power company san diego
Illustration by Adriana Heldiz

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Come May, residents in five major San Diego cities will automatically begin buying their energy from a new publicly-run operation with a big promise: that its energy will be cleaner and cheaper than its competitor, San Diego Gas and Electric, an investor-owned utility that’s been the sole provider of power in the region for over a century. 

The promise is already teetering on a thin margin.  

In January, Cody Hooven, San Diego Community Power’s chief operating officer, revealed the fledgling public power company could maintain a one- to two-percent discount over SDG&E, whose energy prices are already the highest in California, and which spiked again this winter.  

But San Diego Community Power leaders say there’s one major cost that, if removed, could provide much lower rates for customers: a charge SDG&E collects to pay for energy it bought for its customers back when it was a monopoly – before San Diego Community Power was a thing. And it pays for energy SDG&E owns, like the Palomar Energy Project, a natural gas power plant in Escondido, or long-term contracts for renewables purchased when the cost of wind and solar was a lot higher than it is now.  

The charge is called the Power Charge Indifference Adjustment, often referred to as an “exit fee” because those who are against paying it feel it’s an unjust cost placed on customers who automatically leave SDG&E for a public power agency.  

SDG&E says it’s mandated by state law and its regulators at the California Public Utilities Commission to collect this fee so the customers that stay with the utility are “unharmed” by the customers leaving for San Diego Community Power.  

“Absent this charge, remaining bundled (SDG&E) customers would have to pay for the additional costs departing load customers left behind,” wrote Helen Gao, a spokeswoman for SDG&E in an email. 

Here’s how the charge works. Imagine SDG&E contracted to buy power from a wind turbine at $100 in 2010. But that turbine’s energy, if purchased today, is only worth $50. SDG&E can charge its customers – including San Diego Community Power customers, who won’t actually be using that wind turbine’s energy anymore – the extra $50 to fulfill that power contract.  

In truth, all customers – be it SDG&E or San Diego Community Power, or the other public power agency in San Diego called Clean Energy Alliance – pay it.  

“The difference is (San Diego Community Power) customers don’t get any benefit from those resources,” said Laura Fernandez, director of regulatory and legislative affairs at San Diego Community Power.  

What she means is, San Diego Community Power wants its customers to only be on the hook for power their company buys.  

Public power agencies have no control over this extra charge, and it accounts for a significant portion of the rate San Diego Community Power customers pay.  

In June of 2021, exit fees were about 31 percent of an average residential customer’s $54 energy bill from San Diego Community Power, according to the company. The rest came from the actual cost of the energy, called generation, and a little from franchise fees, another charge SDG&E passes on to its customers. In February of 2022, the exit fee was about 18 percent of the San Diego Community Power bill. The cost of the charge fluctuates with the price of energy. 

San Diego Community Power, a new public power company in the region, shows how the exit fee (referred to as the PCIA) costs compared to the actual cost of power its purchased. That exit fee pays for old power purchased by SDG&E. / Graphic courtesy of San Diego Community Power

“(Public power agencies) collectively think there should be more exploration in how to reduce those costs for all customers,” said Hooven, chief operating office at San Diego Community Power.  

One simple thing investor-owned utilities like SDG&E could do is renegotiate those energy contracts that are “old and outdated” for a lower price, Hooven said.  

That would lower costs for all customers, not just ours, she said.  

SDG&E said its “currently examining” doing just that.  

“We have solicited contract counterparties to gauge their interest in either contract buyouts, renegotiations and/or assignments,” Gao said.  

The state utility regulator, the California Public Utilities Commission, made a recent change to how the exit fee works to try and appease both parties. It essentially asked private utilities like SDG&E to offer up for sale a portion of their renewable energy contracts. 

Otherwise, as public utilities argued, SDG&E and other monopolies could hold onto that power and drive up the price.  

“That helps because it would reduce the cost of the (exit fee) because we could then take over those contracts if we wanted to,” Hooven said.  

Think of a big timeline. What matters here is the point in time SDG&E purchased power, and the point in time a customer leaves that company for San Diego Community Power.  

Theoretically, the cost burden of the exit fee on San Diego Community Power customers should reduce over time as the sometimes decades-long contracts SDG&E signed to get that energy run out. But investor-owned utilities could choose to extend them or add additional costs like upgrades to a natural gas plant. And once a contract is extended, should public power customers still have to pay for that energy anymore?  

“There’s an ongoing fight over whether the departed customers (those now with San Diego Community Power) are on the hook for (that),” said attorney Tim Lindl, who has represented other public power agencies on this issue. 

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16 Comments

  1. I have a basic problem with SDCP and that is that they are not being transparent about their costs and operation.

    When this was first sold to the public, SDCP’s fees were going to be “Substantially Lower than SDG&E.” Now it turns out that they are basically breakeven.

    I have never heard an explanation of how SDCP’s power is going to be 100% renewable as they sold the plan early on. Where does the power come from at night or on a cloudy, rainy day like Monday? Now it appears that their 100% renewable plan has been quietly dropped?

    It has been my experience that when a company starts with the smoke and mirrors during the initial pitch to the public, there is a lot more they are not telling us.

    This would be a good time to run away from them, run far away. I will be opting out of SDCP when my turn comes in May.

  2. I agree with Mr. Higgins. There was a lack of transparency, errors and contradictions WITHIN the business plans written by consultants, insufficient energy expertise in the city or board (a consultant’s bonanza), the promise of 5% cheaper energy that was quietly dropped in the pitch, and now the irrational argument that SDG&E should not be kept whole for the billions in capital investments (including clean energy and vitally needed transmission capacity) to ensure that San Diegans had reliable energy with a growing portfolio of renewables (among the highest in California). Oh, and then they forced customers to move to SDCP (I think because they couldn’t to rely on people to switch to an unproven entity). I too will opt to stay with SDG&E.

    1. And, by the way, where the city and regions focus ought to be is on the PRODUCTION of renewable energy — a classic economic development initiative that could create far more jobs for San Diegans. If we don’t have sufficient renewable energy to meet the adopted goals, of course it will get more expensive.

      1. @Julie Meier Wright: The “focus ought to be is on the PRODUCTION of renewable energy — a classic economic development initiative that could create far more jobs for San Diegans.” Good point! So let’s ask ourselves, who will do that? SDG&E, who pays profits as dividends to their investors, or SDCP, that can reinvest income in local projects?

    2. Julie Meier Wright you are not “forced” if you can say no and opt-out, as you are apparently doing. But I agree that the State is being a bit sly or underhanded in order to get larger participation in these plans.

  3. I love the way leftists like Elmer spin these stories…customers “automatically leave” LOL ….if you went to bed driving a Porche and woke up to find it’s now a Prius…did you “automatically leave”? CCA’s are dictated on consumers by overreaching Governments knowing people have more on their plate than taking the trouble to opt out of a lawed system the GOV has forced on them. I’m all for CCA’s IF you make them optional , not forced.
    Also, the writer neglected to mention the long term contracts SDGE entered into were mandated by the same GOV , while the CCAs have no such restrictions. It’s just a matter of time before a few more go bankrupt or are forced to have their rates at or above SDGE.

    1. I know we’re “splititng hairs” but if you can opt-out of something it IS “automatically” applied if you do nothing. You know that. And if you have the option to opt-out, it is not “forced.” But yes it is a bit of a “trick” to get more people on a plan that don’t pay attention. Just like the automatically renewing magazine subscriptions that renew if we didn’t read the fine print.

      1. Great – let’s automatically switch all voters to GOP – and like woke-power you will be given the ability ( for a short time ) to opt out …after that there will be a tax…just like woke-power.

  4. SDG&E offers a similar program to SDCP. It’s called EcoChoice. It also charges that PCIA fee. It was around $30/month for me. I was on that plan for years until it suddenly became very expensive, so I dropped it at no charge. The SDCP comparison calculator includes an estimated PCIA fee in it’s comparison.

  5. As a solar customer, I opted out of the Time of Use plans by SDGE earlier.
    I will be opting out of this offer from SDCP also.
    I have a 20 year contract for my system that I am defending from attack by the CA PUC. The Governor has yet to take a stand.
    More solar production is good. Good jobs for skilled workers is at risk. Why?
    New systems come with new rules and rates. No free lunch.

    1. New residential photo-voltaic systems now have to be oversized to produce more electricity than the home consumes to offset those high time of use rates when the sun is setting. This is not a sustainable trade-off between cost of electricity and value of electricity vs time, especially as residential solar scales up.

  6. At $0.55/kWh from 4pm to 9pm on SDG&E’s TOU plan, there seems to be little solar & wind available during that time. That price must come from some very high priced natural gas generators that are very far away. SDCP doesn’t seem to have a cost effective solution either. Very disappointed.

  7. Another example of how CPUC favors the utilities and does not care about the resident users.

  8. When has a government “ever” produced something for less than a commercial company. Was dumbfounded by the claim of 1% to 2% savings generated by a new government bureaucracy.

  9. Here are some facts that might help this discussion:
    1. Most all of the municipal (publicly owned) utilities in California charge less for electricity than those charged by regulated private utilities. So gov’t can play a useful role in keeping essential services affordable.
    2. SDCP can’t easily compete again SDG&E because of scale (it’s customer base isn’t as large as SDG&E’s). So in the short term, it is unreasonable to think it’s prices will be lower than SDG&E’s. Over the longer term, perhaps it’ll attract enough customers to be competitive.
    3. “Deregulation” of an industry is difficult to do in the best of times. The current uncertainty in the energy (and economic) markets makes this deregulatory effort exceedingly difficult. Five years ago, when this plan was being discussed, there was much greater certainty and potential for lower-priced electricity by a community power group. Chalk it up to bad timing.
    The bottom line: we’ll have to exercise patience and see how this potentially competitive challenger to SDG&E’s monopoly works out.

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