other metered uses. Strategic Plan Approval of the staff recommendation will help to implement Energy & Sustainability Priority 2: Develop policies and programs to discourage waste, increase renewable energy production and increase the use of environmentally responsible materials. Executive Summary Approval of the staff recommendation would switch existing Southern California Edison (Edison) electrical accounts for City-owned facilities to the newly-formed Desert Community Energy (DCE) - Community Choice Aggregation (CCA), selecting a rate structure that provides 100% carbon-free electricity for the same cost as the City currently pays for conventional Edison accounts. Discussion Investor-owned utilities (IOUs) such as Southern California Edison have traditionally decided how much electricity to tap from the various sources available, subject to certain constraints imposed by the State. But during the past decade, a handful of municipalities have formed nonprofit entities — Community Choice Aggregations or CCAs -- that direct those utilities on how to source their power. Community Choice Aggregation is a program that enables local governments to pool the electricity demand in their communities for the purpose of supplying electricity. CCAs buy 12 July 2018 - Staff Report Electrical Service Option - DCE Page 2 of 3 or develop power resources on behalf of the electricity end users in their jurisdictions. Once a CCA is operational, it is completely ratepayer funded, and not subsidized by taxpayer dollars. Ratepayer revenues for electrical generation that are currently paid to the IOUs are re-directed to the CCA, which becomes the default provider of electrical generation services. Desert Community Energy - CCA, a joint powers authority, was created on October 30, 2017, and is made up of the cities of Palm Desert, Cathedral City and Palm Springs. Mayor Sabby Jonathan is the City's representative on the DCE Board and the Coachella Valley Association of Governments (CVAG)) acts as staff for DCE. Earlier this year, the City Council agreed to participate in the formation of a CCA Joint Powers Authority for the Coachella Valley. DCE's Implementation Plan was certified by the California Public Utilities Commission on March 9, 2018, and DCE is on track to commence operations on August 1, 2018. At this time, DCE is planning to offer two product types. 1. Desert Saver: The basic default product will be more carbon friendly than Southern California Edison's and provides a 3% discount from Edison's generation rate. The net savings to customers would be approximately 1.5%. Electricity purchased through the Desert Saver option will be 35% from renewable sources and 50% carbon-free. 2. Carbon-Free: The premium product would offer customers the choice to opt up to greener electricity at a rate that would be equal to Edison's default rate. The DCE Board requested that this premium product emphasize carbon-free electricity, a 100% carbon-free choice. Carbon-free power offers the benefit of reducing greenhouse gas emissions, allowing member agencies to make progress on sustainability and climate actions plans. As is required by California law, when DCE begins operations in August 2018, all customers will automatically be enrolled in the basic product (Desert Saver) unless they opt out or opt up. Unless the City opts otherwise, all of the electrical accounts serving its facilities, parks, and incidental uses will be changed to the Desert Saver option of the DCE. However, all customers will have the option to opt out of enrollment in the new CCA, and of opting up to greener energy sources, such as the Carbon Free option being offered by DCE. All of Edison's current rate discount options (such as CARE and FERA) will remain in place for income-qualifying households. For solar customers, DCE will buy back their excess energy, as Edison always has. It should also be noted, the Board made a policy decision to not procure electricity from nuclear power sources or any electricity resulting 12 July 2018 - Staff Report Electrical Service Option - DCE Page 3 of 3 from new construction of large hydropower (e.g. dams) generation. The investor-owned utilities IOUs are seeking to increase the PCIA (or"exit fee") from the California Public Utilities Commission (CPUC). This will make it more difficult for CCAs to operate at or below the fees charged by IOUs. It is not yet known if the IOUs will be successful at increasing the PCIA. The PCIA proceeding is scheduled to be resolved in July. Assuming that happens, a revised PCIA would take effect in January 2019. DCE has determined that the premium product (Carbon-Free) can be offered at rates equal to Edison's default rate, so no increases are anticipated in the City's energy expenses by virtue of the selection of the Carbon-Free option for City electricity consumption. CVAG has prepared a comparison of the different products to demonstrate the potential differences in pricing. That comparison is appended to this report. Fiscal Analysis There is no difference in cost between Edison and the Carbon Free option. Should the City opt to go with the Desert Saver option, DCE estimates that it would save approximately $15,000. While the PCIA pricing is not expected to increase over the remainder of 2018, it is not known whether the CPUC will increase the PCIA for 2019 moving forward. In the event the PCIA is increased, and depending on how much it is increased, DCE may need to adjust their rates, which would increase the amount that the City pays for its electrical use. LEGAL REVIEW DEPT. REVIEW FINANCIAL REVIEW CITY MANAGER N/A Zy/ Robert W. Hargreaves Ryan Stendell �J p t Moore Lauri Aylaian City Attorney Director of Community Director of Finance City Manager Development ATTACHMENTS: Desert Community Energy Palm Desert Municipal Bill Estimate