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Community Choice Energy Update

The Carlsbad City Council voted Tuesday to initiate negotiations with the cities of Del Mar, Encinitas and other potential partner agencies to create a new Community Choice Energy joint powers authority that would provide an option for local customers to purchase power that is at least 50% from renewable sources.

“The energy market is changing, with SDG&E moving away from power purchasing to focus on distribution, making now the perfect time to proceed,” said Mayor Matt Hall. “It’s a great opportunity to build on the strong relationships with our Innovate 78 city partners and our coastal neighbors.”

“By forming partnerships throughout North County, we can provide our communities with the choice of buying more renewable energy, while achieving economies of scale,” said City Council Member Cori Schumacher, who along with Mayor Matt Hall serves on the City Council Ad Hoc Subcommittee working on Community Choice Energy. “We could sit back and watch a little while longer, but Mayor Hall and I are in agreement that this is an opportunity for Carlsbad to be a leader.”

State law allows local governments to form Community Choice Energy programs that offer an alternative to investor-owned utilities, such as SDG&E. Under this model, local governments purchase and manage their community's electric power supply, and the existing utility continues to distribute the energy to customers. 

On June 14, SDG&E provided a letter to the City of Carlsbad expressing its support for Community Choice Energy programs, stating, in part “… our best course is to move out of procurement and focus on the safe and reliable delivery of energy to our customers.”

The cities of Carlsbad, Encinitas and Del Mar conducted a joint study of four governance models that could be used for a Community Choice Energy program:

  1. Each city creates its own program
  2. Create a joint powers authority with other North County cities
  3. Create a joint powers authority with the City of Solana Beach, which already has a Community Choice Energy program
  4. Join a joint powers authority being established by the City of San Diego

Citing the commonalities shared by North County cities and existing relationships, the Carlsbad City Council decided to go with the option of forming a joint powers authority with other North County cities. Specifically, Carlsbad will negotiate with the cities of Del Mar and Encinitas on an agreement that includes the following conditions:

  1. Equal voting, meaning each agency would get one vote, regardless of size or other factors. Some regional agencies use a weighted voting system where larger cities have a bigger say in decisions.
  2. Equal cost sharing formula for the work leading up to the program launch.
  3. 2021 program launch date.
  4. A minimum of 50% of the energy must come from renewable sources. SDG&E’s supply is currently made up of approximately 45% renewable sources.
  5. JPA membership for the cities of Escondido, Oceanside, San Marcos, Solana Beach and Vista, if they decided to join later, would be approved under the same terms as the original partners. Solana Beach has already implemented a stand alone Community Choice Energy Program, and the other cities are in an early stage of studying whether or not to pursue a CCE program.

Start up Cost

  • The total cost of creating a Community Choice Energy Program through a joint powers authority with other North County cities between now and the 2021 launch is estimated at $1.25 million.
  • Each city’s share will depend on how many cities ultimately join.
  • The costs would be shared equally by the JPA partners and reimbursed by the JPA with interest, or the JPA could seek outside funding to be refunded by the JPA with interest.
  • Assuming the JPA has three partners, the City of Carlsbad’s share of pre-launch costs is estimated not to exceed $500,000.

Next Steps

  • Initiate negotiations with the cities of Del Mar, Encinitas and other potential partner agencies to prepare a Community Choice Energy joint powers agreement.
  • Approve an ordinance implementing a City of Carlsbad Community Choice Energy program through a joint powers authority.
  • Fund the completion of an implementation plan, for a total cost of $25,000.
  • Approve and fund the establishment of a Community Choice Energy joint powers authority board of directors.
  • Approve and submit a Community Choice Energy Implementation Plan to the California Public Utilities Commission by Dec. 31, 2019, to meet the goal of launching a Community Choice Energy program in 2021.

Marin County was the first to create a California Community Choice Energy utility in 2008. Today there are 19 Community Choice Energy programs operating throughout California. In San Diego County, Solana Beach began using this model last year, and other cities and the county are exploring it currently. 

An April 16, 2019, study shows the Community Choice Energy model is technically feasible and would save Carlsbad ratepayers 2% a year compared to SDG&E. The study is available for review on the city’s website. 

The study describes some of the potential risks and concerns associated with Community Choice Energy, which include power supply costs, financial risks, customer participation and the availability of renewable power. The study shows that even when taking these variables into account, costs projected under most combinations of variables and potential market conditions will not negatively affect Community Choice Energy rates compared to SDG&E rates, and where negative impacts may exist, those risks can be mitigated. 

On March 19, the Carlsbad City Council approved a resolution stating the City Council’s intention to pursue a Community Choice Energy program that prioritizes the following operating principles: payment of prevailing wages on construction projects in the event a Community Choice Energy program constructs local clean energy resources, use of community benefit agreements and project labor agreements, and an assurance that a Community Choice Energy governing entity would remain neutral in the event its workers intended to unionize. 

The soonest a new Community Choice Energy program in Carlsbad could be up and running would be 2021. Between now and then, as the city works its way through the approval process, there will be a number of public meetings and other opportunities for community input. Once established, the program would include all Carlsbad ratepayers unless they choose to opt out and remain with SDG&E.

For more information
Jason Haber, assistant to the city manager, jason.haber@carlsbadca.gov or 760-434-2958
Community Choice Energy webpage

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August 20, 2019