IID officials suggest Renova Energy looking to claim jackpot in spat with Riverside County
EL CENTRO — When it came time to file a civil lawsuit against Riverside County, Imperial Irrigation District directors said it was a private company that forced their hand, and one that stands to gain tremendous profits now that the metaphorical chips are down.
On the flip side, the owner of the company said IID is being greedy and fighting much needed changes to the business of rooftop solar energy at the expense of its customers.
Two weeks ago, IID filed a civil lawsuit against the Riverside County Board of Supervisors in regard to Ordinance No. 943, which was formally adopted by unanimous consent during the board’s regular meeting on July 17.
Ordinance No. 943 would require IID to expand its net-metering program to unincorporated parts of Riverside County, including Bermuda Dunes, Mecca, Thermal and Thousand Palms. Net-energy metering is a state-mandated program designed to benefit customers who generate their own electricity using solar, wind, biogas fuel cell or a hybrid of these technologies.
The lawsuit, dated July 13, was filed at Superior Court of California, County of Riverside, by Emily L. Brough of the San Francisco law firm Zacks, Freedman & Patterson, PC, which is representing IID. A hearing date has yet to be determined.
The civil document seeks unspecified monetary remedies and a declaration of injunctive relief against the Riverside County Board of Supervisors in relation to the ordinance, according to court documents obtained by Imperial Valley Press.
The lawsuit “is not what we would have chosen,” Kevin E. Kelley, IID general manager, said during the meeting. “It is not the outcome we would have hoped for a year ago. It is a bad pass that we have reached, but now that we are here, you have no choice as a board but to stick up for the ratepayers as a whole.”
The lawsuit comes down to pre-emption, which precludes county or city governments from regulating utilities if regulations already exist at the state level, Attorney Maria C. Severson, an IID consultant based in San Diego, said during the regular IID board meeting Wednesday afternoon
The ordinance has the backing of the Electric Ratepayers Alliance, a California 501(c) (6) non-profit mutual benefit corporation, and Renova Energy, a private solar panel installation company based in Palm Desert. The non-profit and for-profit organizations jointly submitted an indemnity and reimbursement agreement with the County of Riverside pledging to cover the legal costs of anticipated litigation tied to Ordinance No. 943.
The agreement was signed on June 5 by Chuck Washington, Riverside County board chair; the clerk of the board; county counsel and Vincent Battaglia, chairman and CEO for both Renova Energy and Electric Ratepayers Alliance. A copy of the agreement was obtained Wednesday by Imperial Valley Press.
Pulling the strings
“The principals involved, not necessarily the board of supervisors, but private companies have tried to make this a themvs.-us and us-vs.-them” scenario, Bruce Kuhn, Division 2 director, said during the meeting.
IID President James C. Hanks, director of Division 3, said that when Renova o ered to pay Riverside County for litigation costs, “if that [didn’t] run up a red flag, I don’t know what would. That should have been enough right there to cause the board of supervisors to run.”
Battaglia said over the phone Thursday afternoon that such indemnity agreements are a common practice.
“Indemnifications occur all the time,” he said. “Every time a developer comes to a [county] and wants to build a project, and the [county] recognizes there will be people who want to sue, like the IID … then the [county] reaches to the developer” for indemnification.
The Riverside County “board of supervisors is trying to do the right thing for their constituents, and the IID, just because they are not getting their way, are simply going to spin and spend as much [taxpayer] money as they can to make a fuss about something that doesn’t need to be made a fuss about.”
The indemnity agreement remains a point of contention for IID, which considers it a conflict of interest because Renova Energy stands to gain access to thousands of potential new customers with the passage of the ordinance, Severson said.
“The reason that we believe it goes a step over the line and are concerned about the lawfulness of the indemnification agreement is that you have a for-profit company who [is] looking to have a potential market of 22,000 homes to sell residential solar to, that is who is proposing the ordinance, and has entered into an agreement to the county saying, ‘If you get sued, if this is challenged, then we will pay for it,’” she said. “We believe the County [of Riverside] was regrettably induced by [a] company that would profit to enter into this.”
Power grab
IID o cials claim that Ordinance No. 943 is nothing less than a power grab by the Riverside County Board of Directors at the behest of Renova Energy.
“What Riverside County Board of Supervisors essentially has done is they have taken … a program that is offered by Southern California Edison … and said, ‘We really like that one, so IID, we are going to vote for you to adopt this program,’” Antonio Ortega, IID government affairs and communications officer, said during the meeting.
And, Severson said, the ordinance goes even further by making failure to comply a criminal offense.
“What is really interesting about this is one government entity has said to another … that if you don’t comply within 90 days after the effective date, which is basically about November 14, then it is subject to escalating criminal penalties,” she said. “It makes it a misdemeanor subject to fines and things like that. That is highly unusual and, we believe, not lawful.”
State-mandated program
IID’s current net-energy metering program was mandated by AB 920, which obligates California utilities to make net-energy metering available to eligible customer-generators on a firstcome-first-served basis, according to IID documents. IID determined its obligation to be 50.2 megawatts based upon a peak of 1004 megawatts in 2010, and that level was reached in early 2016.
In July 2016, the IID Board of Directors made a policy decision to change its net-metering program “to ensure that everyone pays their fair share for their use of the energy grid,” according to IID documents, “including customers who choose to install rooftop solar systems on their homes.”
The new net billing program aligned prices with the “actual cost” of providing power for IID customers, according to IID documents, which was “a necessary solution that balances the interests of every customer IID serves in order to continue to deliver on our obligation to providing the greatest value at the lowest cost.”
IID officials contend Ordinance No. 943 is unnecessary because its existing program already surpasses state obligations and currently provides a similar solar tariff and net-energy billing to customers who install residential solar systems. To date, IID customers have installed approximately 5,000 solar systems totaling more than 68 megawatts, according to IID.
Ordinance No. 943 would require IID to expand its net-metering program based on language in AB 464, as amended on March 14, 2017, that states “territory that is outside the boundaries of an irrigation district, but is currently receiving electrical services from the irrigation district” may be regulated by counties and cities. Riverside County officials contend this is case for IID, which is headquartered in Imperial Valley but sells electricity to Coachella Valley residents.
In addition to billing credits for net energy exported to the electric grid, the ordinance would exempt participating customer-generators from standby charges, departing load charge and costs associated with interconnection application fees, studies and distribution upgrades, according to Riverside County documents.
Such losses in revenue, coupled with the cost of installing new infrastructure to serve customers in unincorporated areas, may lead to a rate hike not only for IID customers in Riverside County who benefit from the new ordinance, but also for customers in Imperial County who would see no benefit.
“By the ordinance, [Riverside County] dictate[s] how much the rates are and what financial components IID must participate in,” Severson said. “If there is too much generation, too many people participating, then that just also effects the whole IID grid and its ability to distribute energy. There might be a surplus, and so there are financial components to it if this is required to be enacted.”
At this point, it’s too soon to determine if there would be a rate hike, or how big it might be, IID officials have said.
Battaglia contends that instead of a rate hike, there would be a cost savings to customers.
“When solar is integrated onto the grid, all ratepayers stand to gain,” he said. “When you are building solar power plants along the grid, you now no longer need to upgrade transformers or other grid [infrastructure]. If you are not having to upgrade that part of the grid, you are saving money for the entire grid and those that support it.”
IID officials’ belief that rates will inevitably be increased in response to Ordinance No. 943 “is an immature, uneducated utility response,” Battaglia said, “because if they simply look to their rate structure, adapt their rate structure to solar, add a monthly fee for those folks who do go solar, then boom, its magic. It is magic finance. And mind you, all that solar infrastructure is not paid for by the utility or the ratepayers. Solar infrastructure is paid for by the homeowner” or business owner.
Government subsidy?
IID officials argue Renova Energy is trying to use Ordinance No. 943 as a subsidy to offset the costs of doing business.
“I think part of the issue is subsidies keep being offered, therefore it has become part of the business model for developers,” Henry Martinez, manager of IID’s Energy Department, said during the meeting. “They count on that money coming back to offset their expenses.”
Battaglia vigorously disputes this claim.
IID officials “don’t understand the word subsidy,” he said. “They need to get a dictionary. Solar is not subsidizing any one group to the disadvantage of another group. All ratepayers end up getting the benefit of reduced costs and cleaner energy and more jobs. When solar is integrated onto the grid, all ratepayers stand to gain.”