Orange County Power Authority’s Costly Price Reduction

Power lines in Fullerton, Calif., on Dec. 22, 2020. (John Fredricks/The Epoch Times)

Commentary

Orange County Power Authority (OCPA), an energy provider claiming to focus on “green power” as an alternative to Southern California Edison (Edison), recently announced a new rate reduction for its Basic Choice product that is 2 percent lower than Edison pricing, now in effect. The rate reduction is timely considering public distrust and whispers of city departures from OCPA.

However, a closer look at the rate reduction reveals a sizable stealth cost increase that sets up continued price escalations by the agency.

Aside from minimal offered savings, there are three issues that do not reconcile with the announced price reduction.

First, OCPA is “benchmarking“ Edison’s price increase to “maintain parity” with the company, then shaving off a few cents and advertising the difference as a ”savings” or “lower price,” which amounts to around $1 per month for the average home subscribing to the lowest-price Basic Choice. With $247.9 million of its energy supply contracts already locked in (pdf), each time Edison raises its prices, OCPA’s corresponding benchmark makes millions in additional dollars from a community whose impression is that “choice” results in lower prices.

Second, OCPA claims increasing natural gas prices in the western U.S. are driving up its energy costs. However, most of OCPA’s ratepayers are supposedly natural gas-free, enrolled by default in the agency’s 100 percent renewable product, while nearly everyone else supposedly receives 69 percent renewable energy with the Smart Choice product.

Third, as natural gas prices increase, the monthly exit fees Edison charges to OCPA ratepayers decrease. However, OCPA absorbs those savings while increasing its electricity prices for those same ratepayers, masking its windfall in the process.

Cities throughout California are coming to terms with community choice’s broken promise of controlling escalating energy prices. The City of Rocklin protested benchmarking by Pioneer Community Energy, whose rates are determined by Pacific Energy Advisors, the consulting firm that serves OCPA in a similar capacity. Rocklin cited $60,000 of benchmarking that is paid by the city and its residents.

Outages Coming, Plan Accordingly

OCPA’s record does not inspire confidence for sustained low energy bills compared to Edison. This is particularly true given the agency may have put Orange County’s and California’s electricity reliability at risk in return for its own profit.

After advertising low prices last year when building support for its business launch, OCPA abandoned its low-price commitment, placing nearly everyone into its premium priced Smart Choice and 100 percent renewable products (pdf). That action was taken after OCPA determined its “at parity” pricing with Edison for its default Basic Choice was unsustainable.

The agency’s cash issues developed into a $2 million fine after dismissing the state’s regulatory requirement to supply specially designated gas-fired generation that supplements and supports intermittent wind and solar resources feeding California’s electric grid (pdf and pdf).

Without resource adequacy, the state’s transmission system is unstable, creating reliability issues across the region and inviting blackouts, hence the regulatory requirement.

OCPA’s record puts a different light on its offer of “lower prices,” which obscures millions of dollars needlessly collected from the community by benchmarking. Just as troubling is the absence of OCPA’s basic purpose for being in business—assuring reliable electric service to the community it claims to serve.

Advertised rate reductions may temporarily obscure underlying issues while garnering support for OCPA, but the agency’s history demonstrates that consumers will pay substantially more in stealth costs than OCPA’s $1 dollar per month lower price compared to Edison while putting our grid in jeopardy.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.