By Robert Mullin

Californians who receive their electricity service from one of the state’s growing number of community choice aggregators (CCAs) could face higher costs under a plan being proposed by the state’s three investor-owned utilities.

The proposal — filed jointly by Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric — calls for the California Public Utilities Commission to adopt a new approach to apportioning the utilities’ costs for energy contracts among the departing and remaining customers.

Utility customers departing for CCAs and direct access arrangements “are not paying their full share of costs associated with the long-term contracts [for renewables], forcing other customers to pay more,” PG&E said in a statement. California’s direct access program allows nonresidential retail customers to purchase power from independent electricity suppliers.

The new plan would replace the PUC’s current formula for calculating those costs — the power charge indifference adjustment (PCIA) — with a new system the utilities call the portfolio allocation methodology (PAM).

The PCIA acts as an exit fee, requiring customers departing for CCA to pay for their estimated share of the contracts IOUs signed to meet California’s energy policy mandates, such as the renewable portfolio standard and energy storage requirements. The fees are assessed until the termination of the contracts. Departing customers also pay a competition transition charge (CTC) that represents their share of a utility’s costs for older fossil fuel generation.

‘Financially Indifferent’

The fees are designed to keep the IOUs’ remaining bundled service customers “financially indifferent” to the departure of CCA customers, the PUC has said.

The PCIA’s calculation relies on an estimate of “above-market” costs incurred by the IOUs for procuring or building policy-driven resources.

But the utilities see a problem with that approach. The PUC bases its “above-market” cost assessment on administratively defined benchmarks developed during a time when prices for renewable energy credits and resource adequacy were higher than they are today. That makes the IOUs’ portfolios appear cheaper than they actually are, the utilities contend.

“This directly translates into departing load customers paying PCIA and CTC rates that do not fully pay for their share of the actual above-market costs of the portfolios, which is contrary to law,” the utilities said.

Under the utilities’ PAM proposal, departing customers would be charged based on the “actual” costs for the contracts procured on their behalf. On the flip side, those customers would also be allocated the “actual value” of contract portfolios, including RECs, capacity credits and revenues generated from providing ancillary services.

Under the new methodology, rates for the contracts would be regularly trued-up in the same manner as those charged to the IOUs’ remaining bundled customers, although the utilities note that most of the agreements in question are fixed-cost.

The IOUs are proposing to implement PAM on a “vintaged-portfolio” basis that depends on the customer’s departure date, “ensuring that all customers are only assigned the costs and benefits of resources actually procured or built on their behalf.”

“We can achieve the state’s clean energy goals while also supporting customer choice and treating all customers fairly and equally,” said Steve Malnight, PG&E’s senior vice president of strategy and policy.

Consumer Protections Needed

Woody Hastings, renewable energy implementation manager for the Santa Rosa-based Center for Climate Protection, told RTO Insider his support for the proposal would in part depend on whether it contains adequate consumer protections. “We have long held that the PCIA is broken,” he said.

Hastings said that while his organization agrees with the concept of bundled ratepayer indifference, his assessment of the plan would come down to exactly what expenses the utilities would roll into the new methodology.

“We need some kind of assurance that avoidable costs are being avoided,” Hastings said. “A third-party audit should happen [in order] to show that the numbers being presented are valid.”

In their filing, the utilities said they will seek approval to develop a formal process to provide load-serving entities with access to portfolio and contract data as part of the PAM.

“PAM is transparent, objective and fully consistent with California law … and should be expeditiously adopted by the commission,” the utilities wrote.