Despite being originally touted as a cheaper option, residents across Orange County will soon be paying more for their electricity following power plans adopted by OC Power Authority member cities.
The proposed rate hikes come less than two months before the launch and just after the authority unveiled its financial audit for the end of 2020, which showed it doesn’t have much cash left in the bank.
At last Tuesday’s city council meeting, Irvine City Councilman Larry Agran voiced his support for the power authority, but said he was worried about what the finances could look like going forward and expressed concerns over whether or not the agency would ever deliver on the promise of cheaper energy.
“Someone has to ask the question: what happens if this enterprise falters or fails? Who’s going to be stuck with the bill?” Agran asked at the meeting. “Not predict it, not wish for it, but to imagine it.”
Councilman Mike Carroll, who also serves as the chair on the board of directors for the power authority, responded quickly, saying the agency was run by “actual professionals,” and “dare I say a competent board.”
“If you’re worried, I urge you to vote no, and you will be on the record as having voted against 100% renewable power,” Carroll said. “All this stuff about money, the councilman doesn’t know what he’s really talking about.”
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The Orange County Power Authority launched at the end of 2020 with the cities of Irvine, Fullerton, Huntington Beach and Buena Park all onboard to offer the county’s first community choice energy program, a system that lets city leaders purchase and sell power to customers instead of Southern California Edison.
The biggest advantage to that system is that local leaders can choose to offer more renewable energy options for local customers, with plans to eventually reinvest the funds in local energy programs.
While it can’t directly send clean power to homes that opt for it, the more people who choose clean power options, the more renewable energy there will be on the grid.
Last month, the power authority’s board of directors chose to offer three different rates for residents and businesses to pick from, including options for a mix of 100%, 70% and 38% renewable energy.
[Read: OC Residents Face Electricity Price Hike After Clean Power Agency Picks Preliminary Rates]
Agency leaders were informed by their staff that despite initial pledges that the agency would offer lower rates than Southern California Edison, it wouldn’t be able to anymore.
Instead, every city had to opt themselves and their residents to at least the 70% option in order to preserve the cheaper 38% tier that will cost the same as SoCal Edison currently does because it wasn’t economically possible to have every city pick the cheapest option and maintain rates.
Most cities decided to push their residents into the 100% renewable power tier, with the cities of Buena Park, Huntington Beach and Irvine requiring residents, businesses and the city government itself to join the most expensive tier.
The 100% renewable tier is the most expensive program offered by the power authority, at a premium of 5.6% or around $76 more per year on the average homeowner’s bill.
The higher cost for power didn’t go unnoticed by city council members across multiple cities, with some saying they felt misled by the agency’s initial promise theyd be able to provide cleaner, cheaper power than Edison.
Fullerton narrowly decided to opt their residents in at the middle tier, with Councilman Jesus Silva casting the deciding vote after expressing his concerns about what the more expensive rates could mean for customers who can barely make ends meet.
“I’m concerned the people who this is going to cost, who are barely making the cost of living are the ones not paying attention, they’re just going to pay because they want to pay their bills on time,” Silva said at the council’s Feb. 1 meeting.
Council members Bruce Whitaker and Nick Dunlap also pointed out the agency’s earlier promises of cheaper rates, asking what had changed to cause a rate hike instead.
“Things have not quite played out how they were presented to us,” Dunlap said at the meeting. “I’m a bit concerned about this creation of a new government entity that’s going to cost rate payers more in the end, especially when some of these benefits are available through Edison.”
Silva ultimately agreed to opt homeowners in at the middle tier, asking that the city also conduct an outreach program to inform residents their bills would increase.
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That decision to push for the most expensive option comes as the agency prepares to launch in April.
Council members and community groups across the three cities that chose the cleanest, more expensive option praised the move.
Ayn Craciun, a policy advocate for the nonprofit Climate Action Campaign said the 100% renewable option could stop roughly 1.7 million metric tons of greenhouse gas emissions annually.
“It’s an exciting day for environmental justice,” said Irvine Mayor and OC Power Authority board member Farrah Khan at the city council meeting Tuesday. “This has been the forefront of this council’s work over the last two years. This council has done more for the environment in the last two years than the last 50 years combined.”
Irvine originally planned to introduce their customers at the 70% rate, but Khan and Councilman Carroll announced they would push for 100% renewable after pressure from multiple community organizations.
Advocates also pointed out the agency would be sending four notifications to customers, starting two months before the switch happens, letting them know about the new change and providing them options to opt out if they wanted to.
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Homeowners and businesses who want to opt for a cheaper rate with less renewable power, or opt out of the program altogether, can remove themselves via the power authority’s website or by calling the authority’s call center that started operating earlier this week.
While an online portal is currently set up only for businesses, a page for residents is expected before the program launches in October for homeowners.
When the agency approved its budget in June 2021, it planned for a $35.4 million budget and secured $35 million in a credit agreement with MUFG Union Bank in September to fund itself until it could begin selling power.
[Read: OC Electric Utility One Step Closer to Turning Lights On After Approving Financing Plans]
Six months later, power authority leaders are estimating they’ll end the year with anywhere from $4.5 to $6.2 million left in their bank account according to a financial audit attached to their board of directors’ meeting agenda last Tuesday.
Right now, the agency has $1.1 million in its bank account and $34 million left on its credit agreement, but nearly $27 million of that money is already budgeted to go out the door when the agency begins operating in April.
While the agency hasn’t started its major spending yet, it’s already gone above and beyond several of its budget allocations.
The agency has spent nearly three times its original budget for legal services, budgeting $177,000 and spending over $492,000. The agency also overspent on its professional services budget, spending an additional $71,000 that wasn’t set aside in the plan.
The agency’s board of directors did not discuss their budget at their Tuesday meeting, approving the budget update under the consent calendar.
The power authority begins providing power to local businesses in April, with a residential rollout scheduled for October.
Correction: An earlier version of this story stated that the Power Authority had $6.2 million remaining in its 2021-22 budget. That number represents how much the power authority hopes to have at the end of its fiscal year. We regret the error.
Noah Biesiada is a Voice of OC Reporting Fellow. Contact him at nbiesiada@voiceofoc.org or on Twitter @NBiesiada.