CPUC Puts Direct Access Back in Play

By Published On: February 29, 2008

The California Public Utilities Commission February 28 unanimously agreed to consider lifting the suspension of direct access if certain legal requirements are met. It acknowledged in its rulemaking, however, that it currently lacks authority to lift the freeze on direct access, which allows consumers to buy power from providers other than investor-owned utilities. “While we conclude that the commission does not have the authority to unilaterally lift the suspension of direct access imposed by AB 1X, at this time we can and should consider how DWR can extricate itself from the power supply business, which it wishes to do,” states the regulators’ rulemaking. “California’s rates are among the highest in the country. We’ve lost about 400,000 manufacturing jobs in California in the past six or seven years,” California Manufacturers and Technology Association spokesman Gino DeCaro said. “The ability to go out and procure electricity contracts and shop around would go a long way in helping business in California.” AB 1X–a relic of the 2000-01 energy crisis–mandated the suspension of direct access. Regulators thought deals between consumers and non-utility providers could provide electricity at prices below regulated utility rates. It also was thought that allowing cheaper arrangements would help keep large businesses from heading to states with cheaper electricity. However, the crisis plunged utilities into financial chaos and customers dumping utility service exacerbated the problem. AB 1X was meant to stop the financial hemorrhaging of investor-owned utilities by keeping customers under the utilities’ realm. It specified that the ban on direct access would continue until the California Department of Water Resources no longer supplied power. Before the CPUC considers lifting the direct access ban, it has to consider strategies to remove DWR from its role as a power supplier. As long as DWR holds legal title to power that it sells to retail customers, it is deemed to be supplying power under the statute. The commission’s action generated a negative response from utility watchdog group The Utility Reform Network. TURN likened the decision to opening the door for the “Enrons” of the world. Many state politicians blame Enron for saddling ratepayers with billions of dollars of costs due to alleged market manipulation during the energy crisis. “The CPUC’s action … clearly contravenes the Legislature’s desire to protect consumers from high prices and rolling blackouts,” TURN executive director Mark Toney stated. ”Why would we invite Enron and its ilk back to California?” Surprisingly, at least one utility did not oppose the move. In a statement, Southern California Edison noted, “The specific electric service in question — power procurement — is provided by SCE at actual cost. Therefore, the utility’s concern in this proceeding is not preventing competition but ensuring that any new state policies do not saddle utility customers with unfair costs.” Commission president Mike Peevey said that Thursday’s decision was just the first phase of a three-phased decision on whether direct access may be lifted. Future phases, he said, will deal with satisfying the legal requirements of AB 1X. They also are to focus on deciding whether the direct access program should be revived and expanded and, if so, how to best to do so. Also at the meeting, the commission approved a San Diego Gas & Electric motion to adopt an all-party settlement addressing revenue allocation and rate design issues for the utility’s electric revenue requirement for 2008 through 2010. “The decision approved time-of-use meters languishing in the utility’s inventory at no cost to customers that install solar energy systems, as well as adopting a new energy rate for customers with solar generation,” said commissioner John Bohn. A new tariff was also established for customers with other forms of distributed generation less than 2 MW in capacity. “Perhaps most importantly, this decision includes a new default time of use rate with critical peak pricing for all large commercial and industrial customers of SDG&E,” Bohn said. Customers of the utility would have a year of bill protection and the ability to opt out of the critical peak pricing program. Small commercial customers and residential customers will not be placed on the default time of use and critical peak pricing rates. Instead, they’ll continue to have flat rates, but with an additional feature called peak time rebates. This allows customers that use less than typical amounts of energy during periods when electricity is in short supply to earn rebates. Although commissioner Rachelle Chong said she was disappointed that small commercial customers would be kept on the flat rate plan, it proved to not be a deal breaker. The commission approved the decision on a 4-0 vote. Commissioner Tim Simon missed the meeting because he was in Sacramento before the California state Senate, which confirmed his CPUC post.

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