Electricity Markets

Calif. community choice aggregators seek rehearing

Community choice entities and advocates in California have filed a petition asking the state’s Public Utilities Commission to revise its decision on the exit fee customers have to pay when departing from investor-owned utility service.

The California Community Choice Association, along with CleanPowerSF and Solana Energy Alliance, are asking the PUC to rehear its October 11 decision on the Power Charge Indifference Adjustment, or PCIA, that investor-owned utilities charge community choice aggregation and other departing load customers to compensate for electricity generation built or contracted in the past at prices that are now above market.

Several other parties have also petitioned the PUC for rehearing on the PCIA decision, including California Large Energy Consumers Association and the Direct Access Customer Coalition, Shell North America, and a joint application by Peninsula Clean Energy, Sonoma Clean Power Authority and Marin Clean Energy.

In the California Community Choice Association filing, the community choice entities say the PUC’s decision will result in a “sharp increase in PCIA rates” for community choice customers and may make it uneconomic to launch new community choice entities.

“The PCIA decision fails to ensure equitable treatment of all market participants in California,” Beth Vaughan, executive director of the California Community Choice Association, said in a statement. “It favors incumbent utilities by shifting costs, including recovery of shareholder returns, from IOU bundled customers to CCA customers.”

Community choice aggregation has grown rapidly in California, particularly in the past two years. There are now 19 community choice programs serving about 8 million customers in California, according to the California Community Choice Association. Consulting firm Next 10 estimates that programs such as community choice aggregation and direct access could draw 85 percent of customers away from California’s investor-owned utilities by 2025.

In the California Community Choice Association petition, the community choice parties argue that the PCIA approved by the PUC “artificially inflates” the fee that must be paid by community choice customers and thus shifts costs from bundled to departing load customers.

The community choice entities say the PUC’s decision does not follow California law because the approved PCIA fails to exclude the costs of utility-owned generation, does not reduce IOU portfolio costs by the value of any benefits that remain with bundled service customers, and fails to exclude portfolio costs that are not attributable to departing load customers.

The PCIA typically comprises financial obligations IOUs made on behalf of customers, such as agreements to build power plants or to enter into long-term power purchase contracts with independent power producers.

In its October decision, the PUC was guided by the principle that customers who remain with one of the state’s IOUs – Pacific Gas and Electric, Southern California Edison, or San Diego Gas & Electric – should not be required to pay costs a utility incurred on behalf of customers who leave IOU service to join a community choice aggregator or a direct access provider and that departing customers are not required to take on costs that were not incurred on their behalf.

The PUC estimated its order would cause increases in the 2018 bills of residential community choice customers ranging from 1.68 percent for departing customers in PG&E’s territory, 2.50 percent in Edison’s territory, and 5.24 percent in SDG&E’s territory. The PUC noted that rate increases for any one group of customers will be offset by rate decreases for other sets of customers.

In the California Community Choice Association filing, the parties are seeking expedited review for rehearing on the basis that the decision will, in some cases, result in PCIA rates that prevent community choice aggregators from serving their customers at the same total generation rates that an IOU can charge its customers.

Departed and bundled customers pay different generation or portfolio charges, but pay the same transmission and distribution rates. The community choice entities also argue that the new PCIA rates may cause community choice aggregators to suspend or cancel the launch of service to new customers.

Community choice, also called municipal or community aggregation, has been adopted into law in California, Illinois, Massachusetts, New Jersey, New York, Ohio, and Rhode Island.

Some environmental advocates applaud the growth of community choice aggregation because it is often driven by customers’ desire for a cleaner mix of generation sources.

The California Community Choice Association recently announced that community choice aggregators in California have signed long-term contracts with new renewable energy facilities totaling more than 2,000 MW. This milestone was reached in October when Monterey Bay Community Power and Silicon Valley Clean Energy approved power purchase agreements totaling 278 MW of solar coupled with 340 MWh of battery storage for two separate projects to be built in Kern and Kings counties.

In 2017, California community choice aggregators secured about 1,000 MW of new renewables under long-term contracts.