Southern California Edison is short nearly $1 billion in its power budget — and it's hoping to charge a big chunk of that money to customers leaving for another energy provider.
Edison estimates it will spend $972 million more than expected on electricity this year, partly because it didn't have access to enough power during a summer heat wave and was forced to pay sky-high prices on the energy market. The investor-owned utility is now asking state officials for permission to raise next year's electricity rates to recoup those costs, as allowed by law.
But there's an unusual twist in Edison's request. The utility wants to charge about $125 million of the shortfall to more than 1 million homes and businesses that will leave Edison over the next few months to join Clean Power Alliance, a government-run energy provider that intends to compete with the massive power company.
Clean Power Alliance plans to start providing electricity this February to about 930,000 residential customers of 29 cities, including Oxnard, Santa Monica, Simi Valley, Thousand Oaks and Ventura, as well as unincorporated parts of Los Angeles and Ventura counties. They'll be joined by 100,000 nonresidential customers in May.
The government-run energy agency is one of 19 community choice aggregators, or CCAs, now operating in California.
Forming a CCA enables local officials to decide what kinds of energy to buy for their communities, how much to charge and what incentives to offer for rooftop solar and other clean energy technologies. Investor-owned utilities such as Edison are still responsible for building and operating the poles and wires that deliver electricity to CCA customers. They can make money for their shareholders by charging CCA customers for those costs.
Edison says the $972 million shortfall was caused by energy the utility purchased to serve all of its customers, including those who will soon leave for Clean Power Alliance. So from Edison's perspective, it's only fair that those customers should pay back their share of the costs, which amount to nearly 13 percent of the total.
"Basic fairness and the law dictate that all customers responsible for the undercollection should pay a fair share; anything else would raise costs for other remaining customers," Edison said in a statement.
Community choice advocates have objected, asking the California Public Utilities Commission to deny Edison's request. They say charging $125 million to customers switching to Clean Power Alliance in 2019 would hurt the new energy agency's finances and could affect its ability to lure customers away from Edison.
West Hollywood City Councilmember Lindsey Horvath serves as the city's representative on the Clean Power Alliance board. She said Edison had "every opportunity" to recover its $972 million by raising electricity rates during the final months of 2018, before many customers leave for Clean Power Alliance. But Edison chose to wait until next year, when the rate increase could harm the utility's biggest competitor, she said.
Customers joining Clean Power Alliance in February would see their electricity rates rise by an average of 1.4 cents per kilowatt-hour in 2019 to cover their share of the $972 million shortfall, as would customers remaining with Edison. That comes out to an additional $11.50 on the average Los Angeles-area resident's monthly bill in the summer, and nearly $8 in the winter, based on the most recent electricity use data available.
Most Californians have long purchased electricity from three investor-owned power companies — Edison, Pacific Gas and Electric, and San Diego Gas & Electric — or from municipal utilities such as the Los Angeles Department of Water and Power.
But about a decade ago, several San Francisco Bay Area communities began launching their own locally run energy agencies, a trend that has recently spread to Southern California. By some estimates, the big three investor-owned utilities could lose 80 percent of their energy sales over the next decade.
The growth of CCAs has been a source of tension for state regulators, who must ensure that Californians who remain with the big utilities don't face higher costs as their neighbors leave for new energy providers. That's why Edison, PG&E and SDG&E are allowed to charge exit fees to their former customers, to help cover the costs of long-term energy contracts that were signed years ago to serve them.
After years of debate, there's still little agreement on the best way to calculate exit fees. The Public Utilities Commission approved a new methodology in October that largely gave the big utilities what they wanted, prompting critics to object that the higher fees would slow the growth of CCAs and make it harder for them to invest in clean energy.
Community choice advocates have asked the utilities commission to reconsider its exit fees decision, and in some ways the debate over Edison's $972 million shortfall is an outgrowth of that conflict.
Clean Power Alliance and another CCA, the California Choice Energy Authority, have questioned whether Edison should have been able to avoid the $972 million shortfall. They suggested the utility may have been caught off guard by a record-breaking heat wave that caused electricity demand to soar in late July. The Public Utilities Commission will scrutinize Edison's claims during a regulatory proceeding that begins in April.
(c)2018 The Los Angeles Times. Distributed by Tribune Content Agency, LLC.
