SBC staff recommend 3.6¢ premium and acceptance of prior nuclear allocations to avoid multimillion-dollar deficit

Staff for the city’s community-choice energy program presented a package of rate and procurement recommendations at the Feb. 6, 2025 Sustainability Committee meeting to prevent a projected FY26 budget shortfall.

The most newsworthy item: staff recommended a 3.6¢ per kilowatt-hour premium on the city’s 100 percent green product and recommended accepting previously procured carbon-free allocations (including nuclear credits) that the program’s customers are already paying for through the PCIA charge to avoid a projected $14 million deficit in fiscal 2026.

Staff briefed the committee that Southern California Edison reduced its rates in October 2024 and again in January 2025, reducing the revenue baseline for the city’s community-choice program while staff remain under fixed-cost contracts. "It keeps generation rates static to today. So bills do not increase by 3.6¢ per kilowatt hour," a staff presenter said, describing the staff proposal to stabilize generation revenue by setting the 100% green premium at 3.6¢.

Staff said the combined mitigation measures — delaying some hires, halving some program spending, shifting procurement toward lower-cost hydro where feasible, accepting previously procured nuclear allocations and using rate-stabilization funds — would reduce a starting $14 million shortfall by about $11 million; staff proposed using $3 million from rate-stabilization funds to balance the FY26 budget.

Staff explained details and tradeoffs: accepting previously procured allocations would recognize carbon‑free credits that Pacific Gas & Electric and other investor-owned utilities had procured for bundled customers and for which the city’s customers currently pay via the Power Charge Indifference Adjustment (PCIA). Staff said the allocation for the current year is worth about $1.15 million to the program; not accepting those attributes would require the city to procure equivalent carbon-free content elsewhere.

Staff described other mitigation levers they analyzed: prolonging lower-cost hydro procurement (about $2 million saving), deferring two requested FY26 positions, cutting program budgets roughly in half, and not procuring certain expensive resource‑adequacy products and instead taking a state penalty in the short term if needed. Staff said a 3.6¢ premium would bring the program’s reserve forecast back near policy targets.

Committee discussion focused on the acceptability of the nuclear credits, customer messaging, and opt-out risk. Some committee members said the recommendation should be visible and clearly explained to the public because typical customers may not understand the difference between the city’s 100% green product and Edison’s bundled offering. One member said the city should proactively communicate that the proposed premium would keep generation charges level with the October baseline so bills would not increase by the full premium figure.

Several committee members asked for additional technical and contractual detail before council-level action. Members also asked staff to clarify whether accepting the previously procured allocations would amount to adopting a policy position on new nuclear procurement; staff said the recommendation is limited to accepting credits already purchased on customers’ behalf and does not extend existing contracts.

Public comment on the energy item was mixed; some speakers urged caution with nuclear allocations for political or messaging reasons, while others and staff noted the fiscal consequences of declining allocations the city is already funding. The committee voted to move the staff recommendation forward to the finance committee and (as included in the meeting roll-call) to forward it on the city council consent calendar with the staff proposal.

Why it matters: the recommendation affects customer bills, the program’s reserve trajectory and the city’s renewable/low-carbon reporting. Accepting previously procured carbon‑free credits would lower the program’s near-term costs but prompted committee requests for clearer public messaging and a staff memo explaining legal and contractual details for the finance committee and council.