In a 5-0 vote, the City Council set electricity rates that city officials said will undercut Southern California Edison’s standard residential prices and business rates by 3% and by nearly 15% for 19,000 lower-income Lancaster households.
The council also voted to allow residential customers to pay an extra $10 monthly fee to get their power from 100% renewable sources, compared to 35% for the standard plan.
“This is going to be, as a result of our success, something every city in Southern California should do,” Deputy City Manager Jason Caudle said before the council vote.
Homes, businesses and other customers automatically will be switched to the new system, called Lancaster Choice Energy, but customers can “opt out” and choose to remain with Edison, officials said.
Southern California Edison will continue to own and maintain power lines and other electrical distribution equipment in Lancaster. Its crews also will answer repair calls.
Residents and businesses still will get electric bills sent out by Edison, but the bills will contain an electrical delivery fee charged by Edison plus an electrical generation charge from Lancaster Choice Energy.
“All of this should be seamless to the customer,” Caudle said.
The rates are proposed to reduce electric bills $2.7 million a year for Lancaster residents, businesses and other customers, city officials said.
The reduction would have been greater for non-low-income households and commercial customers, city officials said, except for a Southern California Edison surcharge or “exit fee” that the California Public Utilities Commission allows Edison to charge most customers who leave its service.
The exit fee, which the PUC allows to be charged for 20 years, is a little over 1 cent a kilowatt-hour for most residential households and about 0.6 cent to roughly 0.9 cent for business customers, city officials said. City officials said they intend to approach state lawmakers about reducing or shortening the fee.
The exit fee will not be charged to lower-income households that get discounted Edison bills as part of the California Alternate Rates for Energy, or CARE program, which Edison said covers 42% of Lancaster households. The low-income threshold is $47,700 a year for a family of four.
Including the Edison “exit fee,” the Lancaster Choice Energy rates are 8.72 cents and 11.077 cents per kilowatt-hour, depending on usage, for standard residential customers. CARE customers’ rates are 7.674 and 10.031 cents per kilowatt-hour.
Rates were developed to generate enough revenue to cover annual expenses, fund a 10% operating reserve and financial stability reserve, and at the same time save customers a minimum of 3% per kilowatt-hour compared to Edison rates, stated a report from Barbara Boswell, the city finance director.
Lancaster Choice Energy will start providing electricity for city buildings, parks and other facilities in May. Some residential and business customers will also sign up to start trying the new arrangement then.
Service will be extended to all other customers in October.
Lancaster Choice will offer residents two electricity products – Clear Choice, a 35% renewable energy product, and Smart Choice, a 100% renewable energy product. City staffers had proposed making the 100% renewable energy product available for an extra fee of 1.5 cents per kilowatt-hour, but at Tuesday’s meeting the City Council switched the fee to $10 a month, saying the flat fee would be more understandable to customers.
The rate schedule for commercial customers mirrors Edison’s commercial rate structure, making comparisons easier for customers, though in total there will be 19 different rates compared to 76 from Edison, city officials said.
Homes will automatically be placed in the Clear Choice program, but they will have an opportunity to “opt up” to the Smart Choice program.
Lancaster Choice customers who possess electricity-generating facilities, such as rooftop solar panels, will be able to opt for the power supplier’s Personal Choice Product.
Based on that option, customers whose facilities generate more energy than they use will receive a credit of 6 cents per kilowatt-hour on their bill.
Customers who have a credit greater than $100 as of October each year will receive a check in the amount of that credit.
Anyone with a credit less than $100 will see the money roll into the next billing cycle, according to the report.
Lancaster will be California’s first city to offer a “community choice aggregation” system. Such systems are in operation in Marin and Sonoma counties. Community choice aggregation systems are authorized under a state law passed in 2002, following California’s so-called “electricity crisis” that saw statewide rolling blackouts.
The plan, officials said, came as part of the city’s efforts to become a “net zero” community – producing as much power as it consumes.
Most of the power will be provided by a company called Direct Energy, which sells electricity to businesses and other customers around California. Owned by a British firm called Centrica, Direct Energy has more than 6 million residential, commercial and government customers in the United States and Canada.
The five-year contract is arranged so Lancaster is obligated to buy a decreasing percentage of its power annually from Direct Energy, meaning it can seek other, cheaper sources or use power provided by local solar power fields or other facilities.