New Direct-Access Costs Hidden in Otay Mesa Decision

The final language of the California Public Utilities Commission?s decision on Otay Mesa and Palomar acquisitions by San Diego Gas & Electric means future direct-access customers will be liable for paying excess costs of new generation, and potentially power-purchase agreements, in the utility?s territory. The text of the order also points out an apparent contradiction between commission president Michael Peevey?s embrace of direct access and making direct access more expensive to achieve?at least in the San Diego area?for the next decade. ?All customers that are currently ineligible for direct access are obligated to pay for the stranded costs of any new generation for the next ten years,? the commission ordered in D04-06-011 . If and when new direct access is permitted?as is heralded by the Schwarzenegger administration and supported by Peevey, but on hold at the Legislature?those exiting the system will be on the hook for stranded costs. ?This will insure that neither the utility, nor its bundled customers, will be forced to pay stranded costs for these new generation assets in the event that new direct access is permitted,? the commission added. ?If the commission wants utilities to sign up lots of long-term resources while also pushing direct access, the costs of these resources have to be backed by all customers,? said The Utility Reform Network attorney Matt Freedman, whose organization proposed the payments. ?Otherwise we will end up with 2001 all over again, with a dwindling customer base left to pay for the big resources commitments made in response to the Schwarzenegger-Peevey plan for a new long-term shopping spree.? The consumer group believes that direct access for a noncore market simply ?will not work,? added TURN attorney Mike Florio. As currently envisioned, large electric customers (noncore) could choose direct access to nonutility providers, skirting the rates charged to bundled customers. Proponents believe direct access to nonutility providers will cost them less and provide tailored service. ?This is another example of the efforts by those groups who oppose consumer choice to try to shift costs and burden commercial and industrial customers with costs that should appropriately be borne by their own constituents who actually use the power,? said Alliance for Retail Electric Markets attorney Dan Douglass. Douglass noted that stranded costs do not necessarily have to be tied to the power plants that were approved in the commission?s June 9 decision, which could bring in new liabilities for future direct-access customers. It?s ?unfair and shortsighted to once again mortgage the future of direct access in order to mollify certain ratepayer advocacy groups,? he said.

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New Direct-Access Costs Hidden in Otay Mesa Decision

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