On May 1, 2015, a coalition of 40 San Diego County School Districts and the County Office of Education (Coalition) executed a Memorandum of Understanding on Undertaking Collective Action (MOU). This MOU contained Project Addendum #1 which launched an initiative to pursue remedies for the electricity rate shock experienced by all San Diego school districts the year before. In one year, school districts saw their electricity bills rise by an average of 40%, with some experiencing over a 70% increase. This was primarily caused by skyrocketing electricity rates, since only 6% of the increase was attributable to increased usage. This resulted in $37 million of increased operational costs for school districts annually, thereby diverting Local Control Funding Formula funds away from the goal of increasing or improving services for students.
The Coalition pursued two strategies to remedy the electricity rate shock:
1. Working with key Legislators to introduce three (3) bills to address the following objectives:
a. Create a separate rate class for school districts: School districts are in the Commercial and Industrial ratepayer class along with “for profit” businesses. However, unlike “for profit” entities, school districts do not generally have the ability to raise their rates or generate additional revenue to respond to rising operational costs. Consequently, the only option for school districts is to cut expenses in other areas to balance the budget.
b. Provide intervener compensation to offset the costs of intervening in General Rate Cases: General Rate Cases (GRC) are quasi-judicial proceedings and require legal and utility rate expertise. Therefore, the costs to intervene are substantial. Under current law, some entities receive intervener compensation from the Public Utilities Commission (PUC) but school districts are excluded from this provision of law.
c. Create a mechanism to protect school district’s investments in solar from subsequent adverse rate changes
2. Intervening in the 2016 General Rate Case (GRC): Every several years, public utility companies file a GRC with the PUC and the GRC is divided into two phases. Phase 1 allows the utility company to present their projections of costs for justification. Phase 2 is concerned with determining how these costs and allowed public utility company profit margins are distributed among the various classes of ratepayers.
Ultimately, the Coalition was unsuccessful in getting the 3 Legislative bills passed but was successful with the following:
- Temporarily reducing the adverse impact of the proposed changes to Net Energy Metering for photovoltaic systems (solar)
- Extending the grandfathering period for implemented or planned solar systems to be on the more favorable Time of Use Periods
- Negotiating a settlement agreement with SDG&E to mitigate some of the electricity rate shock impact (Schools Settlement)
- Persuading four Senators and four Assembly members from San Diego to send a joint letter to the five PUC Commissioners urging them to accept the Schools Settlement
The PUC is scheduled to issue their final decision on the 2016 GRC, including the Schools Settlement, on August 10, 2017. Nevertheless, even if the Schools Settlement is adopted by the PUC, its benefits are only temporary as it would expire after December 31, 2019.
In order to continue to advocate for lower electricity costs and protection of solar investments for school districts, it is necessary to intervene in the next GRC, scheduled to be submitted in 2018, and continue to pursue legislative remedies. An informal survey was conducted of County Chief Business Officers regarding continuation of a Coalition (Extended Coalition). As of July 21, 2017, 39 of the 42 San Diego school districts and the County Office of Education expressed an interest in continuing (Initiative).
In order to participate in the Extended Coalition, it is necessary to execute Project Addendum #2 to the MOU which describes the new Initiative.
The estimated costs for this Initiative are as follows:
The Coalition agreed to a 4 tier structure to allocate the costs among participating school districts. Costs for each district increase as the number of participating districts declines. For this reason, and to send a message of solidarity and strength, the County Chief Business Officers believe it is imperative for every school district to participate. Therefore, rather than dividing the costs equally among all districts, a 4 tier structure was developed to lower the overall cost for small districts (2,500 ADA or less) and make the distribution fairer given the size and relative potential cost saving benefit each district would experience with a favorable GRC outcome.
After factoring in an estimated carryover from the prior Coalition, the estimated cost per district for this new Initiative compared with the original 2015 Coalition is as follows:
In order to minimize impact to school district budgets and take into account that the bulk of the costs would not be incurred until 2018 when the GRC is filed, the payment schedule has been established to divide payments over 3 budget years as follows:
- 40% to be paid upon executing Project Addendum #2
- 30% to be paid on or about September 30, 2018
- 30% to be paid on or about July 31, 2019