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Huntington Beach is disregarding upwards of $50 million of taxpayers’ funds abandoned in controversial green energy retailer Orange County Power Authority (OCPA) after touting its zero cost liability departure last September.
By burying its head in the sand and ignoring its role as caretaker of its taxpayer’s money, Huntington Beach sets up Irvine as the sole claimant of Huntington Beach’s cash when Irvine exits OCPA mid-2025 and asserts its massive claim to OCPA’s monetary reserves.
That will likely ignite taxpayer lawsuits and calls for changes in Huntington Beach’s city council, particularly as OCPA burns through the city’s money for its illusory benefits:
Illusion #1- pseudo “clean” energy.
Gas-fired and coal-fired power (“Unspecified Power”) is purchased to keep OCPA’s lights on even though OCPA advertises delivery of realistically impossible amounts of renewable energy to its customers.
Were it not for Huntington Beach’s funding of OCPA’s purchases of “Unspecified Power” OCPA would be down the path of Riverside County’s now-bankrupt community choice energy agency, Western Community Energy.
Illusion #2- fictional “lower” prices and nuclear power.
OCPA uses Huntington Beach’s money to artificially depress its prices.
For example, Southern California Edison’s (SCE) competitive prices are scheduled to drop well below OCPA’s in 2025. To placate OCPA’s price conscious ratepayers, Huntington Beach’s cash — residing in OCPA’s Rate Stabilization Reserve Fund — is used pay down the agency’s higher prices.
To further reduce costs, ratepayers are switched into OCPA’s watered-down, low-renewable energy content products that are reliant on “carbon-free” nuclear power. Using nuclear doesn’t jibe since, after the Fukushima disaster, leaders of the community choice energy industry called for the closure of California’s nuclear power plants.
Illusion #3- Enron-style prepayment bonds and ditched financial liability.
OCPA needs upwards of $100 million in Rate Stabilization Reserves for a credit rating in 2027 which, it says, improves purchase terms from energy suppliers. Rate Stabilization Reserves have now fallen to $45 million.
OCPA is in for a rough ride because $45 million is only enough to offset 1.9¢ of SCE’s lower competitive prices (SCE’s residential Generation rates have fallen 2.8¢ per kilowatt-hour in the last six months).
To extract additional subsidy OCPA wants to issue prepayment bonds, where investors’ money is used to prepay energy contracts in exchange for lower upfront-prices from its wind and solar suppliers.
What’s not disclosed is that prepayment bonds represent an Enron-type ruse, where financial liability is shifted off OCPA through a complex layering of multiple Joint Powers Authorities (JPA).
If OCPA falters, bondholders are left holding the bag.
Mom & Pop investors wanting their continued “tax-free” cashflow will have to assume the role of energy traders looking for buyers of OCPA’s wind and solar energy since all other parties in the scheme have been pre-paid.
Huntington Beach’s role as an unwitting financier of OCPA’s bonds is reminiscent of its infamous Elan and Breakwater affordable housing fiasco, where a JPA and tax-free bonds were used to hoodwink Huntington Beach taxpayers out of nearly $500,000 in lost annual tax revenues. The same Wall Streeters developing those bonds are involved with OCPA’s prepayment bonds.
Irvine’s new OCPA board representatives, councilmembers James Mai and William Go, are walking the worn path previously traveled by Irvine’s former OCPA representatives who experienced the agency’s muddied transparency.
OCPA continually rejects disclosing its energy transaction records and now misleads the community with its Improvement Plan, obvious here. OCPA undermines the public trust and calls into question why any city would join the agency.
As a condition of repaying Irvine’s $7.5 million start-up loan earlier than required, OCPA may push a non-disclosure agreement onto Irvine, quashing publicity of insider experiences. However, OCPA has already made key mistakes, undermining its leverage.
When Irvine completes its exit from OCPA’s labyrinth of deception and asserts claim to its start-up loan, its membership share of OCPA’s cash reserves, and all proceeds from its energy contract resales – forecasted to exceed $100 million — OCPA’s jig will be up.
By that time, Huntington Beach’s leaders will discover its voters are looking for city council candidates who embrace responsibility as financial stewards of taxpayers’ money.
Jim Phelps is a former power contractor and utility rate analyst. He served four years helping implement energy reporting legislation for the California Energy Commission, codified by the California Public Utilities Commission. Mr. Phelps is currently contributing to the Commission’s new Rulemaking for Power Source Disclosure Proposals on Hourly & Annual Accounting.
Opinions expressed in community opinion pieces belong to the authors and not Voice of OC.
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