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Orange County Power Authority
Response to Fullerton City Council
March 28, 2023
Responses to Requested Information
1. Fullerton would like to sign an NDA with OCPA to view OCPA power contracts.
A draft NDA for the City of Fullerton will be provided for your review. This draft will be the same as the draft executed with the County of Orange and requested by the City of Irvine and the City of Huntington Beach. As background for the City’s review, the NDA is part of a process approved by the OCPA Board to allow members to designate representatives who will have access to documents that contain confidential market sensitive information, such as un-redacted power purchase contracts. The NDA between the City and OCPA will govern the types of documents requested and the terms and conditions of access using a secure document portal. The purpose of providing this access is to allow members to conduct audits or evaluate potential liability in connection with a member’s withdrawal from OCPA. Given that the power purchase contracts deal with the purchase of both energy and regulatory products in a highly dynamic and competitive market, it is strongly recommended that the City designate individuals as representatives who have the qualifications and expertise necessary to interpret the market data contained therein. The NDA also allows the members of the City Council and executive management to view documents for oversight purposes without the right to download or copy such documents.
2. Information on changing the city’s default.
The city of Fullerton’s municipal accounts are currently at the Basic Choice 38% energy level. At current rates the city is enjoying a 2% savings vs the comparable SCE generation rates which will result in an approximate 2023 savings of $38,000. Like all OCPA customers the city may choose to opt-up its accounts to Smart Choice (69% renewable) or 100% Renewable Choice. As the original decision was made by a vote of the council, changes should follow the same process.
Residential and business accounts in the city of Fullerton are enrolled by default (chosen by the Fullerton City Council) in the Smart Choice 69% Renewal energy product. To change the default energy product for new customer accounts, the city should have its city council vote to change the default to either the Basic Choice 38% renewable or 100% Renewable Choice products and then provide OCPA with a letter from the city manager along with the agenda noting the item, staff report on the item, and minutes of the meeting noting the action taken by the city council. In the alternative, the city council could pass a resolution changing the default for city accounts and all new customer accounts and then transmit the resolution to OCPA.
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3. Information on the process of withdrawing as a member of OCPA.
Before initiating withdrawal, the city should first determine a reason to consider such an action. Over 11 million Californians in more than 200 communities are currently served by a community choice energy program (CCE). Participation in OCPA brings residents and businesses a competitive choice where none existed before and access to a greater array of energy options, including an option for savings vs the prior incumbent provider.
A member may withdraw from OCPA by giving formal notice under Section 6.1.2 of the Joint Powers Agreement. The decision to withdraw must be made by a majority vote of the governing board of the member. In the case of the city, this would be a majority vote of the City Council.
A notice to withdraw must be given at least 180 days prior to the beginning of OCPA’s next fiscal year, which is July 1. Notice given following January 1 of a fiscal year will not be effective on July 1 of that year but will be effective with the commencement of the following fiscal year. Accordingly, a notice to withdraw given on March 1, 2023, would not become effective until the fiscal year commencing on July 1, 2024. During the 15 months following such a notice, there would be a transition period during which the customers of the member would continue to be served by OCPA. On July 1, 2024, the customers would transition to SCE unless an earlier date is agreed upon in negotiations with SCE.
Following receipt of notice that a member is withdrawing from OCPA, OCPA would undertake several practical and regulatory actions:
a. Provide notice to SCE of the return of customers following a twelve-month period and commence cooperative discussions with SCE as to the smooth transition of such customers;
b. Revise its budget and proforma to reflect the change in anticipated load as of the effective date of the transition and file amended regulatory filings as to its forecasted load profile and RA requirements;
c. Commence an evaluation of its contractual obligations with respect to hedged energy, renewable energy, and RA, and put together a revised procurement strategy intended to mitigate the cost of excess energy and regulatory products by potentially selling such products in the market in such a manner as to reduce potential losses; and
d. Evaluate whether the loss of load will result in changes in its financial position that may breach the covenants under its credit terms with lenders and energy providers and if such a breach is possible, seek to renegotiate the terms of such covenants. A good example of how this might happen is the accumulation of reserves. OCPA’s credit facility has financial reserve targets that are based on the 3 | Page
anticipated load of serving all its current members and a diminishment in customer accounts could adversely impact the accumulation of such reserves.
The withdrawing member is liable for costs incurred by OCPA because of its withdrawal and although OCPA has a duty to mitigate these costs, it is not possible to fully anticipate the consequences of the withdrawal until the transition has been completed. Following the initial analysis described in paragraphs (b) and (c) above, OCPA will have a good idea of the potential value of the excess energy and other products that will need to be sold, but the extent to which such sales can be carried out on a positive basis that do not result in losses will take time and will be dependent on market conditions. OCPA has the right to require a deposit from the withdrawing member to ensure that the financial impact of the withdrawal does not create a burden on the remaining members, however, OCPA has not yet determined the procedure for imposing the deposit and this would likely require a decision by the Board.
Following the transition of all customers of a member to SCE, there will be a final reconciliation of the costs of withdrawal and the liability of the member.
4. Data on Fullerton’s participation rate and any other data related to Fullerton’s participation in OCPA.
Below charts are based on data from 2022 through February of 2023.
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Responses to Statements Made During the Last City Council Meeting About OCPA
5. OCPA made a choice not to disclose its power contracts. The state allows OCPA to disclose details or keep them confidential for the first three years, and OCPA decided to keep all details confidential.
This statement is not accurate. OCPA makes power contracts available to the public in redacted form. The only information that OCPA treats as confidential and redacts from its power contracts is market sensitive information that is confidential under the rules of the California Public Utilities Commission (which protects such information from public disclosure for three years) and the provisions of the Public Records Act. This is a practice followed by all utilities and CCEs to prevent the market manipulation that was occurring in the days of the California energy crisis. Suppliers would not do business with OCPA if they saw their pricing and market information publicly disclosed.
It is important to understand that the energy market in California is highly competitive and dynamic. Pricing and availability of energy and regulatory products such as resource adequacy can change on an hourly or a daily basis and non-disclosure provisions in contracts protecting this information are standard in the industry as access to such information can provide a competitive advantage. The three year rule was adopted as a compromise to balance the transparency requirements of the Public Records Act with the need to allow market participants such as OCPA to carry out an effective procurement and hedging strategy. Without confidentiality, OCPA and its providers would be at a disadvantage with other market participants, raising the cost of energy procurement and limiting the providers who would be willing to contract with OCPA.
To accommodate the requests for information from members who were conducting audits of OCPA, the Board authorized OCPA to develop a process whereby
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representatives of members could be given confidential access to market sensitive information in un-redacted power contracts through a secure portal governed by a Non- Disclosure Agreement between OCPA and the member (as described above in item no. 1). This is like the access provided to OCPA Board Members, who have the ability to review un-redacted power contracts in connection with their oversight role.
6. OCPA customers are eligible for state and federal funded programs offered by SCE.
OCPA customers are eligible for state and federal funded programs administered by SCE, including programs aimed at assisting those who are not able to afford their energy bill or who have fallen behind their energy bills.
7. OCPA is financially strong.
Beginning in April 2022, OCPA successfully launched electricity generation services to approximately 243,000 commercial, municipal, and residential customer accounts. OCPA is financially strong as it nears the first anniversary of commercial service. In March 2023, the OCPA Board approved its FY 2022-23 mid-year budget update projected a healthy contribution to reserves of $41 million. OCPA’s proactive efforts in its energy hedging program and fiscal responsibility have directly benefitted the bottom line allowing OCPA to set the 2023 rate design for Basic Choice at 2% less than the SCE equivalent generation rate. OCPA’s net income will be used to help stabilize rates, provide incentives for solar installations, support energy efficiency programs, and develop more local renewable energy sources in and near Orange County.
8. SCE has a 100% energy offering that is less expensive than even OCPA’s 38% energy offering.
Though SCE previously advertised a green rate program, and it is still listed on their website, the program is not open to new customers. New customers can apply to be placed on a waitlist if SCE ever has the capacity to serve additional customers. So, the only energy product presently available to customers is SCE’s 31% renewable energy product, which is 2% more on the generation rate than OCPA’s Basic Choice of 38% renewable energy.