Cities Should Take the Exit Ramp From Orange County Power Authority

High tension towers are seen in Redondo Beach, Calif., on Aug. 16, 2020. Apu Gomes/AFP via Getty Images

Commentary

Orange County Power Authority (OCPA) arrived on the scene promising to out-green and underprice Southern California Edison (Edison) with a new way of serving Orange County’s electricity consumers. The agency immediately engaged in what many have called personnel miscues, financial shell games, and energy green-washing.

OCPA now faces audits from the City of Irvine, County of Orange, and California State Auditor.

The agency’s troubles continue to unfold, failing to supply what is known as “resource adequacy” to our electric grid. This special type of supportive energy is required of all energy sellers to maintain the electric grid’s reliability when intermittent renewable resources like wind and solar fail to perform. Resource adequacy also combats blackouts.

In some ways, the situation is reminiscent of Enron’s manipulations twenty years ago when that corporation gamed California’s electric market and threw the state into rolling blackouts.

According to OCPA’s appeal of its $2 million fine (pdf) for noncompliance—which the agency lost—OCPA was the innocent victim of a difficult procurement market and claimed it should not be penalized because the circumstances were simply beyond its control.

However, this does not reconcile with County of Orange Supervisor and OCPA board member Don Wagner’s record of what transpired behind the scenes.

Wagner disclosed to his fellow county Supervisors that OCPA made a “conscious decision” to disregard its mandated procurement because the resulting fine was less than the cost of supplying the specialized energy, putting OCPA money ahead despite leaving California’s power grid’s reliability high and dry. Wagner’s recount emphasized “we knew” (pdf), illustrating the agency’s forethought and calculation to maximize revenues.

This puts OCPA at odds with its appeal of the $2 million fine. It also leaves the agency in an awkward position if it filed an insurance claim to recover costs associated with the fine (pdf).

None of this reconciles with OCPA’s regulatory filings which state it will “meet or exceed” its resource adequacy obligation.[1]

Integrity appears to be lacking in other key areas of OCPA, as well.

Before its business launch, the agency addressed concerns that ratepayers would experience financial hardship after everyone was swept into OCPA’s service with its automatic enrollment feature—its opt-out mechanism.

OCPA claimed prices for its default enrollment product, Basic Choice, would be “at parity” with Edison’s prices.[2] Then, after its consultants’ financial presentation, it switched in higher-price, higher-profit “Smart Choice” and “100% Renewable” as the new default enrollment products.[3][4]

To maintain competitive appearances with Edison, the plan called for OCPA to siphon money back into its at-parity product.[5] In essence, every ratepayer was paying money to supplement the agency’s at-parity illusion for its Basic Choice product.

Never mind that the at-parity product was only available to consumers who knew to ask for it. Few were aware what was happening, except that their electricity costs were suddenly spiking.

Consumer bills soared compared to prices for Edison’s service. For example, ratepayers were now saddled with paying upwards of $450 extra per year for OCPA’s version of 100% Renewable after being automatically switched out of Edison’s 100% Green product (pdf).

OCPA makes additional gains through other controversial practices. The agency remains silent about its several variations of financial instruments that facilitate low-cost dirty power deliveries while consumers believe they receive renewable energy at their homes and businesses (pdf).

Utility companies, including Edison, attempted to keep transparency in the energy market by eliminating many of these loopholes from energy legislation, but those efforts were unsuccessful given the lobby of OCPA’s community choice energy industry.

The public remains in the dark about simple and key aspects of the agency:

• A 3-year regulatory audit exclusion obscures gas-fired and coal-fired power deliveries, leaving ratepayers with little available recourse other than to opt out of OCPA;
• As a government agency OCPA is not supposed to make a profit, yet the agency skirts this legal issue by labeling its profits “reserve funds” (accrued after automatically sweeping consumers into its program with its opt-out enrollment mechanism).

Newly elected city councils should ask why their cities remain bound to an agency whose primary characteristics seem to be misdirection and misrepresentation.

Gaming and misleading residents and constituents, while dismissing electric reliability mandates previously made to the community it claims to serve, are characteristics of an agency that should be shut down.[1]

Notes

[1] OCPA’s December 28, 2020 Implementation Plan and Statement of Intent, page 18 reads, “The OCPA resource plan will meet or exceed all of the applicable regulatory requirements related to resource adequacy and the RPS (Renewable Portfolio Standard).” OCPA’s December 21, 2021 Implementation Plan and Statement of Intent Amendment No. 1 version, filed with California Public Utilities Commission December 30, 2021, page 18 reads, “The Program will meet or exceed all the applicable regulatory requirements related to resource adequacy and the RPS.”

[2] OCPA Staff Report Item 5.2, dated January 11, 2022, “Adopt Resolution Approving Initial OCPA Rate Design, Authorize OCPA Rate Adjustments Effective April 2022,” Scenario 3 (Basic Choice designed for rate parity such that each rate component is equal to the corresponding SCE generation rate, after accounting for the surcharges that SCE will assess on customer bills).

[3] January 11, 2022 board meeting minutes. Director Posey made motion, seconded by Director Sonne, unanimously carried to: (i) set default rates “at parity” with Edison prices; (ii) elected Smart Choice as default (all board members except for Fullerton subsequently changed to 100% Renewable as the default).

[4] OCPA’s board is comprised of: City of Fullerton’s OCPA Vice Chair Fred Jung; City of Buena Park’s Susan Sonne; City of Huntington Beach’s Dan Kalmick (and formerly Mike Posey before Kalmick was inserted May 2022); City of Irvine’s OCPA Chair Mike Carroll and Farrah N. Khan; County of Orange’s Don Wagner.

[5] January 11, 2022 OCPA Board meeting (PDF), elapsed time 42:23.

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