CPUC Expands “Customer Choice” Debate beyond CCA Exit Fee – What Is California’s “North Star” for an All-Encompassing New Regulatory Paradigm?

Written By: Stratton Report
November 3, 2017

JK

Don’t miss Community Choice Energy Summit coming up Nov 14-16 in Santa Clara – with participation from dozens of CCAs up and down the state, many leading renewable developers and DER Innovators

Big new regulatory moves were in the air at a Cal PUC “Informal Workshop on Customer Choice” in Sacramento on October 31. The latest workshop followed on the heels of sessions in both the California Senate and Assembly, and two En Banc PUC/CEC hearings. And is almost guaranteed not to be the last in the series.

This, in a state already scrambling to reconcile myriad mandates, targets and disruptive technologies and business models.

Informed observers might have assumed the hearing in the state capital was an attempt to wrestle mainly with the customer Exit Fee or “Power Charge Indifference Adjustment” (“PCIA”) – the most contentious topic in the move towards local energy choice aka “Community Choice Aggregators” (“CCA”) or “Customer Choice Energy” (“CCE”). Municipalities and counties are forming special entities to procure energy, generally 5% cheaper and with a higher renewables quotient, than that of the “Big 3” utilities. The PUC itself has opined that CCAs, if the current trend continues, may be procuring up to 85% of the state’s load by the early 2020s. (For more background and developments on CCAs follow the excellent blog at CleanPowerExchange.org or CalCCA.org, the policy voice of the movement.)

Instead, the Workshop re-framed “Customer Choice” in the broadest possible terms, with short presentations examining Texas, New York, Illinois and the UK as possible templates– each with its own unique regulatory and market features. Self-generation, direct access, private retail choice marketers (ala Texas) or DER aggregators, in tandem with storage, Demand Management, and other innovations, were explored as a wide, interlocking set of challenges and opportunities – both serving to accelerate California’s world-leading “de-carbonization” goals but also making the whole landscape ever more complex – and potentially volatile and unreliable – according to some stakeholder critics.

President Picker and colleagues adopted the novel (for a regulatory forum, at any rate) Shark Tank structure to query energy market stakeholders in a search for “shape, context, coherence … in a landscape of flat demand, surging peaks and disaggregation,” or as another Commissioner put it, “California’s North Star.”  (Or perhaps instead, “Orion’s Belt”?)

The first stakeholder “pitch session” included SoCal Edison, Whole Foods, Walmart, California Energy Storage Association (CESA), Ohm Connect, DBL Partners, CalSEIA, Marin Clean Energy (MCE) and Jan Smutny Jones large generator group IEPA (“we’ve now cleaned out most of the ‘B.O.G.s’ – Boring Old Generators”).

(The background underlying the Exit Fee debate is the rapid drop of renewable prices over the last 5-10 years, and sunk investments at long-term contracts on the part of the IOUs, as well as the cost of maintaining the grid that delivers energy, whomever may wind up procuring it – CCA or IOU.  CCAs are effectively reaping the benefits of a large infrastructure, and able to contract for now much cheaper power from both the wholesale market and contracted generation – so-called Virtual PPAs. For true energy policy wonks, the nuances can be found in submittals to the PUC under proceeding #R.17-06-026.)

Stakeholder statements were, unsurprisingly, mostly self-interested, but there was a sense that the current energy policy pillars of “reliability, affordability and de-carbonization” were somehow not adequate for integrating many different moving parts, some of which are at least partially antagonistic to one another, in their current form.

The upshot: given all the other disruptive trends in play, simply issuing a single rule-making to settle the dispute between IOUs and CCAs is not sufficient.

Picker in particular seemed to be willing to even consider the structure of the PUC itself as up for grabs. In contrast to New York state, where REV is an ambitious attempt to re-write the rules for the entire energy system, California has largely “stumbled forward” with one legislative fiat or ballot initiative or proceeding after another, but without re-examining the fundamental IOU business model (around rate-basing of assets).

According to one NGO, the debate and its broader context may need to be brought before the larger public, beyond the sometimes “opaque processes” of the PUC. In a previous hearing, PUC officers had suggested that the debate may need to go back up to the Legislature.

Random highlights –

  • “Choice” per se is not a principle or a value – most stakeholders agreed.
  • Many alluded to the earlier De-Regulation phase of the 2000s, with notoriously catastrophic results. Others contested the analogy.
  • Enviro and social justice NGOs called for entirely new resource adequacy strategies or entities, demanding that new energy players be held to a high standard, be vetted for quality and integrity, with some kind of consumer protections, and uniformly take responsibility for reliability, whatever the exact final mechanism.
  • Much discussion of tariffs and rate structures as more important than the exact identity of the ‘Load-Serving Entities’.
  • Tradeoffs between competing needs was a recurring theme. Short vs. long term contracts.
  • Indifference to the choices of “other customers” should be a guiding principle, according to one NGO – in other words, one customers’ choice should not impair the broader system; optimizing the system and system-wide goals should take priority.
  • Access to utility grid data – transparency, and “preferably in a machine-readable form” for the benefit of Silicon Valley innovators and investors, presumably
  • “And don’t forget that 1/3 of the state is poor or disadvantaged,” was a repeated refrain, cautioning against overly quick adoption of newfangled tech tools and biz models.
  • The majority of CCA testimony wrapped up the workshop in the public comments section. Largely the CCAs see themselves as the avant-garde of California energy/climate policy, and inherently responsive to their local voters; plus they are not required to turn a profit to their shareholders, and can therefore implement creative energy savings strategies that potentially undermine their own revenue base.

Two intriguing whitepapers were mentioned at the hearing – one from a coalition of SunSpec Alliance, DBL Partners and TechNet, “Unlocking Grid Data: Enabling Data Access and Transparency to Drive Innovation in the Electric Grid,” tied to a CA Senate bill SB-356 (https://sunspec.org/unlocking-grid-data-enabling-data-access-transparency-drive-innovation-electric-grid). The second, from SoCal Edison, issued the same day as the workshop, is entitled, “The Clean Power and Electrification Pathway: Realizing California’s Environmental Goals” (sce.com/pathwayto2030).

Workshop agenda, slides and related docs can be found at cpuc.ca.org/choiceworkshop.

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Don’t miss Community Choice Energy Summit coming up Nov 14-16 in Santa Clara – with participation from dozens of CCAs up and down the state, many leading renewable developers and DER Innovators, and a keynote from Nick Chaset, newly appointed CEO of Alameda Clean Energy, and former Chief of Staff to President Picker.