Energy Program Could Have Costly Consequences for Huntington Beach, Finance Commissioners Warn

Energy Program Could Have Costly Consequences for Huntington Beach, Finance Commissioners Warn
A file photo of Huntington Beach City Hall in Huntington Beach, Calif., on Sept. 29, 2020. (John Fredricks/The Epoch Times)
Jack Bradley

Huntington Beach’s finance commissioners are raising flags about the possible implications of joining the community choice energy (CCE) program.

The city’s entry into the CCE poses significant financial risks for the city if the CCE program isn't profitable, some say.

“The contract that we would have to pay to get out of it is so massive,” Finance Commissioner Casey McKeon told The Epoch Times.

The CCE is overseen by the Orange County Power Authority (OCPA), which was formed by the City of Irvine.

The organization aimed to recruit additional cities to form a locally controlled cooperative utility authority to buy and sell energy, providing citizens a CCE option.

Huntington Beach joined the program last December, along with Irvine, Buena Park, Fullerton, and Lake Forest. (The latter city has since withdrawn from the program.)

Huntington Beach’s Finance Commission voted Feb. 24 to write a letter to the city council addressing its concerns.

The city has until April 1 to either amend the terms of the contract or drop out completely. If the city decides to drop out of the OCPA after that date, it must pay a penalty.

“The action item of the Finance Commission meeting was to send a letter to the council,” McKeon said. “[There are] areas of our concern in this contract, and that they should look at it more closely before they decide to jump in on April 1.”

A Councilor's Perspective

After voting to join the CCE on Dec. 10, councilors nominated Councilmember Mike Posey to represent Huntington Beach on the board. At the time, Posey told The Epoch Times that he favors community choice energy because it offers options to the consumer.

“Having single-source [energy] from an investor-owned utility gives you really one choice or no choices,” said Posey.

“So this gives you a choice of energy supply, and also gives you a menu of options of how invested that consumer or business wants to be in conventional energy supply or renewable energy supply.”

Posey also said that the savings could attract certain businesses to come to one city over another, based on involvement with community choice energy.

“For cities that are members ... it gives them another tool in their toolbox to attract business,” he said. He added that the estimated savings of around 2 percent “could be part of the decision-making process” that is used by an energy-consuming business to “choose one city over the other, if they can save money on energy.”

“Two percent doesn’t mean much when your electric bill is $75 a month, but it means a lot if your bill is $40,000 a month,” Posey said.

Cost Concerns

However, concerns about the program's costs linger for finance commissioners such as McKeon.

By opting into the CCE, Huntington Beach will sign 10- to 15-year contracts for renewable energy sources. The estimated financial liability for the city is $884 million, McKeon said.

If too many people opt out of the program, then the CCE wouldn't have enough funds to purchase energy.

If the city is unable to pay the liability, the OCPA may take from the city’s general fund, which would mean that SoCal Edison's users would in effect be paying for the debts related to the CCE for the remainder of the contract, McKeon said.

Another risk of CCEs involves energy rates that are contingent upon market forces and regulations by California’s Public Utilities Commission.

“I just feel that language in the Orange County Joint Powers Agreement is so cumbersome that it should be looked at more closely,” McKeon said.

SoCal Edison, an investor-owned energy company serving the majority of Orange County residents, already meets the state’s requirements on renewable energy generation, such as solar and wind power, rather than natural gas.

CCE purchases energy contracts on the open market and uses SoCal Edison’s infrastructure to deliver the energy to households. One of the main focuses of the CCEs is to obtain renewable energy more quickly and abundantly.

The CCE will be able to purchase the renewable energy generation with a 2 percent savings, compared to SoCal Edison, using “tax free municipal bond financing,” McKeon said.

“If I look at my [electricity] bill for my home ... just the generation portions of my $122 a month electricity bill is $47. They're going to save me 2 percent on my $47, which is 95 cents a month,” McKeon said. “To me, that's a minimal savings for a massive liability risk on these contracts.”

Residents in the cities utilizing CCEs are automatically opted in to the program.

Residents who don’t want to participate in the CCE must opt out and join SCE to avoid automatic registration.

They have a 60-day window to opt out of the CCE at no cost from the start date of the program in 2022.

Members of the OCPA are not allowed to leave the contract once entering.

Irvine will fund $2.5 million to implement the program in 2022, however, it must be repaid to Irvine by January 2027. Until Irvine is repaid, it will receive two votes on the OCPA, while every other party will receive one vote.

Huntington Beach Councilmember Erik Peterson said he was afraid that the concerns the finance committee was raising to council would fall on deaf ears.

“It's putting politicians and lobbyists and lawyers in charge of your power bill, which is horrible," Peterson told The Epoch Times. "They know nothing about power.

“If they can't buy that renewable energy in the energy market cheaper than Southern California Edison can produce energy and sell it in the market, then our prices will be above market rate."