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San Diego is a founding city of newly formed San Diego Community Power, a community choice energy supplier that will begin purchasing electricity for five cities in our area in 2021. This should be a huge step forward toward reaching the city of San Diego’s goal of 100 percent clean energy by 2035.
But reaching that goal the right way – locally and on rooftops – will require San Diego Community Power to overcome a regulatory obstacle.
The world of electricity and regulation can seem daunting but is less complicated than pro football. Here’s a bit of background.
Last week, the San Diego-based Protect Our Communities Foundation published the Roadmap to 100 Percent Local Solar Build-Out by 2030 in the City of San Diego, a strategy for San Diego Community Power to rapidly reach the city’s 100 percent clean energy target with local solar power and battery storage. The focus on local energy sources is fundamental to the city’s Climate Action Plan.
From technical and economic perspectives, the 100 percent clean, local energy target is readily achievable. In fact, reaching 100 percent clean energy with local resources will save money and improve the health of area residents.
Building our renewable power locally means that the same community paying for the power benefits economically from its development. Good-paying jobs stay in the community. Local financial institutions gain by investing in local projects. Local businesses benefit from the increased need for services of all kinds. Homeowners and building owners increase the value of their property. Renters gain direct access to clean power.
Institutional pushback, however, has placed a daunting hurdle along the path to reaching this local renewable power goal primarily with rooftop solar and battery storage.
Homeowners who receive power supply from San Diego Community Power (San Diego Gas & Electric will continue to provide transmission and distribution service) must pay the densely named power charge indifference adjustment, better understood as an “exit fee.” This fee was imposed by regulators at the behest of the state’s utilities.
SDG&E claims it needs this fee to cover investments in high-cost gas-fired power plants and remotely located renewable energy contracts. This exit fee is large, imposing nearly a 50 percent premium on the cost of power, and forces community choice energy providers like San Diego Community Power to scramble to offer less expensive power than SDG&E.
The exit fee is calculated by dividing the utility’s fixed annual exit fee amount, for SDG&E about $450 million in 2020, over SDG&E’s grid power sales. If those grid power sales decline, as they would if more customers take care of themselves with rooftop solar, more and more of the exit fee burden is concentrated on fewer and fewer grid power kilowatt-hours.
An analogy would be the Metropolitan Transit Authority funding all of its capital improvements through bus and trolley ticket sales. If a ticket price of $2.50 is sufficient to cover all the costs with an average of 100,000 riders per day, the cost would need to increase to $5 per ticket if ridership drops to 50,000 per day. More of the burden is placed on public transit riders who do not have access to a car.
This is also how the exit fee works, pitting one group of San Diego Community Power customers against another – those with and without rooftop solar – to pay for legacy electricity investments that were far above reasonable cost to begin with. Forcing community choice customers to cover the entirety of these bloated exit fee costs creates a major disincentive to the expansion of local rooftop solar power.
That’s why Protect Our Communities is challenging the exit fee in state appellate court in San Diego. The earliest the court will rule on whether to take the appeal is June 22.
A “friend of the court” brief from San Diego Community Power opposing this egregiously expensive exit fee would be of great value. It would signal that San Diego’s community choice energy provider will fight for 100 percent local clean energy by 2035 and refuse to be passive in the face of unfavorable regulatory decisions heavily influenced by investor-owned utilities.
A successful appeal would send the exit fee decision back for revision to the California Public Utilities Commission with direction from the court that any exit fee be reasonable and conform to state law.
A reasonable fee will open the door to equitable treatment of rooftop solar for San Diego Community Power customers. The stakes are high. Here’s betting that San Diego Community Power fulfills its promise as an organization that fights for local clean energy and its customers.
Bill Powers is a principal at Powers Engineering and a member of the Protect Our Communities Foundation board of directors.