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Home My WebLink AboutAGENDA REPORT 2018 1017 REG CCSA ITEM 09BCITY OF MOORPARK, CALIFORNIA City Council Meeting of 10.17.2018 ACTION Selected a 50% renewable rate tier as the default rate tier BY M. Benson B. Consider Default Rate Tier Selection for Clean Power Alliance . Staff Recommendation: Select the 36% renewable rate tier as the default rate tier with the Clean Power Alliance. Item: 9.B. Item: 9.B. MOORPARK CITY COUNCIL AGENDA REPORT TO: The Honorable City Council FROM: Jessica Sandifer, Community Services Manager DATE: 10/17/2018 Regular Meeting SUBJECT: Consider Default Rate Tier Selection for Clean Power Alliance BACKGROUND On January 17, 2018, the City Council voted to join the Los Angeles Community Choice Energy Authority (LACCE), which has subsequently been renamed the Clean Power Alliance (CPA), as it no longer involves just Los Angeles county cities. In order to participate in CPA, a default rate tier needs to be selected. The default rate tier determines the starting rate for all Moorpark residents and businesses. Once selected the ratepayer has the option to opt up or down among the available rate tiers as often as they like. On February 7, 2018, the City Council selected the default rate tier for the Moorpark Community using the Renewable Portfolio Standard (RPS) Bundled Tier. In addition to being marketed as a tool to obtain local control over power rates, the other main benefit to Community Choice Aggregation has always been savings on the energy costs being charged by SCE, while also obtaining a higher level of power provided by renewable resources. In consideration of these factors staff recommended the Default Rate Tier for the community because it provided the greatest savings to those electrical consumers that choose to stay with CPA, while giving consumers the option, at their choice, to select a greener power portfolio, rather than the City choosing for them. In addition, leaving the choice with the consumers will create a smoother transition for them, since they would be forced to take action to opt down if they did not want a higher renewable power content due to smaller savings or additional cost, which they likely wouldn’t notice, until they receive their first bill. At the time of selection, staff received information from CPA that this rate tier would have provided 33% renewable energy at the greatest cost savings. The below summary shows the projected savings at that time for each tier: 51 Honorable City Council Regular Meeting October 17, 2018 Page 2  LACCE RPS Bundled Tier – projected to save 5.4% over SCE base rate  LACCE 50% Green Bundled Tier – projected to save 4.1% over SCE base rate  LACCE 100% Green Bundled Tier – projected additional cost of 6.3% over SCE’s base rate. DISCUSSION The City Council has been asked to reconsider the default rate tier selected for the City of Moorpark now that CPA is closer to setting their power rates for residential customers. It should be noted that the cost savings to CPA customers may not be as high as originally anticipated. CPA currently has three rate tiers:  36% Renewable Tier – projected average savings 1% - 2% over SCE base rate  50% Renewable Tier – projected average savings 0%-1% over SCE base rate  100% Renewable Tier – projected additional cost of 7% -9% over SCE base rate Each of the noted percentages describes the amount of power in that tier derived from renewable resources. As the Council will recall, under current California law 33% of electrical power provided by utilities needs to come from 33% renewable resources by 2020. This is known as the Renewable Portfolio Standard or RPS. CPA’s 36% Renewable Tier is the lowest renewable resource power tier provided and has slightly better renewable resources then the state standard requirement and SCE. Currently, SCE’s base rate has approximately 34% renewable resources . The base tier will always be tied to the RPS standard, as it may be amended from time to time, such as with SB 350 which increased the RPS Standard to 50% renewable resources by 2030. Reconsidering the default tiers and selecting a higher default tier would have the following benefits:  City of Moorpark, as a community, would be an energy leader in choosing a higher renewable rate tier, particularly if the 100% rate tier was chosen.  A higher renewable rate tier would reduce the City’s greenhouse gas emissions and their resultant impacts. Selecting a higher default tier would have the following disadvantages:  Reduction in energy savings associated with making the switch from SCE to CPA with a possible increase in energy rates if the default tier is set to 100%.  Potential ill will based on an expectation of energy savings that are replaced with energy rate increases. 52 Honorable City Council Regular Meeting October 17, 2018 Page 3 It’s important to note that there are a range of projected savings (or costs) associated with the rate tiers due to two main uncertainties:  SCE’s 2019 energy rates, which are a benchmark for CPA rates are difficult to predict until SCE submits their updated rate forecast to the CPUC in November.  CPA is still procuring energy for 2018, leaving some uncertainty around costs. In addition to SCE’s rate filing and the fact that CPA anticipates having all of its 2019 energy costs locked in by November, CPA will be able to set residential rates at the November 15, 2018 Board Meeting. As noted above, the projected rate savings (or cost) are shown as ranges to reflect these uncertainties. CPA does, however, have targets for the various rate tiers:  36% renewable, targeting a discount to the overall SCE bill of 1.5%, the discount could be higher or lower depending on the SCE rates and CPA costs  50% renewable, targeting a rate equal to SCE’s rates. If CPA has improved financial forecasts, it may be possible to lower rates, or increase renewable purchases. If SCE’s rates decrease more than expected or energy costs are higher, CPA could reduce the renewable content to ensure parity with SCE.  100% renewable, targeting an 8% premium to SCE’s overall bill, but this could be higher or lower, again based on the described factors. No matter what default rate tier is chosen, residents who choose to remain with CPA, can opt up or down as often as they like throughout the year, so no one is locked in to any rate. After CPA is operational in the City of Moorpark, the City could review the default rate tier and make changes to a higher tier, but it will only affect those customers that have chosen to remain on the default tier. It is important to note that the default rate does not impact the City’s choice of rate tier for City operations. A subsequent item will be brought to City Council for consideration on rate tiers fo r the City’s individual service accounts, prior to the end of the year. At this point, staff recommends remaining with the 36% renewable rate as the default tier for Moorpark. Making a selection of this tier ensures some savings or at least parity with SCE’s current rates as originally presumed when the City chose to participate. While 50% and 100% renewable tiers are better choices environmentally, staff believes that the choice to increase energy costs should stay with the consumer. Once the Council approves the default rate tier, staff plans on rolling out promotional materials and information explaining the environmental benefits of opting up to a higher tier and outlining what rate tiers the City chooses for our operations. Details of the program are in the planning stages. 53 Honorable City Council Regular Meeting October 17, 2018 Page 4 As of the writing of this agenda report, below is the status of the other CPA cities and the County of Ventura and what rate tiers they have chosen, or alternatively, when they plan to choose:  Camarillo 36% Renewable  Simi Valley 36% Renewable  Thousand Oaks 50% Renewable  Ojai 100% Renewable  County of Ventura, non-residential - County unincorporated 100% renewable, residential decision scheduled for 10/16  City of Ventura, scheduled for 10/15, staff recommended 50% Renewable  City of Oxnard, unknown FISCAL IMPACT Last fiscal year, the City spent approximately $654,000 on electricity under SCE. Under the previous rate savings projection, the RPS standard rate would have saved the City of Moorpark operations $35,000 annually. Using the new rate projection, these savings decrease to between $6,540 to $13,080 annually. Increasing to the 50% renewable scenario, would decrease these savings to $6,540 or no savings at all. These savings projections will fluctuate once staff returns to City Council with a recommendation for the rate tiers for City operations. STAFF RECOMMENDATION Select the 36% renewable rate tier as the default rate tier with the Clean Power Alliance. 54