Officials at San Diego Community Power think San Diego Gas & Electric is manipulating rates to discourage customers from joining the soon-to-launch community energy program that will cover five cities, and have complained to the utility and the California Public Utilities Commission.
SDG&E officials deny the accusation, saying they are relying on the appropriate formula they are authorized to use to calculate rates for this year.
The dispute is expected to be resolved Thursday when the CPUC’s commissioners are scheduled to vote on a pair of competing proposals.
“We’re not trying to pick a fight,” said Bill Carnahan, interim CEO of San Diego Community Power, the community choice energy program that will offer an alternative to SDG&E when it to comes buying power for customers in San Diego, Chula Vista, La Mesa, Encinitas and Imperial Beach when it begins to accept customers later this year.
But an open letter sent last month by the group’s board members to CPUC commissioners minced no words, accusing SDG&E of “willful manipulation of data” that, if allowed to stand, “will set a precedent that no community choice program will be able to launch in its territory and competition will be stifled.”
SDG&E says it is not trying to undermine San Diego Community Power. “SDG&E is required to follow the law and well-established CPUC processes in setting rates,” utility vice president Mitch Mitchell responded in a letter to the community energy program, known as SDCP for short.
Some background
San Diego Community Power is one of the community choice aggregation, or CCA, programs that have grown in popularity in California in the past decade.
CCAs were established as a way for communities to compete with traditional power companies when it comes to procuring greater amounts of clean energy sources, such as solar and wind. Under a CCA model, local governments purchase the power contracts while offering rates equal to or lower than the incumbent investor-owned utility in that particular area.
When a CCA is formed, however, the traditional utility does not go away. The power companies still perform all their other functions, such as transmission and distribution of energy as well as customer billing and services.
According to state rules, all SDG&E customers will be automatically enrolled in the new CCA. However, if customers want to remain with SDG&E, they can opt out for free.
In the case of San Diego Community Power, the transfer of customers from SDG&E will be big — an estimated 770,000 residential, commercial and industrial accounts by the time SDCP’s rollout is complete in January 2022, making SDCP the second-largest CCA in the state.
The dispute
In filings to the public utilities commission, SDG&E forecasts a rate decrease of 12.35 percent for its customers in the coming year, using a complex set of data points that each of the state’s utilities use when they crunch the numbers.
A rate decrease would be good news for customers but San Diego Community Power says SDG&E is using outdated numbers that will lead to only a temporary decline in bills for customers that will be timed to coincide with the rollout of SDCP.
The “inaccurate and misleading rate calculation,” SDCP officials said in a CPUC filing last week, will result in rates that will be “artificially low” in comparison to the rates the new CCA will offer. That, in turn, would entice customers to stay with SDG&E instead of going with SDCP.
The lower rates will represent a “false price signal” that SDCP said will lead to an under-collection of $260 million that will then lead to rates being increased shortly afterward.
In an open letter to the CPUC’s commissioners in December, the elected officials at each of the five cities who make up SDCP’s board said, “With the current pandemic and economic crisis, the last thing ratepayers need ... is this type of fluctuation.”
On Jan. 6, Carnahan wrote a letter to SDG&E CEO Caroline Winn saying that while the utility has expressed support for community choice energy, “Unfortunately, SDG&E’s actions speak louder than these words.”
SDG&E has countered by saying it is relying on 2019 figures the utility has been authorized to use by the commission. More up-to-date numbers, SDG&E said, are still being debated before the CPUC in a separate “general rate case,” the complex proceedings that typically cover a three-year span for each utility.
“SDG&E is simply not permitted to unilaterally change the sales forecast,” Mitchell said in his December letter to SDCP. “In the meantime, we must use the currently authorized 2019 sales forecast to set rates.”
The ball is now in the CPUC’s court
When the commission meets Thursday, it has two proposed decisions to choose from: A “revised” decision that favors SDG&E and accepts the utility’s argument to use the 2019 forecasted numbers or an “alternate” decision that favors San Diego Community Power and uses the 2021 sales forecast.
SDG&E says the methodology used in the alternate decision could result in an increase of “roughly” 40 percent for medium and large commercial and industrial customers this year.
SDCP’s case before the commission has been joined by the Clean Energy Alliance — the North County-based CCA representing Del Mar, Solana Beach and Carlsbad also scheduled to come online this year — and the California Community Choice Association, a trade group advocating for CCAs.
Last week, SDCP and its partners submitted comments to the commission calling for the CPUC to adopt the alternate decision. But they said in “the “spirit of accommodating a middle ground,” the commission should adopt a method that would average out changes in rates across customer classes to help mitigate impacts of any fluctuations.
The Public Advocates Office, the independent organization within the CPUC that works on the behalf of utility customers, has come down in the middle of the dispute.
Last week, it recommended the commission OK the revised decision that SDG&E favors but said if the CPUC approves the alternate decision that SDCP wants, the commission should adopt the method that averages out any changes in rates “to mitigate this risk and promote rate stability.”
“SDG&E supports the commission’s effort to balance the interest of all customer classes to minimize rate impacts,” said utility spokeswoman Helen Gao. “Any decision has no financial benefit for SDG&E because the company does not make a profit on the sale of energy to its customers,” as per California regulations.
Regardless of how the commission rules, the dispute raises questions about how well SDG&E and San Diego Community Power will get along with each other.
“They (SDG&E) have said they support us and, ‘we want to help you,’” said SDCP’s Carnahan. “They keep saying that and yet ... we’re not seeing evidence of that, to be blunt about it.”
SDG&E’s Mitchell, in his December letter, said, “Our common goal remains a successful launch for CCAs in our region and we remain committed to be a good partner.”
San Diego Community Power needs the utility to transmit and distribute the power SDCP purchases to its customers and take care of billing and other services. Conversely, SDG&E has said it wants to get out of the business of purchasing power contracts, which would effectively cede the local market to SDCP. To exit the power purchasing business, SDG&E would have to receive approval from the CPUC.
“We both have to coexist,” Carnahan said. “We are, to some extent, joined at the hip and we need to cooperate.”
SDCP plan to roll out in three phases:
- In March, by activating about 1,000 municipal accounts
- In June, by folding in about 70,000 commercial and industrial accounts, and
- January 2022, by integrating close to 700,000 residential customer accounts in the system.
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