Who should be responsible for paying $7.5 million a year? Ask the city and you’ll get one answer. Ask Southern California Edison, and you’ll get another.
The two are gripped in a dispute over who bears the cost of implementing Measure LB, a voter-approved law that eliminates an exemption used by energy producers in Long Beach to avoid paying a 5% municipal utility tax on natural gas that powers two plants in the city: Alamitos Energy Center and Haynes Plant, which is run by the Los Angeles Department of Water and Power.
The two plants generate a capacity of 2,778 megawatts, sold to the state’s power grid.
According to several Long Beach officials, the two plants are the only businesses in the city that do not pay the utility tax. Under the new law, each plant would have to pay about $7.5 million into city coffers annually, according to city projections.
This cost would amount to 50 cents a year tacked onto the electric bill of the region’s 15 million ratepayers. Edison, however, argues the cost should be passed on as a surcharge, paid only by its 150,000 customers in Long Beach.
How much the Long Beach-only rate would be remains unclear: Edison says it will amount to $1.29 a month per ratepayer, while the city expects such a plan will cost about $4 per month, or about $50 annually. Every year thereafter, the company said, the charge will be based on their in-house sales projections.
The city argues in an April 24 letter that the tax exemption no longer benefits Long Beach. It was approved decades ago, when Edison owned and ran the AEC plant. Officials at the time did not want to double tax the company for the electricity it produced and the gas used to make electricity.
Following state deregulation in 1996, Edison sold the plant — along with nine others — in 1998 but still sells its electricity wholesale to the state power grid.
AES Corp., which owns or has an interest in 91 power plants worldwide, bought the plant, along with two other stations in Huntington Beach and Redondo Beach, from Southern California Edison in 1998 for $781 million.
Despite the change in ownership, the city never repealed the exemption. Meanwhile, officials say the plants that power 15 million homes across the region come at the cost of nearby residents who deal with continued air pollution.
The hulking power plants, situated on either side of the San Gabriel River, loom with smokestacks over some of the most densely populated neighborhoods on the California coast.
The city cited a June 2024 settlement where AES Alamitos paid a $195,000 fine to the California Air Resources Board for sulfur hexafluoride emissions that were above state regulations. According to self-reported emissions data, the AES plant emits substantial amounts of carbon monoxide, ammonia and formaldehyde.
“For decades, SCE has received significant financial gains as a result of an outdated loophole in the Long Beach Municipal Code,” the city wrote. “SCE has done this in the face of Long Beach residents who have borne the environmental burden and impacts of having two of the state’s largest power plants located within the City that have provided power for the region beyond Long Beach.”
Removing the exemption, they argue, offers at least a partial compensation for the burden placed on the city’s residents. It’s also backed by a majority of voters — 82% in the November 2024 election.
Measure LB will send $15 million to the city’s annual budget starting in 2026 — $90 million accumulated by 2030 — though revenue will ebb with utility prices and usage. Funding can cover anything from potholes to parks, police officers and more.
It was optioned as the cheapest of four solutions last summer to punctuate an estimated nearly $20 budget shortfall in the 2026 fiscal year.
But Edison isn’t paying without a fight.
In an April 4 letter to the California Public Utilities Commission, the power company asked permission to impose a surcharge on its 150,000 Long Beach customers to recoup the difference.
“Approval of the surcharge will prevent unfair cost shifting to customers outside Long Beach, who do not benefit from the additional tax revenue raised by Long Beach per Measure LB,” the company writes.
This surcharge, the company wrote, would take effect January 2026 and be spread equally across all classes of Long Beach consumers — residents, businesses and government offices alike.
It would also cost $250,000 to upgrade their billing system, Edison said, which they intend to charge to Long Beach ratepayers.
They argue it’s unfair to charge Long Beach taxes to the region’s customers.
It’s also unfair to Edison, they continue: Due to a power purchase agreement with the plant’s operators, the power company said it will have to pay the utility tax.
Historically, the company has succeeded before, shutting down a similar venture by the Huntington Beach City Council in 2001.
But the decision rests with the Public Utilities Commission. While it has no jurisdiction over local taxes, the agency does have the say over the costs imposed on public utilities and the treatment of the costs incurred by public utilities the collection of these taxes.
A commission spokesperson said Thursday the agency is reviewing the matter and will make a decision by Aug. 22.
LADWP wasn’t able to answer questions on Friday. The utility department previously expressed concerns over the cost, though it’s unclear whether they have raised those complaints with the commission.