Community Energy Helps Cover Legacy Costs. It Now Could Get Something in Return

27 Apr 2021

Changes continue to ripple in California from the rise of community aggregators. A bill passed out of the Senate Energy Utilities & Communication Committee April 26 that would allow community energy and direct access providers to count the attributes of the power in private utility legacy resources toward their renewable energy and supply cushion requirements. These groups pay a proportional share of these legacy supplies, but do not benefit from them.

“There is no good policy rationale for this inequitable treatment,” Sen. Anthony Portantino (D-La Cañada-Flintridge), SB 612 author, said.

Source: California Community Choice Association

Non-utility electricity providers specifically pay for their share of the IOU’s above-market early renewable agreements and utility-owned generation. The rational is that the investments were made when their customers were IOU ratepayers.

Today, 11 million former utility ratepayers are served by community energy and the number is growing.

“It is a very different landscape than we had 10 years ago,” Portantino said.

The above market costs of the utility legacy resources show up in the exit fee, or Power Charge Indifference Adjustment, imposed by the California Public Utilities Commission.

The combined tab of the three investor-owned utilities PCIA this year is a forecast $3.9 billion, according to the California Community Choice Association. It is allocated among utility and non utility customers. Pacific Gas & Electric’s forecast 2021 PCIA is $2.4 billion, according to the utility.

Sam Kang, Pioneer Community Energy chief operating officer, told the committee that the exit fee Pioneer pays is currently 20% of its customers’ bills. Yet they don’t get any of the benefits, he said.

Legacy resources

SB 612 would allow community aggregators to take a portion of the resource adequacy and clean energy characteristics of legacy resources offered, starting in July 2022. In return, the aggregators would pay the IOU the market price as set by the CPUC.

The private utilities argued that Portantino’s bill will shift costs from community energy customers onto utility ratepayers, increasing their bills.

“SB 612 would cause broad harm to PG&E bundled service customers and may have broader impacts on the resource adequacy markets,” PG&E’s DaVina Flemings said. She claimed it would force PG&E to allocate and sell capacity even if it was needed to meet its reliability obligations.

But the legislation passed 11-1 over utility opposition. It heads to the Senate Appropriations Committee.

Senators Bob Hertzberg (D-Los Angeles) and Steven Bradford (D-Gardena) said their continued support hinged on Portantino addressing IOU concerns about cost shifting to their ratepayers.

Uneconomic costs

The bill comes in response to recommendations made by a working group created as part of an earlier PCIA proceeding at the Commission to ensure optimization of utility portfolios, “to minimize further accumulation of uneconomic costs.” The working group consisted of the California Community Choice Association, Southern California Edison, and the consulting firm Commercial Energy. They worked out a consensus on how to allocate unused resources accumulating in utility portfolios due to a shrinking customer base. In February 2020, they released a report recommending a voluntary allocation of the benefits at issue.

Much to the dismay of community energy, the CPUC released a proposed decision veering from the working group’s recommendation after SB 612 came out in March and more than a year since the release of the group’s report. The proposal says the utilities should hold on to all the legacy resource adequacy and other attributes, and also will need to buy additional resources in 2024.

The timing of the proposed decision “soon after the introduction of this bill, may have spurred action by the CPUC,” the bill analysis states. “As such, the Legislature may find value in a bill to direct the CPUC to resolve these issues by specified dates,” it adds.

Elizabeth McCarthy

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