Financial Viability of Aggregators Hangs on Exit Fee Decision

A California Public Utilities Commission proposed decision about to be filed would set the basic economic terms under which communities and public agencies aggregate customers and buy electricity from direct-access providers. The level of exit fees attached to customers who leave utility bundled service to go with community aggregation can make or break the ability of potential aggregators, such as San Francisco, to use their newly minted authority to broker electricity sales. As defined by enabling legislation AB 117, community-choice aggregators would procure power through a CPUC-registered electric service provider and sell it to customers, while investor-owned utilities continue to provide transmission, distribution, billing, and other functions. One of the suggestions during a workshop process that provided input to administrative law judge Kim Malcolm for her upcoming proposed decision was that the commission could set an exit fee number annually. Then every year it could be revisited to see whether changes need to be made, according to Amy Chan, CPUC Energy Division analyst. ?We?re looking at a model that incorporates a lot of assumptions, so logically then you?d need to revise the numbers? on the basis of future data, she said. In addition to workshops, the CPUC has had consultants run models to determine exit fee cost formulas. Those models forecast fair compensation for utilities that does not become prohibitively high for aggregators. Chan declined to disclose details of the models or offer an estimate of the range of costs per kilowatt-hour that were promulgated. ?The mechanics of the model are public, but certain inputs were confidential,? she said. Pat Stoner, who is following the community aggregation rulemaking for the Local Government Commission, said he expects surcharges to be different for each utility but consistent across each utility?s territory. ?But that hasn?t been decided,? Stoner said. ?Obviously, it would be best for the utilities to have [the surcharge] as large as possible, while potential aggregators want it to be as small as possible,? Stoner added. In addition to San Francisco, more than a dozen other government entities are considering becoming aggregators. With funding from the California Energy Commission, the Local Government Commission and Navigant Consulting are drafting aggregator feasibility reports for the cities of Berkeley, Beverly Hills, Emeryville, Oakland, Pleasanton, Richmond, Vallejo, and West Hollywood; the county of Los Angeles; and a joint power authority that includes Marin County and all cities within its borders. Other financial issues to be addressed in Malcolm?s draft decision include costs that utilities would charge aggregators for meter reading, billing, servicing the distribution network, and providing customized load information. A second phase of the rulemaking, to deal with operational issues, will open soon after the draft decision is issued.

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Financial Viability of Aggregators Hangs on Exit Fee Decision

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