Leaders of San Diego’s public power company voted Monday to set electricity prices three percent lower than its investor-owned competitor, San Diego Gas and Electric.
The San Diego Community Power board could have opted to lower electricity prices even more, but staff of the three-year-old agency encouraged its leaders to focus on banking more cash in reserves so the company can better stabilize rates during future heat waves or other unpredictable changes in energy markets. The young company also wants cash reserves to earn a better credit rating so it can borrow money at lower interest rates when it builds its own energy projects.
“It means less liability for power producers and more favorable terms for San Diego Community Power,” said Lucas Utouh, the company’s director of data analytics and account services, during Monday’s board meeting. “It means savings we can pass onto customers once we achieve that credit rating.”
Six cities and unincorporated San Diego County banded together to form the government-run power company to compete with SDG&E, which has ruled the energy space as a monopoly for more than a century. San Diego Community Power was created to provide 100 percent renewable energy by 2035. Right now, its approximately 770,000 customers receive around 55 percent renewable energy with an option to pay more for 100 percent renewable power. San Diego Gas and Electric’s most recent reported energy mix is around 45 percent renewable.
San Diego Community Power controls only the electric generation portion of customers’ energy bills, but SDG&E still delivers the power to customers. Investor-owned utilities cannot profit off buying and selling energy – they instead make money by a guaranteed rate of return on infrastructure they build, like electric poles and wires. SDG&E argues it must charge ratepayers what the energy costs to generate.
San Diego Community Power isn’t obligated to shareholders to turn a profit. It instead answers to the public on its ability to deliver on the reason it was created: providing more renewable energy faster and cheaper than its competitors. In that regard, it can decide what to charge customers based on competing priorities, which is why the board considered Monday offering either a 5 percent electricity discount or 3 percent savings.
Under the new 2023 rates, an average San Diego Community Power residential customer who uses 327 kilowatt-hours of electricity would save about two dollars on their monthly bill over staying with SDG&E, according to the company’s calculations.
Customers in San Diego Community Power’s member cities and county automatically buy electricity from the public power company, unless they opt out.
San Diego Community Power’s 3 percent discount includes some other SDG&E costs that public power customers still have to pay. One of those is a charge the utility collects that pays for energy it bought for customers before they left for San Diego Community Power, a charge known as the “exit fee.”
But the company’s savings over SDG&E excludes one cost that customers have to pay. Including the cost paid to SDG&E for delivering the energy shrinks a San Diego Community Power customer’s savings to 1.5 percent.
While San Diego Community Power can offer cheaper electricity for now, SDG&E may appeal to the California Public Utilities Commission to raise or lower rates, since energy markets and prices are constantly on the move. SDG&E did so back in June, which San Diego Community Power lawyers called a deceptive and temporary under-collection of money from ratepayers based on an inaccurate forecast of how much energy would cost the rest of the year. San Diego Community Power has maintained its rates, but its electricity at that time was a dollar more expensive than SDG&E, after the utility’s rate cut.
San Diego Community Power can also choose to raise or lower rates at any point by a vote of the board. However, the company has so far committed to setting rates once per year, by February.