REPORT TO COUNCIL
SUBJECT
Title
Approve a Silicon Valley Power One-Time Climate Credit for Small Commercial (C-1) Customers
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
On May 23, 2023 (Council Report 23-479), the City Council authorized a 5% mid-year increase to the electric rate schedules of Silicon Valley Power (SVP) for all classes of customers, effective July 1, 2023. This proposed increase was necessary due to the spike in market energy prices and market natural gas prices which mostly occurred in December 2022 and January 2023. This spike in natural gas prices caused unforeseeable and significant increases in SVP’s power purchase and production costs.
As discussed at the May 23 Council meeting, as part of the rate increase staff will also be implementing a one-time efficiency/climate residential credit of $30 that is intended to help cover the increased costs for all residential customers. The credit is funded from existing Green House Gas reduction funds which are derived from the sale of allowances under the Cap-and-Trade Program. A number of utilities, including PG&E, provided similar credits. These credits are not typical for SVP, and the only similar credit SVP has implemented was to provide customer relief during the Covid-19 pandemic.
During its consideration of the mid-year rate increase, the City Council suggested staff develop a similar small commercial (C-1 billing rate) credit.
DISCUSSION
Even with the approved increase, SVP’s rates will remain significantly below PG&E’s current rates (and lower than any other utility with more than 10,000 customers). For the small commercial customers (C-1 rate), SVP rates are 35% lower than PG&E. For a typical small business (1000 kWh) the proposed increase is approximately $11.00 a month for a new total of $228.88.
In comparison, for a large commercial/industrial customer, the typical increase will be an additional $3,912 a month and for a large industrial customer the typical increase will be $14,361 a month. For the largest SVP customers, the 5% increase will range from approximately $50,000 - $400,000 additional a month.
Proposed Credit
Staff reviewed three possible credit options for the approximately 6,300 small business customers.
• $30 total credit which would cover approximately 2.7 months of the approved 5% increase.
• $50 total credit which would cover approximately 4.5 months of the approved 5% increase.
• $70 total credit which would cover approximately 6.4 months of the approved 5% increase.
As comparison, the $30 residential credit covers approximately 10 months of the approved 5% increase for the average residential customer and 4 months for a high-use residential customer.
Proposed Credit
Staff is proposing to move forward with a one-time $70 dollar credit from Green House Gas funds. This credit aligns with similar relief provided to residential customers, and for the average small business, it fully covers the additional cost for the six months of a mid-year increase. It is expected the credit will appear on customers’ bills in the August/September timeframe.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to section 15378(b)(4) of Title 14 of the California Code of Regulations in that the proposed action is a fiscal activity which does not involve any commitment to a specific project that may result in a potentially significant physical impact on the environment .
FISCAL IMPACT
The one-time $70 C-1 credit will cost approximately $441,000 and will be funded from existing Green House Gas reduction funds in the Mandated Program Costs budget in the Electric Operating Grant Trust Fund. California Air Resources Board (CARB) provides these allowances to publicly owned utilities, like SVP, to mitigate the Cap-and-Trade Program’s compliance costs. The proposed credit is an authorized use of the proceeds of CARB allowances.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Approve a Silicon Valley Power one-time $70 Climate Credit for all C-1 customers.
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Approved by: Jōvan D. Grogan, City Manager