CITY OF POMONA
COUNCIL REPORT
March 6, 2023
To: Honorable Mayor and Members of the City Council
From: James W. Makshanoff, City Manager
Submitted By: Chris Diggs, Water Resources Director
SUBJECT: POMONA CHOICE ENERGY RATE INCREASE
RECOMMENDATION:
It is recommended that the City Council receive and file this report.
EXECUTIVE SUMMARY:
Pursuant to Resolution No. 2022-06, the City Manager has authorized staff to implement a Pomona Choice Energy (PCE) rate adjustment (Attachment No. 1) that is five percent under the January 2023 Southern California Edison (SCE) rate.
FISCAL IMPACT:
Given the outstanding PCE loans and rising cost of power, it is necessary to increase the rate for power. Important to note is that the new rates being charged by PCE are five percent less than the rates charged by SCE. Although the PCE rates have increased, the discount is greater than the previous discounted rate, that being three percent. It is also important to note that the PCE reserves increase each year, and come close to the desired goal of 25 percent of operating costs by the year 2030.
PREVIOUS RELATED ACTION:
On January 10, 2022, City Council authorized a PCE rate at three percent under the then current SCE rate. Additionally, City Council authorized the City Manager to adjust PCE rate to no greater than three percent above the then current SCE rate.
DISCUSSION:
In December 2022, the Public Utilities Commission approved an increase for SCE’s power generation rate, which is expected to cost the average residential customer $11.80 per month. This increase is intended to cover the losses from the prior two years and went in to effect in January 2023. These losses are estimated to be roughly $1.68 billion. This is important to note as PCE has held the practice of comparing its rates to SCE; so if SCE has significantly under-collected in the past two years, and PCE rates are somewhat benchmarked to SCE rates, our practice could have led to PCE also under-collecting, given much of our expenses are similar.
In March 2020, the City Council approved a $783,428 loan from the Water Fund to cover the initial creation of PCE, and in July 2021 the City Council approved a $4.5 million loan from the Water Fund to PCE, which was intended to cover a shortfall in revenue due to COVID and the increased cost of power. Finally, in January 2022 the City Council approved a third loan from the Water Fund to again cover the higher than expected cost of power. Knowing SCE too under-collected for the cost to generate power, these loans should be of little surprise. As stated above, at this juncture SCE is attempting to recover the revenues necessary to pay for the power its customers used. PCE too is in this situation; however, PCE is, and will continue, to supply power at a discounted rate to that of SCE.
On the bright side, because of the increasing costs of power, the exit fee PCE customers are required to pay has been, and continues, to decline to the point that the exit fee is now negative, meaning PCE customers will receive a credit on each power bill in 2023. This is important to PCE customers as it reduces the cost they pay of their power.
Currently PCE customers receive power at a three percent discount to that of SCE. Given the reduction on the exit fee, increase in SCE’s rate, and rising cost of power, staff proposed adjusting PCE rates at five percent under that of SCE, which includes the exit fee reduction as is required in Resolution No. 2022-06. This does equate to an increase, however, the rate provides PCE customers with a discount greater than three percent, which was the overarching goal of the program when it was established. Given the new rates of SCE, PCE now provides the same service to its residential customers, but with an average discount of $4.36 per month.
The City provided outreach to customers prior to the March 6th council date of the rate increase. The rate change was advertised on social media, City Manager email distribution list, and on the home page of the Pomona Choice Energy website located at www.pomonachoiceenergy.org. The website provides the user to choose a language.
ATTACHMENT: Attachment No. 1 - Pomona-SCE Joint Rate Comparison Prepared by:
Chris Diggs
Chris Diggs, Water Resources Director
Pomona Choice Energy Rate Increase