Kamala Harris’s Home State Shows the Risks of Green Power

W e don’t yet know many specifics about Kamala Harris’s energy-policy preferences — or much else. But, in her nomination-acceptance speech at the Democratic convention, she seemed to make clear that her policies would likely be in line with those of her home state. Freedom, as she defined it, includes the freedom “to live free from the pollution that fuels the climate crisis.”

No state has more aggressively tried to reduce fossil-fuel emissions to “net zero” than California. The state has made that clear in its long-range plan to build the “electricity grid of the future.” It imagines a “future where clean electricity increasingly powers the daily lives of Californians” — and “keeps costs reasonable.” But local governments and residents are finding this movement toward purchasing renewables-based power to be more costly than promised — and it is leading some localities to turn their back on green power.

If Harris has any interest in learning about the complications that can result from attempts to reach net zero, she might start by paying a visit to Baldwin Park, Calif. This city of 72,000 in the San Gabriel Valley suburbs of Los Angeles County is known best as the site of the first In-N-Out Burger joint, which pioneered the fast-food drive-in. But it has more recently distinguished itself by turning its back on green energy. In October 2021, its council voted to “deregister” the city from a program it had joined with great fanfare just a year earlier to purchase electricity generated with higher percentages of solar and wind power than that which Southern California Edison (SCE), the local utility company, provides. In doing so, it separated itself from a growing national movement called “community-choice aggregation” (CCA) — by which communities buy green power directly from suppliers — to presumably save the planet and save on utility bills. It’s an approach not confined to California. It has been legislatively authorized by ten states and promoted by the Biden-Harris administration’s Environmental Protection Agency.

At first — in October 2020 — Baldwin Park mayor Manuel Lozano gushed about the prospect. “We have seen other [communities] successfully launch their CCAs and start reinvesting revenues from the program into their communities.” Baldwin Park joined 200 Golden State cities and counties in contracting for up to 100 percent renewables-based green energy. Utilities such as SCE and Pacific Gas and Electric still distributed and transmitted the power, read the meters, and sent out the bills. It was meant to be a green-power win–win, offering both cost and carbon savings. The California Community Choice Association — “advancing local energy choice” — estimates that 14 million state residents are relying on CCAs for their electricity.

But Baldwin Park quickly soured on the not-so-sweet deal, joining the less-than-affluent cities of Santa Paula, Commerce, Hanford, and Montebello (as per a list maintained by the California Public Utilities Commission) by “deregistering” its CCA. “There was an expectation under CCA,” recalls Baldwin Park chief executive Enrique Zaldivar, “that costs would be lower than SCE.” The city council was very disappointed that within a few months of the CCA’s launch there was already a need for a rate increase. In a state with skyrocketing electricity rates, Baldwin Park budgets for more than $500,000 in municipal electricity bills this year, and, as with any city, such cost needs to be balanced against such core services as police, fire, and public works.

Southern California Edison’s market includes twelve CCAs — the electricity rates of eleven of them are higher than those for the traditional utility. The differences can be substantial, especially for the commercial and industrial rates that governments have to pay for themselves. For the Rancho Mirage CCA, for instance, monthly residential rates for 100 percent renewably generated power average $12 higher than Edison ($331 vs. $298), while industrial rates average $15 higher ($331 vs. $316). The differences are even greater for the Desert Community Energy CCA: Residential bills are $24 higher, and commercial and industrial bills are $42 higher. For the San Jacinto CCA, commercial bills average $3,797 per month compared with Edison’s $3,775.

Utility costs in California are already pushed up by its “renewable portfolio standard,” which requires that all utilities source at least 38.5 percent of their power from renewable sources. It is no accident that California’s power rates are the highest in the lower 48 states.

The same problem has arisen in New York, where 80 communities have passed local laws authorizing CCA participation. The Office of Markets and Innovation of the Empire State’s Department of Public Service has tracked rates for CCA-contracted power since 2017. In only the first year were CCA rates lower. The agency’s director, Marco Padula, reports: “In 2017, the CCA supply contracts did provide program participants a rate lower than the incumbent utility — while also providing a 100% renewable energy supply product. Unfortunately, we have not seen the CCA program’s supply savings trend continue.”

It’s important to note that in the ten states where CCAs have been authorized, the program operates on an “opt-out” model. Unless a customer notifies the local utility of his preference not to participate, CCA power is the default. City councils are effectively making a choice on households’ behalf. By choosing CCA power, they are trying to goose demand for renewables — and join the charge against fossil-fuel-generated energy.

By choosing CCAs, local governments are also risking paying more to keep their own lights and AC on — which will likely have to be subsidized by taxpayers lest some public services be cut back. Leora Vestel, communications director for the California Community Choice Association, notes that “of course rates are changing and there have been points at which CCA rates are higher.” “But over time, they’ve been consistently lower.” If that was once true, it does not seem to have been the case since.

Moreover, CCA rates may not reflect the full costs imposed on utility companies by the participants. California law requires CCA prices to include a “power charge indifference adjustment” that reflects the investments that utilities have had to make historically to maintain vital infrastructure. But the state’s Public Utilities Commission notes that CCA customers might be subsidized by those who purchase power from the traditional utilities: “A future in which CCAs procure electricity for a significant portion — perhaps even the majority — of IOU [investor-owned-utilities] customers would present several questions,” such as “who would ensure reliability, cost allocation for reliability procurement and what entity or entities would be the ‘Provider of Last Resort.’”

In plain English: CCA customers rely on traditional utilities when there is insufficient wind- and solar-generated electricity available to meet demand, but they may not be paying the incremental costs of maintaining that traditional “insurance” capacity.

Rate risk and other questions haven’t deterred the Biden EPA from promoting the approach: “CCAs are an attractive option for communities that want more local control over their electricity sources, more green power than is offered by the default utility, and/or lower electricity prices. By aggregating demand, communities gain leverage to negotiate better rates with competitive suppliers and choose greener power sources.” Aggregating, of course, leads to the “opt-out” model; more customers are key to contracting at the best price. In short, community-choice aggregation depends on limiting consumer choice. It also depends, of course, on there being enough solar and wind power to account for growing electricity needs. On that score, a note from Southern California Edison for the rate program it offers a regional CCA is important: “The volume of interest in both the 50 percent and 100 percent Green Rate program has currently exceeded the amount of capacity available.”

Vestel, of the California Community Choice Association, says that democratically elected — and accountable — officials have opted in to CCAs, just as the Biden administration has, even though “there are some who are campaigning on getting rid of it.” As electricity rates rise to record highs in California and elsewhere, others may join Baldwin Park and realize that moving to “net-zero emissions” does not cost zero dollars.