Opinionated: Back to the Resource Adequacy Drawing Board

17 Dec 2018

By Todd Edmister

Last month, the California Public Utilities Commission issued a proposed decision in its resource adequacy proceeding that would strip community choice aggregators and energy service providers collectively of their authority to procure local capacity resources. It would give this resource adequacy procurement authority exclusively to investor-owned utilities like Pacific Gas & Electric and San Diego Gas & Electric.

Last week, a wide array of commenters explained why making the investor-owned utilities monopsonies for local resource adequacy procurement is bad public policy. They also largely agreed on why this is bad policy. That includes because:

  • It prevents community choice and other non-private utility load serving entities from making their own local RA procurement decisions.
  • It forces them to accept, and their customers to pay for, whatever local RA the utility central buyer opts to buy for them at whatever price it opts to pay.
  • Community aggregators and other non-investor-owned utility energy providers that have already bought local resource adequacy long-term deals will take it on the chin as their multi-year contracts are no longer assured of qualifying towards RA obligations.
  • Private utilities are local RA market participants on both the buy and sell sides. Thus, they are too conflicted to act as independent and fair central buyers.
  • The CPUC proposal disincentivizes investments in distributed resources that reduce load because they won’t count towards local RA obligations.

These are just the most commonly-made points.

Various parties raise numerous other policy and implementation concerns, plus legal arguments centered around how the CPUC is illegally usurping community choice aggregators’ statutory procurement prerogatives in violation of Public Utilities Code sections 365, 366 and 380. Some parties also raise federal preemption concerns.

The comments on the proposed decision reflect broad-based opposition to the central buyer model as proposed in the tentative decision. The CPUC would do well to take heed.  Commenters’ primary concerns can’t be addressed with a little nip-and-tuck to the proposed decision. A much deeper rethink of the CPUC’s going-forward regulatory model is required.

There’s an old saying (Miles’s law) that where you stand depends on where you sit.

From within the CPUC, which has long implemented policy through private utility procurement, recentralizing procurement with these utilities might look desirable. And so we see the proposed decision’s core problem—it’s trying to turn the clock backwards, restoring investor-owned utilities to their historic role as procurement monopsonies. However, much of California has moved on to a more complex procurement world with a slew of players who were not around ten years ago. They all are taking their places in the evolving energy ecosystem. These players are advancing state policy goals too, often more aggressively than the investor-owned utilities.

Ultimately everyone will be best served by a resource adequacy framework that accepts the existence of, and works for, private utilities, community energy, direct access providers, distributed energy resources, and all the other parties in our acronym-laden alphabet soup.

The future is here. It’s increasingly decentralized, and it’s time for the CPUC to work with that decentralized model instead of fighting it.

Todd Edmister is the Director of Regulatory Affairs for East Bay Community Energy, and a former CPUC Administrative Law Judge

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