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A San Diego CCA Would Shift Costs to Everyone Else in the County

Roughly 2 million San Diego County residents may be forced to pay more for their electricity if the San Diego City Council decides to launch a government-energy program to serve its 1.4 million residents.

Power lines rise above homes in the Talmadge neighborhood. / Photo by Sam Hodgson

If you live outside San Diego, in places like Poway, National City or El Cajon, would you want to help pay for a new government-run energy program in the city of San Diego? Of course not.

Well, that is a very real possibility.

Roughly 2 million San Diego County residents may be forced to pay more for their electricity if the San Diego City Council decides to launch a government-energy program to serve its 1.4 million residents.

Some cities across California have decided to get into the energy business as a way to try and meet their climate action goals. The trouble is, these government-run energy programs do little or nothing to improve our air quality because they are mostly in the business of buying existing green energy, which does nothing to improve our environment.

What’s worse is these entities carry a tremendous amount of risk for taxpayers, and they actually shift costs onto utility customers outside their service area.

In other words, if San Diego starts a government-run energy program, commonly referred to as community choice aggregation, residents in Chula Vista, La Mesa, Oceanside and elsewhere will see their bills go up to subsidize San Diego’s new energy program.

The San Diego City Council is considering launching a CCA.

The California Public Utilities Commission recently released a proposed decision to try and prevent cost shifts from occurring, but the proposal does not go far enough, meaning cost shifts would continue to occur.

Everyone in California will be affected by the CPUC’s decision.

In San Diego, if the City Council elected to create a billion-dollar energy bureaucracy, every San Diego resident and business would be automatically enrolled in the new program (they can opt out at a later date and return to the utility), and they also would be required to pay an exit fee. State regulators established exit fees to protect people who remain with the utility from higher bills. More specifically, the costs of long-term energy contracts the state requires utilities to purchase to serve a certain number of customers should not fall solely to the people who remain with utilities, regulators determined. The exiting customers should pay their fair share.

Without exit fees, customers who remain with utilities would be forced to shoulder these costs for new CCA customers. In San Diego County it would mean SDG&E customers in San Marcos, Carlsbad, Lemon Grove, etc. would be hit with higher bills and forced to subsidize a government-run energy program that provides them with absolutely zero benefits because it only services San Diego residents and businesses.

Shifting costs from ratepayers in San Diego to ratepayers in neighboring cities is completely unacceptable. It’s also illegal. California law prohibits it.

In order to try and comply with the law and maintain the viability of government-run energy programs, the CPUC’s proposed decision caps costs artificially for CCAs. In other words, CCA customers would only have to pay so much of these costs, and anything else they owed would be set aside – in an interest-bearing account.

These additional costs would eventually have to be paid. There is no free lunch. It is unclear if CCA customers would pay this bill or if cities would be on the hook. Either way, San Diegans would lose, and so would all of us outside the city of San Diego.

The only way to ensure that costs allocated to utility customers do not increase as a result of government-run energy programs is to recover from government-run energy customers all of the costs that were incurred on their behalf. Artificial price suppression only serves to deceive customers, undermine market stability and increase taxpayer risks.

Ultimately, what the CPUC is proposing is a day of reckoning. We know how this movie ends. We saw it with mortgage crisis, when artificially low teaser interest rates fueled home sales. We also saw it when the San Diego City Council underfunded the city’s pension obligations.

We strongly urge the city of San Diego and the CPUC to fully protect cities that choose to remain with their current energy provider from unfair cost shifts.

We need to deal with this issue, not kick the can down the road. We need market stability. Energy is not something we can live without, and no one should have to pay a premium for it.

If San Diego is going to get into the energy business and launch a CCA, let’s make sure it is paying its share of the costs and not passing them onto their neighbors.

Jim Desmond is mayor of San Marcos; Ron Morrison is mayor of National City; Bill Wells is mayor of El Cajon.

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