San Diego Should Carefully Weigh the Costs and Benefits of Government-Controlled Energy

Many critical questions remain
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SAN DIEGO---The City of San Diego should carefully weigh the costs and benefits of government-controlled energy before flipping the switch and moving residents and businesses into such a program.

Our coalition has said we would support government-controlled energy in San Diego, also known as Community Choice Aggregation or CCA, if it were cheaper, greener and did not shift costs by forcing ratepayers in neighboring communities to subsidize the city’s new program.

State regulators essentially resolved the cost-shift issue earlier this month, ensuring any future costs shifts would be minimal. Several proponents of government-controlled energy programs criticized the decision, because state regulators reformulated the cost formula for CCA customers, ensuring they pay their fair share of legacy costs for power contracts purchased in the past for their benefit. The San Diego Union-Tribune is reporting the new fee structure would add more than $20 a month to the electricity bills of residential customers in San Diego.

For our coalition, the decision by the California Public Utilities Commission to treat all customers fairly eliminated a key concern, but critical questions remain.

  • Would a San Diego CCA benefit the environment materially more than current state laws require, and produce good-paying local jobs?
  • Does San Diego have the expertise to buy and sell energy?
  • If the city launches a CCA and it fails, what would that mean for taxpayers?
  • With all the other problems facing San Diego, including homelessness and the high cost of housing, should government-controlled energy be a priority at City Hall?
  • Given that transportation is the largest generator of greenhouse gas emissions, is the focus on energy, rather than promoting cleaner transportation, misplaced?

“If the city decides to form a CCA, an important question to ask is: would it actually help San Diego reach its clean air goals faster and cheaper than current state laws require?” said Ruben Barrales, who heads the Latino Leadership & Policy Forum and co-chairs the Clear the Air coalition.

SB100 is a sweeping statewide clean energy bill recently approved by the California legislature and signed by the governor. It requires all energy providers in California to provide 100 percent carbon-free electricity by 2045. This development along with other recent state policy changes raise questions about the need for government-controlled energy programs.

“This historic legislation will achieve most, if not all, of the emission reductions targeted under the renewable energy goals of the city of San Diego’s Climate Action Plan,” said Jerry Sanders, a coalition member and president & CEO of the San Diego Regional Chamber of Commerce. “Under this new state law, these reductions will occur with or without a CCA — and without exposing taxpayers to financial risk.”

A city-funded feasibility study determined it would cost San Diego about $1 billion to establish a CCA. That same study said that, under a high exit-fee scenario, a CCA in San Diego could create a potential loss of nearly $3 billion. State regulators unanimously approved a substantial increase to the exit fee, making the high exit-fee scenario much more applicable.

While SB100 diminishes the ability of a San Diego CCA to produce environmental benefits beyond a statewide 100 percent clean-energy mandate, another bill recently approved in Sacramento, SB237, increases the risks because it would allow the city’s largest energy users (school districts, hospitals, data centers, etc.) to purchase their clean energy from sources other than the CCA. Losing large energy consumers to direct access would sharply reduce CCA revenues, and residents and businesses served by a CCA can return to the utility.

To date, CCAs have been reluctant to purchase long-term contracts for renewable energy, or build new facilities. As a result, CCAs mostly buy and sell existing green energy, a practice known as resource shuffling that does not create new local jobs or clean our air any faster.

“The evidence indicates a San Diego CCA would not meet the city’s goal of 100 percent clean energy by 2035 or create many new jobs, but it would create risk for taxpayers, who are ultimately the backstop of any government-controlled energy program,” said Dr. Lynn Reaser, Chief Economist of the state Controller’s Council of Economic Advisors and at Point Loma Nazarene University.

Rev. Gerald Brown, a Clear the Air co-chair who heads the United African American Ministerial Action Council, said: “SB100 and the new exit fees completely changed the game. A CCA in San Diego now means a monthly bill increase of at least $21, with no environmental benefits and few local jobs in return. These added costs hit the communities I represent the hardest. So, the right thing for the city to do is thank the state and focus efforts more intensely on reducing greenhouse gas emissions from transportation sources.”  

Contact: Tony Manolatos

619.549.0137 | [email protected]

About: The Clear the Air Coalition is a group of business, environmental, civic and taxpayer leaders working to ensure a diverse range of voices is heard and important questions are answered before critical decisions are made about San Diego’s climate and energy future. Learn more at: www.clearair.us Follow us at: @cleartheairco and facebook.com/cleartheairco

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It is critical that we openly discuss all opportunities and options for achieving San Diego’s climate action goals. The choices we make today in implementing this bold policy vision will shape San Diego and the lives of its residents for generations to come, so we need to make sure we get this right. 

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