Commentary

Orange County cities are on the cusp of learning that their general funds are exposed to liability claims due to the Orange County Power Authority’s (OCPA) activities. [1]

Supporters of community choice aggregation (CCA) champion its “financial firewall” as a catch-all safety net against financial loss. However, CCAs—which automatically switch consumers into their programs amid questionable claims about greener energy [2] at lower prices—aren’t telling cities the whole story.

That firewall doesn’t extend to OCPA’s alleged illicit activities, including misrepresentation of its energy products, gaming, bait and switch, and conflicts of interest, leaving untold liabilities hanging over OCPA, city members, and ultimately taxpayers and voters.

For instance, OCPA’s false advertising—which is reviewed by a board of directors comprised from its city members—invites class action lawsuits.

The agency’s ratepayers believe they’re receiving actual delivery of their subscribed renewable energy directly to their homes and businesses. OCPA’s advertising on its consumer notices claims the “Customer chooses how much renewable energy to use” (pdf).

That’s technically impossible.

Naïve consumers who pay a premium for this home delivery are showing up at city council meetings retelling mistruths used by OCPA to induce or retain ratepayers (pdf).

When questioned about home delivery even OCPA’s consultant says “I can’t do that.” [3]

OCPA also ventured into potential fraud around its written commitment to supply required emergency back-up power to California’s electric grid. This power—known as “resource adequacy”—combats blackouts associated with intermittent wind and solar energy that OCPA puts onto California’s power grid.

To advance its regulatory approval and to garner public support for its business launch, OCPA submitted implementation planning documents stating it would “meet or exceed” its resource adequacy obligation. [4] Consultants and salespeople know stopping an OCPA-type program after business launch is akin to putting the genie back in the bottle.

However, OCPA already knew its commitment was unachievable despite that guarantee. [5]

After its business launch—which enabled OCPA to switch all electricity consumers within its members’ jurisdictional boundaries into its program via its opt out enrollment mechanism—OCPA made multiple excuses about its failure to meet its emergency power guarantee while foisting associated costs and responsibilities onto others: [6]

• First, in its appeal of its fine from state regulators, OCPA cast itself as a victim of an “unconscionable” electricity market [7] even though it was aware of conditions many months before its business launch, enough time to have halted its plans and left ratepayers in Southern California Edison’s bundled service;
• Then, OCPA’s board of directors boasted that it was money-ahead by gaming consumers and the grid, paying a lower amount via a fine for non-compliance rather than shelling out $80 million for its committed emergency power; [8]
• Finally, its board threw the utility commission under the bus, claiming OCPA’s decision to blow off its compliance was much ado about nothing because regulators’ emergency power mandate was a bunch of “made up numbers.” [9]

CalCCA is now mounting a PR campaign, lobbying for regulatory leniency of its members. This comes after promoters and consultants ushered forth ill-prepared community choice agencies, leaving Californians holding the bag for their emergency power (resource adequacy) obligation and higher energy costs.

Gavin Newsom is scrambling for out-of-state energy to cover California’s looming summertime shortages. He remembers twenty years ago when then-Governor Gray Davis’s political career abruptly ended while Enron and Shell Energy gamed Californians by manipulating electricity prices and creating rolling blackouts.

Today, OCPA is gaming California. Ironically, Shell Energy is one of OCPA’s largest energy suppliers.

Another page in OCPA’s problematic record involves apparent conflict-of-interest with its energy portfolio consultant Pacific Energy Advisors (PEA) and OCPA’s general counsel.

Both were aware of OCPA’s resource adequacy shortcomings well before OCPA’s business launch, which—if postponed or decertified—could have jeopardized their earnings [10], as well as the anticipated dole for OCPA staff. This occurred after board members awarded a contract to EES Consulting, putting it into an apparent conflict-of-interest. [11]

OCPA’s on-going problems dwarf those of California’s nearly thirty other CCA programs, and are compounded by OCPA’s board chair, Fullerton Mayor Fred Jung, who trumpets that OCPA has satisfied nearly all parts of the agency’s improvement plan. That plan falls well short of addressing serious issues.

OCPA continues on a troubled path, steered by a board of directors that is largely oblivious to its own culpability.

Everyone should hope OCPA’s financial firewall doesn’t get tested because there is a lot of hidden liability behind the scenes.

Notes:

[2] OCPA member City of Huntington Beach desired to determine actual dirty power content in OCPA but was denied access to all requested energy invoices and CAISO Settlement Statements even though it executed a nondisclosure agreement.

[3] Pacific Energy Advisors’ Christian ‘Kirby’ Dusel, OCPA board meeting, Feb. 15, 2023, https://vimeo.com/799980327/b3749bc55d, elapsed time 2:29:16.

[4] OCPA Implementation Plan and Statement of Intent, Dec. 28, 2020, page 18: “The OCPA resource plan will meet or exceed all of the applicable regulatory requirements related to resource adequacy and the RPS” (renewable portfolio standard). Page 18 of OCPA’s subsequent December 21, 2021 Implementation Plan and Statement of Intent Amendment No. 1 reads: “The Program will meet or exceed all the applicable regulatory requirements related to resource adequacy and the RPS.” Also note that OCPA failed to meet its RPS obligation, per SB 350 (de León, 2015).

[5] OCPA’s business launch was April 1, 2022. Upon learning of its impending resource adequacy (emergency back-up power) shortfall, OCPA requested a waiver from its obligation on Nov. 1, 2021. Then, a month later, OCPA released its Implementation Plan and Statement of Intent, Amendment No. 1, stating it would “meet or exceed” its resource adequacy regulatory requirement. (OCPA included the same “meet or exceed” statement in its original Implementation Plan a year earlier). OCPA was fined $1.96 million for delinquent procurement of resource adequacy by the utility commission, per Citation E-4195-0116 on April 20, 2022, (three weeks after OCPA’s business launch).

[6] (Former) OCPA Board member and Huntington Beach councilmember Dan Kalmick during Huntington Beach’s special meeting to withdraw from OCPA, May 16, 2023, https://www.youtube.com/watch?v=Yc7aeH2WOqk elapsed time 32:25: “And so we took power from the main, the main pool if you will.” Note: The “main pool” is electric power provided by other suppliers.

[7] OCPA Appeal of Citation E-4195-0116 to California Public Utilities Commission, authored by OCPA general counsel Ryan Baron, dated May 20, 2022, page 1.

[8] (Former) OCPA Board member and Huntington Beach councilmember Dan Kalmick during Huntington Beach’s special meeting to withdraw from OCPA, May 16, 2023, https://www.youtube.com/watch?v=Yc7aeH2WOqk, start at elapsed time 32:10.

[9] (Former) OCPA board member and County of Orange Supervisor Donald P. Wagner during Board of Supervisors hearing on withdrawing from OCPA, https://ocgov.granicus.com/player/clip/4622?view_id=8&redirect=true&h=f5f37035418dc561f57169403e575a11 start at elapsed time 1:38:58: “The PUC [public utilities commission] has its rules ... they made up numbers, and they’re forcing us to live with those numbers—that’s what the PUC did.”

[10] Pacific Energy Advisors received a not-to-exceed $2.388 million contract by OCPA June 9, 2021. General Counsel Ryan Baron’s (Best Best & Krieger Law LLP) first-year contract with OCPA was $240,000, approved Dec. 16, 2020. OCPA’s Annual Budget for legal, through June 30, 2022 was $799,000; through June 30, 2023 is $580,000. Baron resigned under pressure from OCPA Feb. 6, 2023 and was replaced by Best Best & Krieger’s Nicholaus Norvell.

[11] After authoring the original community choice energy Feasibility Study, dated June 18, 2019, for the City of Irvine, OCPA’s largest member, EES Consulting received a not-to-exceed $150,000 contract from OCPA, Dec. 16, 2020, for community choice energy Implementation Services.