JUICE: CPUC Sees Crisis, But Offers No Solutions

Last week’s California Public Utilities Commission white paper on customer choice signals a potential crisis developing in the state’s electric power industry.

“We are seeing some of the same trends that preceded the last energy crisis in California,” according to the CPUC. They include what the commission calls: Fragmented decision-making; Poorly coordinated resource procurement to ensure reliability; and No backup plan in the event that failures among electricity providers leave customers stranded without power service. “The major conclusion of the research,” says the commission, “is that we need a clear long-term vision for our regulatory framework that provides a lasting, stable platform that goes beyond short-term fixes.”

To that end, the white paper says it’s time for state policy makers and industry stakeholders to have “a conversation” about what policy changes will be needed to make sure the state stays on track in meeting its goals to provide power at economical rates over a grid that’s reliable while decarbonizing the electricity industry.

The CPUC white paper bemoans that the state could soon be derailed in meeting those goals due to the proliferation of customer-owned rooftop solar systems and other forms of self-generation, as well as the spread of community choice aggregation. It breaks little new ground, instead repeating and expanding upon what CPUC President Mike Picker has been saying for months on end now and what was in a previous white paper a year ago.

But where the CPUC sees a glass half empty with the level falling, others, like community choice aggregators, see a glass half full with the level rising.

Indeed, CCAs have been operating successfully in California for much of the decade and are beginning to make investments in local renewable power generation capacity.

Meanwhile, the latest earnings reports from the state’s private utilities show the companies are in the black and believe their biggest financial threat stems from potential liability for wildfires sparked by power lines.

Utility executives simply aren’t telling investment bankers there’s any financial threat due to customer-owned distributed generation or formation of more choice organizations.

So just what is the nature of the crisis the CPUC sees on the horizon?

There is no clear cut and consistent answer. Instead, it appears that the CPUC simply does not trust community choice program operators, suggesting they might become financially insolvent or fail to line up adequate power supplies to keep the lights on.

Yet the fear seems to lack any basis in reality when considering that the municipal governments in California, including the ones operating choice programs, have a long record of providing reliable services to their residents.

County governments and cities typically operate massive water and solid waste sanitation facilities, transportation systems, including airports, ports, trains, buses, and roadways, firefighting and police protection services, health and social welfare services, etc.

Few have gone broke doing so and residents and businesses alike don’t give a thought to whether their garbage will be picked up, their water will flow, or the airport will be open when they need to travel.

Given all counties and cities do, including the joint powers authorities they commonly form, any concern that they’d have trouble buying and providing power for their local residents and businesses seems flimsy at best. Municipal governments, after all, have well established credit records in the municipal bond market and staffs that are professionally equal to state agencies, including the CPUC.

The fact is that cities and counties have little trouble financing major public works projects that are equally or more expensive and complex than building a power generating facility.

The CPUC certainly is to be credited with observing that the power industry is changing and that the changes will require continual evolution in energy policy. But change is forever and does not in itself equate to a crisis.

What might be the biggest driver behind the CPUC’s latest white paper is that the commission itself is gradually losing it prominent role, as the California Independent System Operator’s wholesale power market expands and as community choice programs place more of the decision making authority over power at the local level.

You can call these developments fragmented decision-making or uncoordinated procurement, but with utilities making money and community choice programs and self-generation systems saving residents and businesses money on their power bills there seems to be no up swell of complaints. —William J. Kelly

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JUICE: CPUC Sees Crisis, But Offers No Solutions

William J. Kelly

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