This is what happens when government runs a business—even a monopoly. When money is no object, you make bad decisions. If the people of Riverside County wanted this government competitor to private utility companies they would flock to it—instead like the plague they avoided it. Add to that government think running a business—and like the scam high speed rail—an economic disaster.
“A community-chosen energy program that serves six Riverside County cities has filed for bankruptcy after just a year in business, but officials with two recently launched energy programs in the San Diego area say they face no similar fate .
Western Community Energy’s board of directors, also known as WCE, declared a fiscal emergency on May 24 after saying in an employee report that without “an immediate injection of working capital,” it “will not be able to pay its bills.” Due date to be paid ”.
Note the article does not mention this is a government operation instead implies it is private effort. That is how biased the media has become—protecting another government failure.
Riverside County community choice energy program becomes first in California to file for bankruptcy
By Jack Duncan, Riverside Daily News, 6/3/21
A community-chosen energy program that serves six Riverside County cities has filed for bankruptcy after just a year in business, but officials with two recently launched energy programs in the San Diego area say they face no similar fate .
Western Community Energy’s board of directors, also known as WCE, declared a fiscal emergency on May 24 after saying in an employee report that without “an immediate injection of working capital,” it “will not be able to pay its bills.” Due date to be paid ”. . ”
Western cited “several and ultimately catastrophic events in its first year of operation” and filed a petition in federal court for Chapter 9 protection that allows communities to devise plans to reorganize debt and repay creditors.
The staff report listed $ 27 million attributed to lenders, and Bloomberg News cited court documents that found Western creditors owed up to $ 100 million but had less than $ 50 million in available assets.
Western is one of 24 Community Choice Aggregation (CCA) programs across California that offer an alternative to investor-run utilities when it comes to purchasing power in the communities they serve. Western is the first CCA in the state to file for bankruptcy protection.
WCE officials have promised their 113,000 customers in the towns of Perris, Hemet, Wildomar, Norco, Jurupa Valley and Eastvale that service will not be interrupted.
Riverside County’s Press-Enterprise newspaper reported last week, an agency spokeswoman said WCE is likely to hike electricity tariffs over the next several years, with customers seeing an average increase of $ 5 to $ 10 per month.
WCE officials blamed a number of reasons for filing for bankruptcy, including a few related to COVID-19.
First, the number of customers who have defaulted on their electricity bills is “five to ten times higher than the industry standard” due to the financial impact of the pandemic. Orders from Governor Gavin Newsom and the California Public Utilities Commission banning energy companies from disconnecting customers for non-payment resulted in a loss of approximately $ 6 million.
Western applied for $ 25 million in funding through the federal government’s COVID-19 American Rescue Plan, but guidelines tightened and WCE was unable to obtain a bridging loan.
The agency also pointed to the extreme heat wave that hit California last August. WCE officials said they met 90 percent of electricity needs for the summer, but “the heat storm blew the expected demand” as customers turned up their air conditioners, adding an additional $ 12 million in energy costs.
The bottom line also took another blow, Western officials said, as the Utilities Commission increased the need for renewable energy. Western was launched in April 2020, shortly after the statewide bans went into effect.
“Other CCAs and utilities in California experienced similar events and challenges. In order to survive the storm, however, they were able to fall back on reserves that had been built up over the years, “says the staff report, while Western” had no opportunity “to build up financial reserves and had no cushion to fall back on.”
Two CCAs were introduced in San Diego this year:
Barbara Boswell, interim CEO of the Clean Energy Alliance, said her group installed financial metrics to avoid what happened in Riverside County.
“I want to assure you that the Clean Energy Alliance is not in a similar position,” Boswell said during the Alliance’s monthly meeting, three days after Western’s announcement. “We have a very conservative (fiscal) policy. We have an energy risk management policy that we use to manage our portfolio and our energy procurement … and ensure we have sufficient energy procurements to meet our needs. ”
The Clean Energy Alliance began registering customers in May and will have a customer base of approximately 58,000 by the end of this month. For fiscal year 2021-22, reserves of $ 3.1 million are projected, slightly exceeding the target of 5 percent of sales.
San Diego Community Power, or SDCP for short, said it is also meeting its 5 percent target with projected reserves of $ 17.7 million in the next fiscal year.
“We have the checks and balances, the goals, the guidelines, the know-how – all of this to implement the best practices in the industry,” said Interim CEO Bill Carnahan. “Many CCAs have been around for more than 10 years and they are thriving. We are in this camp. ”
After opening in March with 700 municipal accounts, SDCP will add 72,000 commercial and industrial accounts this month. Approximately 695,000 residential customers will be enrolled in the first five months of next year, making SDCP one of the largest CCAs in the state.
“We wouldn’t move forward if we weren’t convinced of our position, the policies in place, and the people we have,” said Cody Hooven, chief operating officer. “We are happy that our prices are in line with our costs, and we feel comfortable where we are with procurement levels for the summer.”
But for CCA skeptics, such as San Diego businessman Bill Roper, Western’s woes are a flashing yellow warning sign.
“Even under ideal circumstances, without COVID, it is difficult for CCAs to have a viable financial model,” said Roper. “You have to have working capital with you. You must make deposits for these agreements. They have to finance themselves … Even SDCP, if they had been widely open (when the pandemic broke out) they would have had a big problem. “
Roper said Western financial losses due to a surge in defaults in the wake of the pandemic were unpredictable, but he has no understanding that WCE attributes some of its problems to last summer’s extreme heat.
“It wouldn’t be surprising if more of the smaller and less mature CCAs have liquidity problems and may have to file for bankruptcy,” said Roper. “They have no capital, they have no reserves and they have not adequately anticipated price and volume peaks.”
Created by the California legislature in the wake of the state’s energy crisis in 2000 and 2001, CCAs are designed to encourage the purchase of clean energy sources, such as wind and solar, at prices equal to or lower than investor-owned utilities. The decisions are made by government officials rather than the established utility companies like San Diego Gas & Electric.
However, the establishment of a CCA does not mean that traditional utilities will disappear. SDG & E, for example, continues to take on all tasks outside of electricity purchasing, such as the transmission and distribution of energy and customer billing.
As soon as a municipality establishes a CCA, all of its electricity customers are automatically registered according to state law. If SDCP and Clean Energy Alliance customers in San Diego want to get off and stay with SDG&E, they can do so for free.
Municipalities that join a CCA typically sign a Joint Powers Agreement, which contains provisions to protect the general resources of the respective municipalities if the municipality energy program fails to meet its financial obligations.
