Direct Access Phase-In Faces Financial, Secrecy Issues

By Published On: October 8, 2010

The California Public Utilities Commission’s staff plan for limited restoration of direct access recommends that non-utilities providing direct access next year should procure “sufficient” power supplies by purchasing generation outright. The paper underscores the risk direct access providers bear. Unlike utilities, these providers have no ratepayer guarantees. Getting into the direct access business won’t be without entailing financial risk for any potential rewards, according to a September 30 commission staff white paper. It also recommended a penalty structure if non-utilities do not purchase enough power to meet projected load. In the initial foray into direct access 15 years ago, non-utility providers could procure energy on paper through wholesale trades. In this round, it appears regulators are requiring actual deliverable electricity. Stakeholders may comment on staff proposals during the ongoing commission proceedings to re-open direct access. After banning new direct access and removing retail customers’ ability to procure it during the 2000-01 energy crisis, the commission this March voted to allow a limited phase-in. As a part of that, regulators are examining the best method to keep track of the flow of new customers away from investor-owned utilities to other businesses that provide electricity service. Direct access allows consumers to bypass utilities for some, or all, of their current “bundled” service package. One of the keys to making direct access function is to balance the load that is leaving utilities and going to non- utility firms with the state’s future needs for new generation--that is, preserving “resource adequacy.” To do that, non-utilities would have to make data on their customers available to regulators. Customer data between utilities and non-utilities in some cases is insufficient, “even in good-faith communications,” the paper notes. “The process is very time consuming for all parties” since a version of the new data-swapping/resource adequacy true-up approach started up in June. As a run-up to electric market deregulation in 1996, the commission allowed both retail and “non-core” customers to purchase electric services from non-utilities. Hundreds of companies--from mom-and-pop operations to Enron--were able to offer alternatives to utility services. In 2001, direct access to all retail, and even large customers without existing contracts, was terminated. Large companies, led by the California Manufacturers & Technology Association, have been petitioning regulators and legislators for reinstatement ever since. Regulators allowed consumers with contracts to use them until the deals expire. Thus, fewer and fewer direct access customers remain after being required to reconnect with utilities. The state intervened in the moratorium in October 2009 with SB 695. That legislation requires limited new connections for three to five years beginning April 10.

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