As Orange County Cities Consider A New Public Utility Program, Final Costs Remain Unclear

JULIE LEOPO, Voice of OC

Power lines running through a Santa Ana neighborhood on Nov. 21, 2020.

Cities across Orange County are discussing launching a new public electric utility service, but are fast approaching a December 31 deadline that if missed could stop the project from launching by 2022.  

The new utility is called community choice aggregation, a program where a single city or multiple cities band together to buy and sell energy, with the goal of investing more in renewable energy and slightly lowering costs for local residents.

The projected savings for customers on their electricity bill that join the new program hangs around 2%, but the report states those numbers could grow over time as cities pay down the costs of launching the program.  

Currently, only one program in Southern California has achieved better than 2%, according to a report presented by Irvine city staff.   

Proponents of the program have praised its options that allow for greater investment in renewable energy sources and microgrids, and point out it allows greater local control over where power supply comes from. 

However, the final costs for Orange County residents moving to this new system remain unclear: the price of electricity, potential exit fees imposed by Southern California Edison and a variety of other factors leave a large grey area as to what the actual final dollar amount will be.  

Orange County would be joining nearly two dozen other counties and cities that have implemented similar programs in the last decade, with each participating city appointing a representative to serve on a board running the agency. 

According to a presentation by Ryan Baron of Best Best & Krieger, the special counsel hired by the city of Irvine to help organize the effort, nearly 75% of California will have access to programs like this in the next few years. Baron did not return multiple requests for comment to discuss the program. 

But to launch the program by 2022, the participating cities of Orange County have to file an official plan with the California Public Utilities Commission by New Years Eve or wait another year to continue the process. 

The city of Irvine has been leading the effort to launch the program since 2018, when it initiated the first of several studies examining what the costs would be for cities interested in joining. 

The city has offered to front the $2.7 million needed to create the new agency singlehandedly, and has committed to offering up collateral for a loan ranging from $8-17 million for the initial capital. Participating cities would then repay Irvine for the initial costs starting in 2026, according to a presentation by Costa Mesa city staff. 

In return, Irvine will initially hold two seats on the governing board for the program instead of one until the member cities have paid off the debt, and as the largest city in the program will hold a heavier weight in certain votes. 

With the approval of at least two board members, a new vote can be called that sees each director’s vote replaced with a weighted vote based on how much power their city utilizes in the program, giving larger cities who join the program a greater pull over where funds are invested. 

So far, the cities of Fullerton and Costa Mesa are the only cities to officially join the effort.

The cities of Huntington Beach, Laguna Woods, Lake Forest, Santa Ana and Villa Park have all requested information about the program and what their potential costs would be, but have not formally agendized any discussion on joining the program. 

But with new city council members taking their seats across the county in December, a decision on community choice energy will likely be the first major vote for over half a dozen new candidates. 

Fullerton is moving forward with the effort after negotiating with Irvine according to city manager Ken Domer, saying the city still has the option to pull out by April with no penalties as they continue to review the situation. 

But Costa Mesa city staff are still negotiating with the city of Irvine after council members raised a variety of concerns over what the potential future costs to member cities would be in the event of a lawsuit or if a pension program was created for employees, along with concerns over Irvine taking two seats on the board. 

Katrina Foley, mayor of Costa Mesa, said one of the major issues raised was Irvine’s decision to take two seats on the board, and said that Costa Mesa would even be open to paying for portions of the program if it meant they would have equal representation with Irvine on the panel. 

“They never asked us to contribute in order to have a seat at the table, so we just want to make sure that it’s equal,” Foley said in a phone call with Voice of OC. “The fact of the matter is Irvine is loaning the (community choice power program) the money and then they’re getting reimbursed all of that plus interest.”

There have also been concerns raised by individual city council members in cities moving forward with the program. Fullerton Councilman Bruce Whitaker raised concerns about the creation of a brand new government agency and was the sole vote against the creation of the agency, and Lake Forest Councilman Mark Tettemer said he was worried that the effort to create green energy would end up costing residents at a meeting in October.

Irvine Councilwoman Farrah Khan, the mayor-elect and a long time proponent of the program, did not return requests for comment from Voice of OC to discuss the issue. 

The Irvine City Council is set to approve the official implementation of the program on Tuesday, and appoint their representatives to the governing board in time to make the year end cutoff for state regulators. 

Noah Biesiada is a Voice of OC Reporting Fellow. Contact him at [email protected] or on Twitter @NBiesiada.