A new Irvine-based nonprofit utility expects to generate $300 million in revenue this year.
The Orange County Power Authority could eventually get to $1 billion a year, according to Chief Executive Brian Probolsky.
“I’d be surprised if we weren’t at a billion within a couple of years,” Probolsky said.
The nonprofit utility, which started in November, officially begins billing business customers on April 1.
It’s been sending letters to businesses in Irvine, Huntington Beach, Fullerton, Buena Park and unincorporated Orange County to inform them that Southern California Edison will no longer be buying the energy to power their facilities.
Instead, Edison will still maintain the electricity grid, deliver energy and handle billing.
And the giant utility, which once dominated the local market, is fine with the change.
“SCE supports customers’ right to purchase power from a CCA and we routinely provide factual analysis to jurisdictions that request it as they consider their decision to launch a CCA or join an existing entity,” SCE spokeswoman Diane Castro told the Business Journal.
Slow Edison
CCA stands for Community Choice Aggregation and is sometimes called a Community Choice Energy, or CCE program.
Approved by the state in 2002, it’s set up to enable local government control over energy procurement—to purchase power, set competitive rates, and collect revenue.
In 2010, voters rejected Prop. 16, a PG&E-based initiative that would have made it more difficult to form community power programs.
The first CCA began in Marin County in 2010; thus far, more than 20 have been formed in the state.
Orange County Power Authority was formed last year because “Edison wasn’t going fast enough” to implement renewable energy production, Probolsky said.
“Cities in Orange County recognize that we have a need in society, the world, to improve our access to renewable energy,” Probolsky said.
“This is the boldest step they have taken.”
Entrepreneur
For the past decade, Probolsky has been involved in Orange County government, serving as chiefs of staff to three supervisors including Patricia Bates. He was commissioner of OC Parks and oversaw $100 million in annual revenue at Orange County’s Landfill System. Since 2008, Probolsky served as a member of the board of directors of the Moulton Niguel Water District, which has 172,000 customers across six cities.
That résumé obscures Probolsky’s background as an entrepreneur.
For 20 years prior, he was in the private sector where he successfully started and sold technology firms, including an internet-oriented industrial fastener distribution company.
Top Line Hit
Rosemead-based Edison International (NYSE: EIX), the parent company of Southern California Edison, on Feb. 24 reported 2021 revenue climbed 9.6% to $14.9 billion.
The company, one of the nation’s largest electric utilities, delivers power to 15 million people in 50,000 square miles across central, coastal and Southern California, excluding the city of Los Angeles and some other cities.
Thus far, about 11 CCAs have been formed in its service territory.
These CCAs will cause a hit to Edison’s revenue line but not affect its profitability, Probolsky said, explaining that public commissions don’t allow utilities to make a profit on production while they can profit off infrastructure and delivery.
“They can focus on what they’re really good at—making sure the lights stay on,” Probolsky said.
Edison said it spent $5.5 billion last year to purchase power and fuel. In 2020, Edison produced about 17% of the energy it supplied.
“They are an open market buyer just the way we are,” he said.
The utility has a $24 billion market cap, about a threefold increase in the past decade, an indication that investors are not worried about the new paradigm.
Two Charges
The bills of customers of the CCA will have two charges: delivery provided by Edison and production supplied by the nonprofit.
“We will be notifying business customers of the launch of the Power Authority to let them know we’re here,” Probolsky said. “They don’t need to do anything.”
The utility offers automatic enrollment to both businesses and residents in their jurisdiction.
Businesses can opt to get their energy only from Edison if they so choose, Probolsky said.
The electricity prices will be similar, he said.
A common question from businesses are fears about an increase in potential blackouts due to changes in weather that can affect renewable production.
Probolsky said the way the grid is constructed should alleviate those concerns because traditional production methods will kick in if renewables are not producing enough.
One recent afternoon, he pulled up a phone app from the California Independent System Operator that showed renewables were producing around 70% of the state’s usage at that time.
“We put renewable electrons on the grid and those mix with other electrons so customers can get electricity from the closest production point,” he said.
$42M Raise
The Power Authority has raised $42 million in capital to close the gap between paying for the energy and collecting the receivables.
Currently, the nonprofit has about 14 employees with plans to add another dozen in the coming year.
“It’s not a people heavy business,” Probolsky said.
Its profit margin, which could be less than 1%, will go to reserves and paying back capital and then shift into programs for customers, he said.
At full capacity, the Power Authority will have a peak load capacity of 875 megawatts. It will service about 330,000 meters that supply electricity to 820,000 Orange County residents.
Desalinization Pact
On Feb. 22, the Power Authority signed an agreement with Poseidon Water to make the proposed Huntington Beach Seawater Desalination Facility the first such plant in the western hemisphere to be powered entirely by renewable energy.
Plans for the estimated $1.4 billion desalination plant—which would be built near the AES Huntington Beach Generating Station just off Coast Highway—are expected to be brought before the California Coastal Commission this spring.
A previous March 17 date for a Coastal Commission hearing was recently pushed back.
The Huntington Beach plant would be the second of its type in the region; a similar facility is located in Carlsbad.
Probolsky said the desalination plant will be a great customer for the nonprofit utility because if approved, it will produce about 50 million desalted gallons of water a day and run continuously for 30 years.
“That’s a real steady customer. You can build new projects with that revenue.”Â
