Staff Report Item 15
Staff Report Item 15
TO: Ava Community Energy Authority Board of Directors
FROM: Howard Chang, Chief Executive Officer
SUBJECT: Review and Discuss Renewable 100 and Bright Choice Cost Allocation Methodology (Information Item)
DATE: July 17, 2024
__________________________________________________________________ Recommendation
Receive a presentation and discuss a Renewable 100 and Bright Choice Cost Allocation Methodology for proposed Board action in September Background
Ava Community Energy (“Ava”) provides our customers with a choice of service plan.
Bright Choice is priced at 5% below PG&E with a power content that includes about 50% renewables. Renewable 100 is priced at ¼ of a cent per kWh above PG&E, comprised of 100% California wind and solar energy.
Historically, Renewable 100 pricing has been set at a premium to PG&E rates. The premium is based on the differential cost to serve Renewable 100 customers relative to Bright Choice customers. Ava’s power procurement strategy includes both contracts and open positions – the open position being filled by market power, including the cost of renewable energy. Current renewable energy market prices have increased significantly. Previously, market prices were not as substantially different from our contracted price for renewable energy power. Therefore, any additional need for renewable energy to serve new Renewable 100 load is exposed to the high marginal cost of renewable energy power on the current market.
Staff Report Item 15
The current market cost of renewable energy has led to the question of how to allocate different costs of renewable energy across the Renewable 100 and Bright Choice products. In order to allocate costs between Renewable 100 and Bright Choice products through a transparent and consistent process, staff recommends adopting a Cost Allocation Methodology, to become effective in Fiscal Year 2025-2026, subsequent to this initial review and discussion by the board.
Additional information on cost allocation methodologies is included in the attached presentation. Staff aims to bring an action item to adopt a Cost Allocation Methodology to the September board meeting.
Fiscal Impact
This information item will have no fiscal impact.
It is anticipated that the Cost Allocation Methodology selected at a future Board meeting will not have a fiscal impact on the wholesale energy expenditures of Ava. However, the methodology selected will impact the retail price paid by Bright Choice and Renewable 100 customers.
• Option A maintains the current methodology and differential in price between the two products.
• Option B will increase the price paid by Renewable 100 customers and increase the discount to Bright Choice customers – increasing the differential in price. • Option C will impact customers in the same way as Option B but with a greater differential in price between the two products.
Regardless of which option is eventually adopted by the Board, Ava will recover the expense for power purchases through its retail rates to customers.
Attachment
A. Presentation
Renewable 100 Cost
Allocation Methodology
July 10, 2024
Attachment Staff Report Item 15A
1. Background
2. Renewable Cost Allocation
Methodology Options
3. Rate Implications
4. Feedback & Next Steps
Attachment Staff Report Item 15A
Background
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• Historically, Renewable 100 pricing is set at a premium to PG&E rates. This premium is set based on the differential cost to serve R100 customers relative to Bright Choice customers. o Certain components of the rates are rising
o Historically Ava has blended all renewable energy costs uniformly across Bright Choice and R100 with the cost differential based on the increased % of renewable energy in R100. o Our historical method of allocating costs associated with energy components may not be the best option for our customers and our agency moving forward due to rising renewable energy costs and large changes to R100 city-wide opt-ups.
Ava requires a Cost Allocation Method to formally allocate procurement costs from renewables to develop our
Renewable 100 and Bright Choice rates
Attachment Staff Report Item 15A
Ava Service Plans: Renewable 100 and
Bright Choice
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City of Fremont
Renewable 100
Transition
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Why is there a Price
Impact for a
Fremont Opt-up,
but not
Historically?
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Renewable 100 Premium over time
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Cost Allocation
Methodology Options
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Options: How toBlend Renewable Energy
Components intoa Rate
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Energy Prices
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Rate Implications
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Cost AllocationMethodology Scenarios
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Considerations •
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Policy
Considerations
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Estimated Impact
ofDifferent CAM
Options and Future
Renewable 100 Load
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Feedback from the Finance, Administrative
and Procurement Committee
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Next Steps •
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Thank you!
Attachment Staff Report Item 15A
Attachment Staff Report Item 15A