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Open Letter to Irvine City Council: Time Will Not Fix OCPA

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Dear Irvine City Council:

Members of your Council have attempted to reassure Irvine residents that the Orange County Power Authority (OCPA) just needs time to “develop and deliver.”  The problem is that many of the embattled agency’s shortcomings are systemic — shared by all community choice aggregators (CCAs) — because CCAs use many of the same high-paid consultants promoting the same so-called “best practices.”

Four of these “best practices” followed by OCPA — none of which have been addressed by previous audits or OCPA’s Improvement Plan — mirror unscrupulous practices notoriously employed by Enron, in the run-up to its multi-billion-dollar bankruptcy 20 years ago. They are discussed below.

1. OCPA games the California electricity grid via Resource Adequacy (RA) for financial gain while putting its ratepayers at risk of blackouts.

Resource Adequacy (RA) is dedicated supplemental power that must be purchased by utility providers to ensure the stability and reliability of California’s electricity grid. For example, renewable energy like solar is not available after the sun goes down. That’s why every load serving entity — including OCPA and Southern California Edison (SCE) —  is required to deliver supplemental electricity to the state’s electricity grid operator to ensure electricity reliability and avoid blackouts.

As a condition of its business launch, OCPA provided assurances to regulators and to the public, stating it would “meet or exceed” its RA obligation.  However, OCPA knew at least five months before its launch that it would not meet its responsibility. Then, several months after receiving a partial waiver from regulators, OCPA officials consciously chose to ignore its RA compliance requirements after determining that OCPA could be millions of dollars ahead by leaving California’s electricity grid in jeopardy — paying a $2 million fine to the state rather than honoring its remaining RA commitment. San Diego Community Power followed a similar business approach, resulting in three fines. (OCPA and San Diego Community Power share the same consultant, Pacific Energy Advisors.) State regulators determined San Diego’s behavior was deliberate. Regulators are currently reviewing OCPA’s fine. Gaming RA is an unethical business practice, putting our state’s electricity grid at great risk.

2. Mirroring Enron behavior, OCPA takes the monetary savings from each Irvine ratepayer and transfers them to OCPA’s own accounts through a price-manipulation practice known as “benchmarking.”

Benchmarking occurs when OCPA ratchets up its prices to just under SCE’s basic rate. This happens while the majority of OCPA’s power costs remain at a pre-existing locked-in contract level. OCPA then advertises “prices remain 2% lower than SCE’s,” while trusting its ratepayers fail to notice what is happening. Irvine customers who were forced into the much higher priced 100% renewable product pay OCPA’s price increase, plus OCPA’s added premium for that product, resulting in escalating costs for you … and escalating profits for OCPA.

These benchmarking techniques may not have been understood by Irvine’s representatives on the OCPA board, Councilmembers Tammy Kim and Kathleen Treseder, neither of whom have experience in the energy market.

During a City Council meeting, Treseder stated that she had requested a rate reduction for Irvine’s 100% renewable electricity plan, but that no such rate reduction could be accommodated until 2024. That’s because 2024 is when SCE’s new rates will take effect and when OCPA’s new round of corresponding benchmarking will be implemented. This means for now OCPA’s budgets and rosy proforma projections, which are distributed to OCPA’s financiers, remain on track. 

OCPA also exploits another layer of benchmarking when claiming that natural gas supplies impact OCPA’s prices. However, Irvine households and businesses are enrolled in the agency’s 100% renewable program, which supposedly doesn’t rely on natural gas.

3. Reminiscent of Enron, OCPA declines to open all of its energy books to public scrutiny, denying consumers independent verification of just how much brown power (gas-fired) is being delivered as part of Irvine’s electricity content.

OCPA claims its “load shaping and procurement strategy” is confidential. That claim allows OCPA to conceal dirty power in its products which, if exposed, would likely result in class action lawsuits against many CCAs since they all use similar excuses to shield themselves from public scrutiny. Even though one of OCPA’s member cities, Huntington Beach, executed a non-disclosure agreement (NDA), OCPA declined to provide all requested information. Why? What is OCPA is hiding?

4. As an OCPA board member, Mayor Khan sought to eliminate greenwashing with “RECs” (Renewable Energy Certificates). But, similar to Enron’s gaming, OCPA is heavily engaged in greenwashing.

“Greenwashing” involves deceiving consumers into believing that they are receiving greener electricity (a higher percentage of renewables) than they actually do.

CCAs and their consultants are largely responsible for the proliferation of greenwashing in communities that believed clean energy was delivered when, in fact, they typically received a large amount of brown power (generated by fossil fuels) that had been promoted as being “green.” Next week’s column, OCPA’s Clean Energy Conceals Dirty Business, exposes the scale and stealth nature of OCPA’s greenwashing.

All four of the items I have included in this letter, particularly benchmarking, contribute to a massive wealth transfer from Irvine ratepayers to OCPA’s bank accounts. In fact, the agency’s reserve fund will reach $100 million in just two years. That $100 million is the result of OCPA’s ratepayers being overcharged.

Irvine residents have been learning the truth about OCPA due to local media persistence. That’s why Irvine households are “opting-out” of OCPA — at a rate of nearly 30%, which is more than five times the state average.

Councilmembers, while I applaud your efforts to move your city to greener energy sources, OCPA is not the way to do that. And, more time will not correct the Enron-style business practices that OCPA and other Community Choice Aggregators employ.

Municipal jurisdictions, including Huntington Beach and the County of Orange, have rejected OCPA. I urge the City of Irvine to join them and sever its ties with this so-called “not-for-profit” agency.

Jim Phelps

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