Orange County Power Authority Is Still Playing the Community

Windmills and power lines in a file photo near Tracy, Calif., on Aug. 17, 2022. Carlos Barria/Reuters

Commentary

Another shoe dropped for Orange County Power Authority (OCPA) after recently losing Huntington Beach as a member and as Irvine’s departure hangs in the balance.

The Irvine City Council will vote on the issue at its meeting tonight at 5 p.m. at 1 Civic Center Plaza.

Aside from these foundational calamities that, together, will trigger the agency’s implosion, there are numerous internal issues that also threaten OCPA’s survival.

OCPA embodies much that is wrong with California’s community choice energy agencies—including agencies in San Diego that one OCPA member is rumored joining. It’s a systemic problem driven by a single consultant behind many of the agencies.

One of OCPA’s newly discovered issues involves the “gaming” of residential ratepayers who, it turns out, are carrying the financial load for the agency’s big business ratepayers.

Residential gaming is not what was sold to the community when promoters arrived at Irvine in 2018 with sparklers and champagne, riding a wave of grass-root support from excited Irvine residents.

OCPA claims its prices are “2% lower” than Southern California Edison’s (SCE). But not on an apples-to-apples basis. Indeed, if OCPA was selling cars they would be stock delivered without a steering wheel, battery, or seats. Check your lug nuts.

The agency loads extra costs of up to 51 percent onto residential ratepayers—more than $40 per month averaged through all tiers—compared to OCPA’s Commercial & Industrial customers for the exact same energy product, at the same time of day.

Why burden residential ratepayers?

Because OCPA’s residential ratepayers consume relatively small amounts of electricity compared to large customers. The agency figures it’s better to lose a few residential customers than to alienate a big guy.

With this cost shift, OCPA undercuts SCE by one-tenth and two-tenths of a penny per kilowatt-hour for commercial and industrial customers, respectively. [1]

Adding insult to injury, former OCPA board member and Huntington Beach city councilman Dan Kalmick recently disclosed that OCPA will add $30 million to its cash account. That’s on top of the $40 million it recently collected by selling its excess energy contracts, for a total of $70 million (pdf).

Separate from that $70 million, Kalmick touted that OCPA saved an additional $80 million under his former leadership and advice of OCPA’s pricing consultant Pacific Energy Advisors (pdf).

The agency effectively gave a single digit salute to regulators and engineers who legally require that energy companies deliver a share of emergency back-up power, known as “resource adequacy” (RA), to California’s electric grid for use in extreme conditions. This after OCPA twice submitted regulatory documents claiming it would “meet or exceed” its RA obligation as a condition of business launch.

RA is predominantly gas-fired generation because, unlike OCPA’s intermittent renewables such as wind and solar, fossil-fired generation produces steady and reliable power when needed.

Monthly energy prices for average homes would have increased $18 per month if the agency complied with its legal requirement. [2]

So, $18 plus the cost-shifted $40 per month reveals that OCPA is charging more and delivering less to residents.

RA is paid by responsible power sellers as a cost-of-business that helps avoid blackouts, or, from a different perspective, circumvents automobile accidents due to traffic lights not working because of a blackout.

Californians should consider what the market looks like if the state’s three regulated investor-owned utilities—Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric—ever fully depart from procuring energy. If they do, “OCPAs” will fill the void, reliability will fall, and prices will climb.

That latter scenario has already played out at OCPA member cities that, within days of one another, switched all residents and businesses within their jurisdictional boundaries from OCPA’s lowest-cost offering—used to justify OCPA’s launch—into its pricey “100% Renewable Energy” product (save for Fullerton’s unusual behavior). [3]

These city councils are the same people who say regulatory oversight isn’t needed because OCPA is self-governed.

What about that $70 million Kalmick touted? Everyone neglects that OCPA is a not-for-profit agency. That money belongs to ratepayers and to member cities like Huntington Beach.

Considering that OCPA has gamed consumers, disregarded key regulatory mandates, green-washed its energy, and left others to shoulder its share for maintaining the electric grid’s reliability, OCPA should return its “reserves” to the community with which it is far out of touch.

That’s about $450 for each of its 155,542 metered accounts.

Then the operators behind OCPA should close its doors, head for Vegas, and game with their own money.

Notes

[1] Joint rate comparison mailer prepared by SCE and OCPA, effective April 1, 2023.

[2] According to OCPA’s regulatory filings, its quarterly energy sales = 639,140,389 kilowatt-hours (KWh). Annual sales are thus 2,556,561,557 KWhs. $80,000,000 / 2,556,561,557 KWh = $0.031/KWh, or 3¢ per KWh if OCPA procures its requisite resource adequacy. Per the joint rate comparison mailer prepared by SCE and OCPA, effective April 1, 2023, an average OCPA residence consumes 569 KWh per month. Thus, 569 x $0.031 = $17.81 per month.

[3] Buena Park voted January 25, 2022 to switch its default enrollment product for all constituents from OCPA’s lowest cost Basic Choice to OCPA’s highest cost 100% Renewable.

• Ayes: Susan Sonne, Sunny Park, Art Brown, Connor Traut
• No: Elizabeth Swift

Huntington Beach voted February 1, 2022 to switch its default enrollment product for all constituents from OCPA’s lowest cost Basic Choice to OCPA’s highest cost 100% Renewable.

• Ayes: Dan Kalmick (Zoom), Mike Posey, Barbara Delgleize, Rhonda Bolton, Natalie Moser, Kim Carr
• No: Erik Peterson

Fullerton voted February 1, 2022 to switch is default enrollment product for all constituents from OCPA’s lowest cost Basic Choice to OCPA’s second-highest cost Smart Choice.

• Ayes: Fred Jung, Ahmad Zahra, Jesus Silva
• No: Nick Dunlap, Bruce Whitaker

Fullerton then moved its municipal accounts back to OCPA’s lowest cost Basic Choice.

• Ayes: Jesus Silva, Nick Dunlap, and Bruce Whitaker
• No: Fred Jung, Ahmad Zahra

Irvine voted February 8, 2022 to switch its default enrollment product for all constituents from OCPA’s lowest cost Basic Choice to OCPA’s highest cost 100% Renewable.

• Ayes: Mike Carroll, Tammy Kim, Anthony Kuo, Larry Agran, Farrah N. Khan
• No: None

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