A community choice aggregation (CCA) company that was formed to procure energy for several cities in Southern California’s Riverside County has filed for bankruptcy, citing increased costs and lower revenue during the COVID-19 pandemic.
Western Community Energy (WCE) is a joint powers authority (JPA) consisting of the cities of Eastvale, Hemet, Jurupa Valley, Norco, Perris, and Wildomar. The JPA was formed last year to develop a CCA program and purchase energy on behalf of residents and businesses as a “cost-competitive alternative” to electricity offered by Southern California Edison (SCE).
The company’s board of directors declared a “fiscal emergency” and authorized its legal counsel to file for Chapter 9 Bankruptcy protection on May 24. In a press release, WCE reported that “several external contributing factors” impacted the company’s financial situation since the program was implemented in April 2020, at the beginning of the COVID pandemic.
Last August, California experienced “an unprecedented heat event” which resulted in substantially higher power needs and a spike in the cost of energy, according to WCE.
“Although WCE had secured 90 percent of its electricity needs for the summer of 2020, the heat storm exhausted the projected supplies prematurely,” the release stated. “An additional $12 million in energy costs were incurred throughout the 2020 summer season due to the unanticipated warm weather.”
In addition, a tightening of the state’s requirements for resource adequacy created a shortage in the market, “significantly increasing the cost of regulatory compliance.”
WCE stated that it lost revenue because many customers did not pay their bills during the COVID-19 pandemic following a mandate by Gov. Gavin Newsom. SCE also blamed Newsom for his mandate “that no customers could be disconnected due to non-payment of their utility bills” during the pandemic. The order was implemented by the California Public Utilities Commission (CPUC).
“Over the last year, delinquencies averaged ten times higher than pre-Pandemic industry standards and have cost WCE millions of dollars in added cost burden,” WCE stated.
WCE Chairman Todd Rigby said that the ongoing impacts of the pandemic “severely limited the organization’s options moving forward” and forced the company to take bankruptcy action.
“Chapter 9 protection gives us the opportunity to restructure the organization and reorganize our finances. We look forward to working with our legislators, the Governor, and other parties to identify a pathway forward for WCE,” Rigby said in a media release.
WCE assured customers they will not experience any service disruptions as a result of the bankruptcy, and said it will keep them informed and updated as it restructures its debt.