After several months of delays, Orange County’s new electric utility approved their primary funding and spending contracts that will allow the agency to begin buying power for its launch next year.
The Orange County Power Authority started late last year as the county’s first community choice energy program, a utility that allows an option other than Edison for people to buy power from.
Depending on how the utility chooses to purchase its power, it can offer more renewable energy to customers and potentially lower their electricity bill.
But in order to get off the ground and into the energy market, the agency needs two key things: a line of credit to buy power for its future customers and contracts with power suppliers to complete the sale.
Originally, the agency was set to work with JP Morgan with a $50 million credit line.
According to an agency staff report in June, the contract would be finished within 2-4 weeks.
Following the board’s request to review the contract, negotiations collapsed when the bank insisted on $10 million up front before a credit line could be opened, according to the agency’s staff report.
“This is probably the first time in 24 years this has happened to me,” said one of the representatives from PFM Financial Advisors, the agency’s finance contractor. “That took them from first to worst … this is all on them.”
Ultimately, the board approved a contract for $35 million with MUFG Union Bank for their credit deal.
Agency staff claimed the breakdown with JP Morgan came over the credit risk in community choice energy programs in California.
But after public commenters pointed out that JP Morgan just agreed to give an $80 million line of credit this month to the Clean Power Alliance, the community choice program in LA County, agency staff pointed to the differences between the two agencies — mainly on how Orange County was still just a startup.
“They’ve also been in business, they have a track record, and they’d be a second lender. There’s just a lot more there compared to you guys,” said Michael Berwanger, a managing director at PFM.
Representatives from JP Morgan did not return requests for comment.
Public commenters also had questions about the new contracts, saying they felt the contracts weren’t sufficiently explained in open session and asking if the agency’s incoming Chief Financial Officer, Tiffany Law, had reviewed the documents.
“We are disappointed this staff report does not provide the information for the board or the public to understand the impact of this decision,” said Ayn Craciun a policy advocate with the Climate Action Campaign, a nonprofit based in San Diego. “How can any member of the public possibly understand what’s happening here?”
Craciun also asked if the contract with Union bank would have any impact on the rates the agency would be able to offer customers at launch.
After public comment, board president Mike Carroll asked staff to combat the “misinformation,” said by public commenters, saying the new bank wouldn’t have any control over the rates.
Agency CEO Brian Probolsky also confirmed board members were privately briefed individually before the meeting to answer any questions they had about the contracts before the public meeting.
The board also approved its primary spending contracts with the Pacific Gas and Electric Company, Southern California Edison and the Morgan Stanley Capital Group, all of which regularly sell power to community choice energy programs, according to the agency’s staff report.
In most public agencies, the biggest spending decisions are made by the board of directors or the city council, with a small cap on what CEOs and city managers are able to spend on their own.
But in community choice energy programs, the CEO is given a broad range of powers to purchase power independently of the board because contracts often have to be approved within one to two hours according to the agency. The board then formally approves the contracts at their next meeting.
San Diego Community Power, which is set to launch early next year, is expected to have around 780,000 customer accounts at launch, and set its CEO’s spending power at a $50 million cap per transaction.
The Clean Power Alliance, the program for Los Angeles and Ventura counties, set their cap for CEO transactions at $80 million for over one million customers.
According to the OC Power Authority’s implementation plan, they’re expecting around 313,000 customers at launch.
But CEO Brian Probolsky’s spending power is set at $75 million per transaction, a higher cap per capita than the surrounding programs.
Probolsky has repeatedly been scrutinized by activists for his history in county politics, including multiple investigations of his work during the time he served as chief of staff to two different county supervisors.