STAFF REPORT
Meeting Date:
August 4, 2026
CONSENT
10 SUBJECT: ORANGE COUNTY POWER AUTHORITY MEMBERSHIP EVALUATION AND
ENVIRONMENTAL SUSTAINABILITY COMMITTEE RECOMMENDATION
RECOMMENDATION: It is recommended that the City Council:
1. Receive and file the Environmental Sustainability Committee's analysis regarding potential membership in the Orange County Power Authority (Attachment 1);
2. Accept the Environmental Sustainability Committee's recommendation to defer further evaluation of potential Orange County Power Authority membership at this time;
3. Direct staff and the Environmental Sustainability Committee to return to the City Council toward the end of 2027 with an updated assessment if conditions warrant further consideration; and
4. Find that the recommended action is not a project under the California Environmental Quality Act (CEQA) pursuant to State CEQA Guidelines Section 15378 because it consists solely of receiving the Environmental Sustainability Committee's report and providing policy direction regarding future evaluation of potential Orange County Power Authority membership.
SUMMARY OF THE MATTER
On April 14, 2026, the City Council approved a structured five phase work plan directing the Environmental Sustainability Committee (ESC), with support from City staff, to evaluate whether joining the Orange County Power Authority (OCPA) would be in the best interest of the City and local electricity customers.
The work plan was designed to provide the City Council with a comprehensive assessment of the financial, operational, legal, governance, and community implications of joining OCPA before any policy decision regarding membership. The work plan stated that the evaluation process did not commit the City to joining OCPA, but instead established a framework for due diligence to inform the City Council’s consideration.
Consistent with the City Council approved work plan, the ESC conducted its evaluation over the past several months. The Committee reviewed OCPA's financial condition, governance structure, customer trends, operational performance, electricity rates, regulatory environment, and potential benefits and risks associated with membership. The Committee also considered the staffing and governance responsibilities that participation would require of the City.
Based upon its analysis, the ESC concluded that the risks associated with joining OCPA at this time outweigh the potential benefits. Rather than recommending against membership permanently, the Committee recommends postponing further evaluation until the organization has had additional time to demonstrate financial stability, navigate current market conditions, and address several areas of concern identified during the evaluation. The Committee believes revisiting the issue toward the end of 2027 will allow the City to make a more informed decision after additional financial and operational information becomes available.
This report summarizes the Committees’ report. The Complete report is included as Attachment 1.
ORANGE COUNTY POWER AUTHORITY MEMBERSHIP EVALUATION AND
ENVIRONMENTAL SUSTAINABILITY COMMITTEE RECOMMENDATION
August 4, 2026
DISCUSSION
Background
Community Choice Energy (CCE) allows local governments to procure electricity on behalf of residents and businesses while the incumbent investor-owned utility continues to own and maintain the electrical infrastructure, deliver power, issue customer bills, and respond to outages. Orange County Power Authority is Orange County's Community Choice Aggregation provider and currently provides electricity procurement services for participating member agencies while Southern California Edison continues operating the transmission and distribution system.
During a City Council study session and subsequent Council action earlier this year, the City Council directed staff and the Environmental Sustainability Committee to undertake a comprehensive evaluation of whether joining OCPA would serve the City's interests. Recognizing the complexity of Community Choice Aggregation, the Council elected to complete a structured due diligence process before considering whether to adopt the required resolution of intent to join OCPA.
On April 14, 2026, the City Council approved a five-phase work plan that established the framework for the evaluation. The work plan included:
Phase Name Objective
Phase 1
(March to April)
Authorization and
Framework
Secure City Council direction and establish the
evaluation framework.
Phase 2
(April to June)
Data Collection, Baseline
Analysis, and Community
Outreach
Build the factual record, begin comparative
analysis, and engage the community early in the
process.
Phase 3
(July to August)
Due Diligence and
Validation
Validate assumptions, fill information gaps, and
assess legal, operational, financial, and
governance issues.
Phase 4
(September)
Synthesis and Draft
Recommendation
Bring together the technical analysis, risk
assessment, and community input into a clear
recommendation.
Phase 5
(October)
Council Review and
Direction
Present the completed assessment and
recommendation for City Council consideration.
The Council directed the ESC to return with findings, community input, and a recommendation before the October enrollment decision timeline. Based on ESC’s findings, the Committee is recommending that the analysis be put on hold and not move past Phase 3.
ORANGE COUNTY POWER AUTHORITY MEMBERSHIP EVALUATION AND
ENVIRONMENTAL SUSTAINABILITY COMMITTEE RECOMMENDATION
August 4, 2026
Environmental Sustainability Committee Evaluation
Over the course of the evaluation, the ESC completed a review of OCPA's financial performance, audited financial statements, governance model, customer trends, operational responsibilities, renewable energy programs, and potential impacts on Laguna Beach residents and businesses. The Committee also examined the City's ongoing governance obligations, staffing commitments, and implementation responsibilities that would accompany membership.
The Committee concluded that OCPA remains financially solvent and continues to receive clean independent audits. The organization maintains positive net assets, adequate liquidity, limited long term debt, and offers several potential benefits, including expanded renewable energy options, favorable net energy metering policies, and community energy programs.
However, the Committee also identified several significant concerns that led it to conclude that additional time is warranted before the City considers membership.
Financial Uncertainty
The Committee found that OCPA's financial position has weakened materially over the past two years.
Among the primary concerns identified were:
• Significant declines in operating revenue and cash reserves following the withdrawal of Huntington Beach.
• Negative operating income and negative operating cash flow during recent reporting periods. • Complete utilization of the Rate Stabilization Fund that had previously been used to offset market volatility and avoid customer rate increases.
• Heavy reliance on investment income and reserve drawdowns to maintain financial performance. • Continued uncertainty associated with future electricity procurement costs and customer retention.
Customer Stability
The Committee expressed concern regarding recent changes in OCPA's membership and customer base.
Huntington Beach has withdrawn from the agency, Orange County has also withdrawn, and Irvine previously considered leaving before reversing course. The Committee concluded that continued stability among OCPA's larger member agencies will be an important indicator of the organization's long-term financial sustainability.
Customer Rate Impacts
The Committee found that, under current market conditions, most Laguna Beach customers served by Southern California Edison would likely experience higher electricity costs under OCPA. The Committee concluded that increases to the Power Charge Indifference Adjustment (PCIA), combined with OCPA's current cost structure, have reduced OCPA's ability to offer rate competitive service while maintaining higher renewable energy options.
Operational Considerations
The Committee also reviewed the City's ongoing responsibilities associated with joining OCPA, including governance participation, appointment of representatives, public outreach, and administrative coordination.
ORANGE COUNTY POWER AUTHORITY MEMBERSHIP EVALUATION AND
ENVIRONMENTAL SUSTAINABILITY COMMITTEE RECOMMENDATION
August 4, 2026
Although these responsibilities appear manageable, they would require continued staff support and organizational resources.
Committee Recommendation
After completing its evaluation, the Environmental Sustainability Committee concluded that the potential benefits of OCPA membership do not currently outweigh the financial and operational uncertainties identified during its review.
Accordingly, the Committee recommends that the City Council defer further evaluation of potential participation in OCPA at this time. Rather than recommending permanent rejection of membership, the Committee recommends postponing additional analysis and discussions with OCPA management until the organization has had additional time to demonstrate financial stability, respond to current market conditions, and address the concerns identified during the evaluation.
The Committee believes that revisiting the issue toward the end of 2027 will allow the City Council to evaluate OCPA using additional financial performance data and a clearer understanding of the organization's long-term direction.
Staff Recommendation
The Environmental Sustainability Committee has completed the work assigned by the City Council. The Committee conducted a thorough review of the available information, evaluated both the potential benefits and associated risks of membership, and developed a recommendation supported by detailed financial and operational analysis.
Staff recommends that the City Council accept the Committee's recommendation to defer further evaluation of OCPA membership at this time, and direct staff and the Environmental Sustainability Committee to return with an updated assessment toward the end of 2027 should conditions warrant further consideration.
FINANCIAL ANALYSIS
The recommended action has no financial impact
ENVIRONMENTAL ANALYSIS
The recommended action is not a project under the California Environmental Quality Act (CEQA) pursuant to State CEQA Guidelines Section 15378 because it consists solely of the City Council's consideration of the Environmental Sustainability Committee's findings and recommendation regarding potential membership in the Orange County Power Authority and direction regarding future evaluation. The recommended action does not authorize physical construction, development, or any other activity that may result in a direct or reasonably foreseeable indirect physical change to the environment.
In the alternative, the recommended action is exempt from CEQA pursuant to State CEQA Guidelines Section 15061(b)(3), the commonsense exemption, because it can be seen with certainty that there is no possibility that receiving the Committee's report, deferring further evaluation of potential OCPA
ORANGE COUNTY POWER AUTHORITY MEMBERSHIP EVALUATION AND
ENVIRONMENTAL SUSTAINABILITY COMMITTEE RECOMMENDATION
August 4, 2026
membership, and directing staff to return with an updated assessment in the future could have a significant effect on the environment.
ATTACHMENTS
1. Environmental Sustainability Committee Report (Pgs. 6-19)
2. April 14, 2026, Staff Report: Workplan to Evaluate Joining the Orange County Power Authority (Environmental Sustainability Committee) (Pgs. 20-29)
Submitted By:
. Approved: .David A Kiff
Jeremy Frimond, Assistant City
Manager
Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Jeremy Frimond, Assistant City Manager