There is no stopping Community Choice Energy

CPUC decision on October 11 will not succeed in crushing community power

Early indications are that the decision made by the California Public Utilities Commission of October 11, as bad as it is, is not going to stop emerging or operational Community Choice agencies (CCAs) from carrying on. As most readers probably know by now, the Commission voted unanimously in favor of the Alternate Proposed Decision that will significantly increase PCIA charges to CCAs.

Cases is point:

Pre-enrollment: On October 10th, the day before the CPUC’s ill-considered and patently unfair unanimous vote to please the profit-driven utilities, the Western Riverside Council of Governments (WRCOG) met to evaluate the analysis of what the worst-case scenario – a “yes” vote on the Alternate Proposed Decision – would mean for the fate of Western Community Energy, WRCOG’s Community Choice agency. The analysis found that although the CPUC decision is a serious blow to what WCE can offer to its customers, cleaner power at lower rates and eventually local programs tailored to the needs of the local community, are still feasible.

In the case of San Diego, Community Choice advocates expect an announcement from Mayor Faulconer next week and are hopeful that he gives CCA a green light. “For us in San Diego, it’s a green light to move forward with community choice,” said Nicole Capretz, Executive Director of the Climate Action Campaign. “For us, it’s let’s go, let’s launch and let’s give families a choice. We no longer have to wait.”

Operating & Enrolling: About ten CCAs are at varying stages of enrolling customers as they launch service in phases. To date, none of them have made any announcements about terminating the enrollment process. A tweet from Monterey Bay Community Power stated that “The Alternate Proposed Decision voted in by the CPUC will increase costs for MBCP, NOT for customers. MBCP is dedicated to never cost more than PG&E. MBCP’s customers will receive their 3% savings rebate on electricity generation for 2018, & an expected 3.3% savings for 2019.”

Operational: MCE – As reported in the Napa Valley Register, Chief Executive Officer Dawn Weisz of MCE, the first CCA to launch in the state in 2010, said the decision won’t deter the agency from its core mission of “providing cleaner power at stable rates, reducing greenhouse gas emissions, and investing in local programs.” In fact, MCE has seen sharper increases in the exit fee in past years, Weisz said. In January 2016, the PUC approved nearly a doubling of the fee. “We’ve always maintained competitive rates with a lot of stability,” Weisz said, “and we’ll continue to do that.”

CleanPowerSF – Barbara Hale, the San Francisco Public Utilities Commission’s assistant general manager for power operations, said the agency would look at ways to keep CleanPowerSF’s customers from bearing the brunt of the increases, which will begin Jan. 1. The San Francisco PUC’s internal policy is to offer CleanPowerSF at an equivalent price to PG&E. “We’re going to take this information and see what we can do to adjust our program costs and rates to protect customers from an increase like that,” Hale said.

Rancho Mirage – As reported in the Desert Sun Rancho Mirage, which launched a CCA this year, City Manager Isaiah Hagerman stated that the decision is not a deal-breaker for Rancho Mirage. “Even under the worst-case scenario, we’re still saving our customers money.”

Nina Turner, the Center for Climate Protection’s Energy Program Associate, drives a point home at the hearing.

Center for Climate Protection staff testifies at hearing. Pointing out that she reads about the successes of CCAs on a daily basis in her work as curator of the Clean Power Exchange e-news, Nina told the Commissioners that “these successes include providing many communities with programs that promote less use of fossil fuels and provide resources that result in cleaner air.” She went on to say that the health of many communities would be placed in jeopardy with a bad decision. “The Alternate Proposed Decision will also hinder the amount of programming that CCAs can offer to their customers. These programs have transformed lives by allowing people to purchase electric vehicles and even to rebuild their homes more affordably burned down by the many recent wildfires.”

Barry Vesser of the Center for Climate Protection points out “double jeopardy” for Community Choice customers.

Barry Vesser, Deputy Executive Officer for the Center for Climate Protection pointed out that “the new burden of up to 25% additional costs in the PCIA on the generation side will be on top of some of the costs of wildfire damage resulting from from the 2017 fires also being borne by Community Choice customers in our area, due to the passage of SB 901.” Mr. Vesser urged the Commission to adopt the original Proposed Decision “that is balanced for all parties and asks the IOUs to exercise prudent management of existing resources while allowing Community Choice agencies to continue to grow, and develop innovative local energy programs.”

We have been through tough battles before and prevailed – Prop 16 in 2010, AB 2145 in 2014. We will ultimately prevail in the PCIA battle as well to the benefit of all electricity customers, including bundled IOU customers. With nearly 20 CCAs now operating in California with hundreds of local government and state elected office leaders experiencing the clear benefits of Community Choice, community power will not be crushed.

There are several prospective regulatory, legal, and legislative opportunities to appeal or remedy the October 11 vote. According to senior CCA leaders, all options are on the table. In addition, Phase 2 of the proceeding may offer some opportunities to mitigate the damage done in this Phase 1 vote.

For occasional updates on the PCIA and other regulatory matters that affect Community Choice, visit the Clean Power Exchange regulatory page.

 

 

 

 

 

 

 

 

 

Governor Signs Energy Wild West Bill

To the detriment of California’s clean energy goals

By Robert Freehling

[Editor’s note: the views expressed in this post are not necessarily the views of the Center for Climate Protection or the Clean Power Exchange program staff]

On September 20, Governor Brown signed SB 237, a bill that allows an additional 4,000 gigawatt-hours of Direct Access (DA) for non-residential customers. DA allows private companies called Energy Service Providers (ESPs) to take customers away from electric utilities or local Community Choice agencies (CCAs). ESPs are power brokers that try to find the cheapest (and often dirtiest) supplies on the wholesale market, and resell it to their customers. DA replaces public oversight and regulation over utilities and CCAs with private, and normally secret, contracts between ESPs and their large industrial and commercial electricity customers.

Direct Access was a key part of the deregulation scheme that enabled market manipulation by Enron and other energy businesses during the California Electricity Crisis in 2000 to 2001. That is because the companies that provided retail DA service had also purchased power plants and fuel supplies that controlled electricity sales on the wholesale market. In the aftermath of the crisis, one of the main actions the state took to protect utility customers was to close the door to further Direct Access. Customers that had already signed contracts with ESPs were allowed to keep their DA service, but the DA market was limited to the size it had at that time – which was about 10% of retail electricity sales. SB 237, by expanding DA, is a step toward further privatization of the electricity procurement system leading toward a new “Energy Wild West.”

The Legislative Counsel’s Digest explains how SB 237 requires the California Public Utilities Commission to expand DA: “…on or before June 1, 2019, to issue an order specifying, among other things, an increase in the annual maximum allowable total kilowatt-hour limit by 4,000 gigawatt-hours and apportion that increase among the service territories of the electrical corporations. This bill [requires] the commission to provide to the Legislature recommendations on the adoption and implementation of a second direct transactions reopening schedule.”

The recommendations from the Commission to the legislature must be consistent with the State’s greenhouse gas (GHG) reduction goals, not increase criteria air pollutants and toxic air contaminants, ensure electric system reliability and not cause undue cost shifting among bundled customers of the Investor-Owned Utilities and DA customers. However, there are no protections from cost shifting to CCAs, which could happen if DA takes customers from a CCA.

While Direct Access providers are required to meet the renewable portfolio standard (RPS), they just don’t do it if they don’t want to. The authority and/or willingness of the state to enforce the RPS and other mandates on DA suppliers appears to be limited, since the entire point of DA is to replace public regulation with the free market and private contracts as much as possible.

SB 237 serves no public benefit purpose; it does not increase renewable energy, or help to reduce carbon emissions. This bill also does not require DA service providers to help with other state programs for energy efficiency, rooftop solar, energy storage, electric vehicle charging, or any other distributed energy resource that is “preferred” by state policy.

Compared to utilities or CCAs, it is also far more difficult for the public to even find out information about Direct Access providers. The CPUC annual RPS report to the legislature does not reveal any historical data or forecast regarding the compliance of DA suppliers. Some information can be gleaned from the power content labels posted on the Energy Commission website. The most recent reports are two years out of date, and you have to figure out which ones in the list are service providers for DA, and go though them one at a time. The reports show percentages from each type of energy source, but don’t indicate total retail sales in gigawatt-hours from each provider. So more data is needed to figure out the size of overall DA compliance. Nevertheless, here is a chart showing percentage of self-reported renewable energy from the thirteen DA providers in California for 2016, when the state required 25% of retail sales to be from qualifying renewable energy sources:

Data Source: 2016 Power Content Labels submitted to California Energy Commission

For 2016, eight of the DA providers reported significantly less than 25% renewable energy (including three with zero percent), four reported significantly more, and one reported exactly 25%. This is not exactly a stellar report card, and it certainly did not merit expanding the DA program, given that one of California’s main concerns is to help protect the global climate.

What Direct Access truly excels at is providing generic commodity electricity from the wholesale market, called “unspecified power,” meaning people can only guess what is in it. It is just the random surplus from thousands of power plants on the western grid at the time when it is purchased, and could include an undefinable mix of coal, nuclear, renewable, hydro, or natural gas energy. The state Air Resources Board (ARB) is tasked with figuring out the carbon content of this mystery meat “unspecified power,” which is one of the California Independent System Operator’s (CAISO’s) main products. Here is a graph of the amount of unspecified power from each of the thirteen ESPs for DA in 2016, with a line showing the state average of 14% unspecified power for that year:

Data Source: 2016 Power Content Labels submitted to the California Energy Commission

The relatively low average unspecified power for California as a whole reflects the fact that unlike DA providers, most utilities and CCAs have greatly reduced dependence on generic wholesale electricity, because it was a crucial tool for market manipulation during the 2000 to 2001 energy crisis, which resulted in an estimated $40 billion in fraudulent overcharges to California electricity customers.

The state has instituted multiple policies to avoid another energy crisis and to promote cleaner energy. The RPS and Community Choice are two examples of such policies. These were intended to reduce exposure to the unregulated wholesale market which most DA providers continue to marinate in. The large commercial and industrial (C&I) customers that had already left utility service by 2001 were allowed to continue with DA, and now account for roughly 10% of retail electricity sales in the state.

Unfortunately, the story of SB 237 is even worse from an environmental perspective. The original version included a requirement for at least 50% renewable energy for any new DA customers, and that was increased to a 100% renewable requirement for a while, which would have provided some social benefit. However, in the course of the legislative process, all such renewables requirements were stripped out. That leaves the only purpose of the bill – now law – being to satiate the desire of large C&I customers to get the lowest rates possible no matter how clean or dirty the power supply.

One version of the bill in early summer 2018 would have removed all caps from DA for non-residential customers. Fortunately, the expansion was greatly scaled back to 4,000 gigawatt-hours of annual sales each year, which is about an additional 2% share of retail sales. It also mandates a study from the CPUC on how to further reopen DA in the future. While the bill that got signed by the governor is a much less urgent threat than the version earlier this summer, it is still a concern because DA takes customers away from utilities and CCAs that in general are performing far better than DA at meeting several important state policy goals, including GHG reductions.

With SB 237, California is rewarding Direct Access suppliers for their misbehavior by giving them an expanded market despite their “race to the bottom” focus on lowest cost at the expense of other goals.

Now, 4,000 gigawatt-hours may seem like a small addition. However, DA already has far more than a foot in the door. The original deregulation in the 1990s caused many C&I customers to leave utility bundled service to get DA service. After the energy crisis, the legislature closed the door to new DA, but allowed existing DA customers to retain their alternative service. That continues to this day as an established part of the electricity market, amounting to roughly 24,000 gigawatt-hours which is a little less than 10% of California total retail sales of nearly 250,000 gigawatt-hours.

Direct Access represents an anti-social market, where corporations leave the commons to get their own electricity apart from everyone else. More power is given to energy marketers with reduced public oversight and increased opportunity for manipulation, cheating, and fraud, which is exactly what happened on a vast scale the last time the wholesale and retail electricity markets were deregulated in California.

DA is about trusting market competition, while reducing the oversight of government. Despite the marketing hype, this does not necessarily lead to lowest cost or best quality electricity service. DA is very different from the intended design of utilities regulated by state commissions, and CCAs controlled by local governments. While imperfect, government oversight over corporate power has succeeded at making electricity by far the leading sector in reducing GHG emissions in California. By contrast, the energy crisis, when the energy free-marketers had maximum control, was the year of peak emissions in the electricity sector.

Robert Freehling is an independent consultant, focused on state and local clean energy policies. He works primarily with NGOs on legislation and regulatory proceedings in the electric utility sector. He worked with Local Power from 2002 to 2012 to support the development of community choice aggregation and other local clean energy programs.

 

 

Get Ahead of the IDER Wave or Be Crushed By It

At the Business of Local Energy Symposium in June David Hochschild, a Commissioner at the California Energy Commission, and Mark Ferron, a Board Member of the California Independent System Operator, agreed that Community Choice Agencies (CCAs) are “the most innovative and exciting development in the United States” in the clean energy sector. They are also the most rapidly growing part of California’s electric service providers in terms of customers served and if current trends continue will control a dominant share of the generation market in California.

But what will the movement look like in five years? Will it still be a low cost service provider that delivers a larger percentage of clean energy than the investor owned utilities to customers? How will CCAs respond to a very dynamic market in California, with market and regulatory changes, new technologies, and will their strategies be successful?

One line of argument is that CCAs should begin to accelerate their support and/or deployment of integrated distributed energy resources (IDERs). Not just solar, energy storage, energy efficiency, demand response, microgrids and electric vehicles, but all of these technologies integrated in an optimized system. But CCAs have other competing priorities like providing reliable service, meeting state requirements, and building up their financial reserves. Many CCAs also have relatively lean staffs and do not have the expertise in house to initiate or manage IDER projects.

So is the best approach to go slow, or accelerate planning and implementation in the early life of a CCA? There are a number of trends right now that suggest that CCAs and load serving entities of all stripes will need to be able to better accommodate and integrate DERs into their operations. Ben Kellison, Grid Edge Director at Greentech Media Research, recently suggested that DERs are poised for “explosive growth” across the United States over the next five years. He emphasized that U.S. utilities “need to change, and are slowly changing” how they plan, operate and maintain their distribution grids to adapt. He looked at DERs which together contributed 46.4 gigawatts of impact on the U.S. summer peak in 2017. By 2023, that figure is expected to more than double to total 104 gigawatts of flexible capacity.

DERs are scaling up. These are all customer side of the meter resources, so the question is will utilities and CCAs create programs to integrate them effectively to better serve their customers and grid stability? What CCAs and utilities alike should be doing is incentivizing Integrated Distributed Energy Resources (IDER) which will add value to the overall system.

There are plenty of trends that suggest that DER will become more functional, cost effective and necessary in the next few years. Here are a few:

  • Time of Use Rates are coming in 2019, customers will be looking for ways to reduce their cost of electricity
  • Lack of storage is putting the brakes on solar production in the middle of the day and this issue has to be addressed if we want to continue to decarbonize our energy supply
  • Decreasing cost of storage – as soon as 2020 residential storage may be economically viable and it is already so for many commercial applications
  • Need for significant upgrades to the grid to meet California’s ambitious Renewable Portfolio Standard is going to be very expensive, and DER will provide opportunities to avoid these costs
  • Replacement of natural gas peaker plants in California with local resources is already happening and is likely to accelerate
  • Increasing intensity of climate chaos disasters, particularly wildfires means communities need more control over the local distribution grid and more resilience in the system in times of stress.
  • The need to electrify everything in order to decarbonize buildings and transportation
  • New sophisticated applications in big data management and grid mapping are helping to optimize the locational value of DER
  • A State mandated 100% Renewable Portfolio Standard is here – what will be the long term impact on CCA’s market advantage of offering a higher content of renewables at a slightly lower price?
  • CCAs using the full extent of their statutory authority developing energy efficiency programs and rate design

The convergence of these trends means that the energy landscape that CCAs will find themselves in five years from now will look very different from the present. Let’s look at a few of these trends in more detail to get a sense of how big those differences may be.

But before we do, a quick caveat about the PCIA, the exit fee intended to address costs incurred by IOUs for procurement of power for customers departing for CCA service. This issue is presently being negotiated at the California Public Utilities Commission. There are two proposals that are being considered by the CPUC and one of them would be quite damaging to CCAs by increasing their costs significantly, making it more difficult for them to compete at all, let alone invest in DER and other local projects. The assumption for this article is that this damaging proposal for CCAs will not be the one to prevail in the final decision.

Storage

According to Greentech Media customer-side-of-the-meter energy storage system prices are projected to decline at a rate of 8% annually through 2022. A total of 1.4 gigawatts and 2.3 gigawatt-hours of energy storage was deployed globally in 2017. Lithium-ion held 98.8 percent market share in Q4 2017.

Tony Seba, an instructor in entrepreneurship, disruption, and clean energy at Stanford University’s Continuing Studies Program has also done some analysis that suggests that the cost of Lithium-ion batteries will decline significantly in the next few years. He predicts that the cost will drop below $200 kWh, making it possible for residential customers to store a day’s worth of electricity $1, which will unleash widespread adoption of customer-side-of-the-meter storage.

McKinsey & Co produced a study released in Aug. 2016 that shows it is already profitable to provide energy-storage solutions to a subset of commercial customers in each of the four most important applications—demand-charge management, grid-scale renewable power, small-scale solar-plus storage, and frequency regulation.

Finally, AB 2514 (Skinner, 2010) mandates that all load serving entities procure 1% of peak load in energy storage by 2020, but that is just a starting point. CCAs could incentivize solar plus storage for commercial customers and help them curtail demand charges. Retaining these customers is worth the investment for CCAs, since they make up a disproportionate amount of the load. For example, in Sonoma Clean Power’s service territory commercial and industrial (C&I) customers make up 12.4% of total customer accounts, but represent approximately 43% of the load. Recently, Sonoma Clean Power has started working with the energy storage company Stem on a storage program for their larger C&I customers. As a retention strategy CCAs could target their largest C&I customers and incentivize them to install solar plus storage offering to be an off-taker for surplus generation in exchange for demand response and other grid services.

Grid Upgrades

The California Energy Commission has estimated that to reach the State’s 50 percent renewable goal by 2030, will require at least $5 billion in transmission grid infrastructure upgrades. This figure may be low, Southern California Edison already expects to spend $2 to $4 billion per year in its service territory for the foreseeable future to support California’s RPS 50 percent goal. Now that we are moving toward a 100% renewable powered electric system, these costs are likely to go up, perhaps dramatically. Thoughtful IDER deployment could significantly reduce the need for expensive transmission and distribution upgrades and also, the overall cost of electricity services to customers.

Protecting Communities During Disasters

This summer California was hit by the second year in a row of devastating and record breaking wildfires. In 2018 alone there were over 5,500 fires that scorched 1,044,770 acres and the fire season is not over yet. Some have taken to calling this the new normal, but the truth is we do not know what the new normal is, because greenhouse gases in the atmosphere are still increasing.

Given the increasing frequency and intensity of wildfires, storms and floods as the result of climate change, being able to close down parts of the distribution grid, or to island critical facilities will become increasing important as the fires that ravaged Northern and Southern California demonstrated. Working with utilities, local governments and agencies will be expected to provide these services.

New RPS

SB 100 calls for eligible renewable energy resources and zero-carbon resources to supply 100% of retail sales of electricity by 2045. This bill is now the law in California. Once it begins to be implemented, it will erode CCAs’ value add of offering cleaner power than the utilities over time. What unique value can they offer to their customers instead?

Some have argued that CCAs had very fortunate timing in terms of the pricing of renewables on the market between the launch of the first CCA in 2010 and the present, and that the private utilities locked in long term contracts on renewables at higher prices to meet the state mandated RPS. This gave the CCAs at least a temporary advantage on their ability to offer cleaner power at lower rates. Eventually, as the utilities are able to renew contracts at more favorable prices, this advantage will go away. So while CCAs will still likely have leaner operations than the utilities going forward and do not have to pay shareholders, the margin of their cost advantage will likely be reduced over time. This is another area where steady investment in IDER over time could help. By increasing the amount of generation that is under local control, it will reduce the risk of their customers to price spikes and market volatility, stabilizing rates in the long run.

CCA Operational Development

CCAs have the statutory authority to do a number of things that only a few have explored so far. For example, CCAs are entitled to use the public purpose program money provided by ratepayers to implement energy efficiency programs for their customers. Currently only two CCAs are exercising this authority, and several others are considering it. It is a great way to initiate tailored programs that address efficiency measures not covered by current IOU-run programs, and to educate customers about other DER related projects and opportunities.

CCAs set their own rates, but they can also design rate structures. The Center for Climate Protection, along with TerraVerde Energy and other partners is working with the National Renewable Energy Lab, Lancaster Choice Energy and Peninsula Clean Energy on a project that will develop a tool that can produce rate structures to incentivize optimized deployment of IDERs. The project will create an IDER rate structure design tool that captures the value of IDER projects; can be readily adopted, customized, and updated by electricity providers in response to load management imperatives, policy directives, technological advances, and customer demands; and enables informed and expedited deployment of IDER resources.

Yes, But…

Some CCA operators assert that it is not their business to invest in the distribution grid. The maintenance and operation of the distribution grid is the private utility’s business and responsibility, so any DERs on the customer side of the meter that have distribution system benefits, or utility side of the meter DER measures, are not their concern. Clearly the operation of the distribution grid is the utility’s primary responsibility. But it is also the case that CCAs’ ability to deliver their service to their customers depends on the smooth functioning of this grid and that they have a real interest in its reliability.

Furthermore, most CCAs have as a goal significant greenhouse gas emissions reduction. Given the constraints on solar production referenced above, if CCAs want to increase the renewable content of their power supply through solar, then they will need to invest in storage on both sides of the meter, in demand response, and energy efficiency. If we are going to completely decarbonize our power supply, we will need a more complex, but also flexible system, which will require the cooperation of all the key players to operate and optimize.

While it is true that there are risks around IDER deployment, it is also true that IDER can help mitigate risk. Chris Sentieri of Blue Strike Environmental, who worked on the Local Development Business Plan for East Bay Community Energy, offers the example of “a prolonged heatwave that might send a CCA on the spot market incurring significant unanticipated costs. If the CCA had dispatchable assets, this could help them shed load when they need to. In this case, IDER could serve as ratepayer protection, a hedge against conditions beyond the CCA’s control.”

Sentieri recently argued on a Clean Power Exchange webinar that in addition to risk management, DER can help CCAs with core operational needs, shedding load, shaping load, managing costs, and meeting Resource Adequacy needs.

The skeptical among you may be saying yes, but what about costs? Storage is not that cheap yet, and the ancillary services market does not really exist, so why invest now? I am not suggesting that every investment in IDER makes sense now or in the future. What I am suggesting is that given the confluence of these trends, CCAs should lead and help create these markets or at least prepare to join them as they mature. They should start planning now, experiment, choose projects that make sense and be ready when prices and markets open up to provide services that will add value to their customers.

Another reason to act now is the availability of state and federal incentives like the Investment Tax Credit, the Production Tax Credit, and the California Self Generation Incentive Program, SB 700, which was signed by Governor Brown last week. All of these programs make it cheaper to finance DER projects reducing costs between 30 to 50% and they will all be expiring eventually.

This analysis also suggests that CCA current advantages in the price of power and percentage of clean power will erode over time, but they have other advantages over the utilities. They are able to customize programs to meet local needs, they are more agile in project and program initiation, and they can work with other local agencies to maximize the benefit of the projects they invest in. DERs are all about responding to local conditions and CCAs are positioned to understand and take advantage of this characteristic.

In a very dynamic and uncertain environment, CCAs are public agencies and as such should be thinking about long term investments for their customers that will provide new services, long term price stability and resilience. Sometimes you have to take a little risk to manage a much bigger risk.

What Can CCAs Do?

Here are some basic steps that even CCAs that are just starting up should consider implementing:

  • Include IDER in Integrated Resource Plans from launch date
  • Hire appropriate staff and consultants with IDER project management experience
  • Hire appropriate staff and consultants with data management experience
  • Build relationships with third parties through RFQ or RFP process
  • Learn from and collaborate with other CCAs on IDER projects
  • Invest in pilot projects that deploy IDERs
  • Collaborate with local agencies on projects that support that boarder community like microgrids for critical emergency services in your community
  • Participate in proceedings at California Public Utilities Commission for IDER
  • Monitor the state legislature to ensure that these markets stay open to CCA participation
  • Use IDER projects to build CCA brand

The data and trends affirm that a wave of IDER deployment is coming, the question is how well will they be integrated into the overall system to enhance its performance. CCAs are positioned to play a vital role in maximizing the benefit of IDERs to the public and the environment. Playing this role is not only sound public policy, but a good business strategy as well.

 

Will the CPUC let no good deed go unpunished?

Community Choice Agencies lead on state clean energy goals, but may be penalized by CPUC on 9/27

By Robert Freehling

On September 27, the California Public Utilities Commission (CPUC) is expected to decide on several elements for the longstanding Power Charge Indifference Adjustment (PCIA) exit fee issue. Before them is a Proposed Decision (PD), and Alternate Proposed Decision (APD), and they can also vote a on a negotiated set of agreements. Some if not most Community Choice Agencies (CCAs) will face major challenges if the APD is adopted by the CPUC.

On Sept 12 Greentech Media (GTM) published “How Community Choice Aggregation fits into California’s Clean Energy Future” that delves into the matter. Much of the narrative in the article is misleading through a hazardous blend of ignorance and propaganda.

For example, the article implies that only the utilities are paying for transmission and distribution: “While CCAs take over the job of procuring energy for their customers, which allows them to exceed utility renewables mandates and increase the roster of clean energy projects being built in the state, utilities remain responsible for all other aspects of keeping the power flowing, including the costs of maintaining transmission and distribution grids and managing customer billing.”

The article fails to make it clear that all CCA customers pay the same rates for transmission and distribution as “bundled” IOU customers who get their electricity from the utilities. CCA customers also pay for several energy costs of the utility, even though the CCA customers do not get even one kilowatt-hour of this electricity. The CCA customers, in addition to paying for their own electricity, as well as transmission and distribution, are also subsidizing energy supply for the customers who stay with the utilities.

When this is all added up, CCA residential customers in PG&E’s territory pay about 72% of their electric bill to PG&E. So, this complaint that the utilities aren’t getting their money is ridiculous; they get the lion’s share of the revenue from CCA customers.

Yet the GTM article cites – without correction – the claim that CCAs are an “existential risk” to the utilities: “While CCAs remain a small percentage of the state’s utility customers, the [CPUC] estimates that up to 85 percent of the state’s retail load could be served by CCAs, as well as by direct access providers, by 2025. These trends are seen as an existential threat for California’s investor-owned utilities.”

This narrative has multiple layers of error, by adding an often incorrectly cited figure about market share. The actual quote, from a CPUC customer choice staff paper in May 2017 states:

“Between rooftop solar, [CCAs] and Direct Access providers (Energy Service Providers or ESPs), as much as 25% of Investor Owned Utility (IOU) retail electric load will be effectively unbundled and served by a non-IOU source or provider sometime later this year. This share is set to grow quickly over the coming decade with some estimates that over 85% of retail load served by sources other than the IOUs by the middle of the 2020s”

The GTM article fails to mention that 1) this was not the CPUC’s estimate, but merely the CPUC staff citing “some estimates,” 2) this figure also included customer’s generating their own electricity, which the California Energy Commission forecasts will supply at least 15% of electricity consumption in California by the mid-2020s, and 3) the CPUC analysis omits consideration of about 50 publicly owned utilities that supply roughly 25% of the state’s electricity. While the growth of CCA is a dramatic change, these omissions greatly exaggerate both the relative magnitude and significance of what is actually changing, and inflate the prejudicial basis for taking action that would undermine CCAs.

Another important point is that since deregulation in the 1990s, the utilities have divested most of their power generation. With retirement of California’s nuclear plants, the investor-owned utilities will only retain some hydropower, a handful of gas plants, and an almost infinitesimal amount of renewable energy. Most of the utility electricity supplies are on contracts from third party vendors. These are normally “pass through” costs, where the utility is not supposed to directly profit, a policy called “decoupling” that is intended to take away utility profit incentive for selling more electricity.

State law requires the CPUC to impose fees on CCAs to cover utility stranded costs from these contracts, which the CPUC has already done. Residential CCA customers in northern California today pay about 5 cents per kilowatt-hour to PG&E for various energy contracts through seven different line items on their monthly bill, even though CCA customers don’t get any actual electricity from these sources.

Therefore utility revenue and profits are strongly buffered from customers who leave to CCAs. The CPUC decision on the CCA fees would not substantially change PG&E’s revenue or profits; its main effect would be merely to change who is paying – bundled customers would pay a little less, while CCA customers would pay a little more.

The California Community Choice Association (CalCCA) has estimated that exit fees in PG&E’s service territory would increase by about half a cent per kilowatt-hour, which implies that PG&E’s bundled customer would pay about half a cent per kilowatt-hour less. This change is out of a current average residential retail rate of about 24 cents per kilowatt-hour. Marin Clean Energy customers that currently save about 2% on their electricity bill might then be paying about 1% more than PG&E customers. PG&E customers would see a savings of $2 per month on a $100 electric bill, while MCE customer would pay about $2 per month more.

While a change of $2 per month is small for PG&E and MCE customers, a combined relative change of $4 is significant, and would be a huge shift in marketing narrative. If customers leave PG&E, the utility gets to charge CCA customers for “stranded costs” for many years. But CCAs only charge a small administrative fee for customers who go back to the utility, meaning CCAs are on the hook for any overprocurement of electricity that they no longer need.

If the unfavorable APD is adopted, to stay competitive CCAs would need to make very difficult decisions – perhaps less renewable energy, or cutting back community programs, or staff reduction, or having no extra money to put into their rate stabilization funds, or accepting higher rates imposed by the CPUC. Each of these choices undermines the stability and benefits of CCAs, and risks bad publicity, customers leaving or becoming disenchanted with CCAs, and local politicians delaying implementation of new CCAs.

Of course, that is exactly what the utilities want.

The revenue threat – to the extent that it is real – is not symmetrical. The article’s claim is exactly the opposite of the truth – CCAs are not in any way an existential threat to the utilities, but the utilities could become an existential threat to CCAs if regulators and the media abandon their responsibility to be checks on power in a democratic society.

Worse, as the GTM article points out, CCAs have far exceeded the state requirements for renewable energy, and provide cleaner supply than the utilities. The CCAs in northern California do this at electricity generation costs about 40% less than PG&E is able to provide, although customers only see a small fraction of those savings due to all the utility fees.

CCAs also benefit the utilities through the back door, because the utilities’ keep the same amount of contracted renewable energy, but will have to serve fewer customers. This increases the utility’s percentage of renewable energy (which is how California measures compliance with the state’s renewable energy standard), and lowers the utility carbon emissions, without the utility buying any more clean energy. Meanwhile the burden to replace and increase that renewable energy for the customers who leave is put onto the CCAs.

The governor’s executive order, recently announced before the world, commits the state to working with and supporting community efforts to meet decarbonization goals: “State agencies will engage the support, participation, and partnership of universities, businesses, investors, and communities, as appropriate, to achieve the goals contained in this order.”

Unfortunately, the CPUC, tugged by the old temptation of letting no good deed go unpunished, is threatening to undermine those community efforts just as they are rapidly expanding around the state and on the verge of success.

~ ~ ~

Robert Freehling is an independent consultant, focused on state and local clean energy policies. He works primarily with NGOs on legislation and regulatory proceedings in the electric utility sector. He worked with Local Power, Inc. from 2002 to 2012 to support the development of community choice aggregation and other local clean energy programs.

 

120 State Legislators send open letter to CPUC on PCIA

On September 12, the California Community Choice Association published a two-page open letter in the San Francisco Chronicle from 120 California local government elected leaders calling on the CPUC to come up with a fair resolution to the longstanding PCIA “exit fee” issue. The meeting date is September 27 and you can find out how to take action at our Regulatory issues page HERE.

My week at the Global Climate Action Summit

Rise for Climate, Jobs, and Justice

My global climate action week began on Saturday, September 8 when I joined and estimated 40,000 of my closest friends for the Rise for Climate, Jobs & Justice march in San Francisco. The demonstration was joined by people on seven continents, in 95 countries, participating in more than 900 actions of people worldwide demanding real climate action from their local leaders.

Happy Birthday San José Clean Energy

Barry Vesser, Deputy Director of the Center for Climate Protection is joined by ally Ruth Merino, San José Mayor Sam Liccardo, and others to celebrate the formal launch of San José Clean Energy on September 12, 2018 as part of Governor Brown’s Global Climate Action Summit.

On Wednesday, September 12, I attended the official launch of San José Clean Energy (SJCE), the largest single jurisdiction Community Choice agency in California. In a prepared news release, Mayor Sam Liccardo stated that “San José Clean Energy represents one of our most impactful tools for reducing greenhouse gas emissions and meeting the ambitious goals defined in Climate Smart San Jose, our Paris-compliant sustainability plan. San José remains steadfast in its commitment to fighting climate change alongside our global partners.”

Starting in the Spring, SJCE will give customers the choice of buying a cleaner blend of power than the mix they currently receive from PG&E. In addition, all SJCE net revenues will be reinvested back into the community, and into developing local clean energy programs and projects. “This is a major milestone for San José Clean Energy and an excellent opportunity to recognize and appreciate all of the community members, organizations, and city staff who worked so hard over multiple years to make SJCE a reality,” said Lori Mitchell, Community Energy Director with the City of San Jose. Learn more about San José Clean Energy HERE.

Sol Lux Alpha

Bifacial solar panels that include photon absorbing cells on the underside increase production by up to 50%. They also serve as a solar shade canopy and rain shelter for the rooftop patio.

Also on September 12, I visited the most advanced energy multi-unit residence in San Francisco, perhaps in California. Sol Lux Alpha is an all-electric 4-unit condo with no gas hook-up. It is solar-powered and features Tesla Powerwalls for energy storage, heat pump systems, inductive range, and more. It is automatically islandable and energy net-positive. In a nutshell, Sol Lux Alpha wraps pretty much everything we are talking about when we talk about integrated clean distributed energy resource deployment. Oh, it is also beautiful style-wise, if you go for the modern look.

Sol Lux Alpha is a 2018 recipient of the 2018 U.S. DOE Housing Innovation Award and is the first U.S. Passive House Institute-certified multi-unit residential building in California. It is a 100% onsite renewable net+ energy nanogrid, generating approximately two times the energy required for building & living energy. Excess energy is designed to be “net metered” for onsite EV charging in off-peak hours. Thus, it is designed as a carbon neutral living+transportation system, and a community energy asset for the local distribution grid. Right now and for the next few weeks one of the units remains unsold and is open for tours. Contact them!

The Summit came to a close with the Governor calling for a fully decarbonized California economy by 2045, and an intention to launch a satellite to monitor greenhouse gas pollution.

 

 

 

Legislature adjourns for 2018 – all bills on the governor’s desk

The final day of the two-year 2017/18 session came to a close at midnight on Friday, August 31. Below are some of the results relevant to Community Choice Energy. All bills passed by the legislature are now on the governor’s desk for his signature. The signing deadline for all bills is September 30.

Highlighted bills:

Support
SB 100 – 100% Renewables by 2045. SUPPORT – PASSED – on to the governor’s desk.
SB 700 – California Energy Storage Initiative. SUPPORT – PASSED – on to the governor’s desk.
SB 64 – Improve air quality in Environmental Justice communities with GHG reduction co-benefits.Read our letter of support. SUPPORT. – FAILED to pass the Assembly – by one vote.

Oppose
SB 237 – Removes cap on Direct Access. See our second letter of opposition and our original letter of opposition. OPPOSE – PASSED – on to governor’s desk. Please urge the governor to veto or ignore.
AB 893 – Interferes with CCA’s procurement autonomy. Read our letter of opposition. – OPPOSE – DIED in Senate Committee.
SB 1088 – Threatened to unnecessarily duplicate CCA programs and services. Read our opposition letter. OPPOSE – Swept up in utility wildfire liability bailout bill SB 901.

No position
AB 813 – Western Electricity Grid Regionalization; See our June 27 webinar on this topic. – DIED in Senate Committee.

For more information about legislation we tracked, see the Clean Power Exchange legislation page.

The start of a new two year legislative cycle will begin in early January 2019.

Energy Legislation Update – August 2018

As the waning weeks of the 2017/18 legislative cycle are upon us, below are a few notes and updates about some of the bills we have been tracking. The final day for bills to clear either chamber is August 31. The last day for the Governor to sign or veto bills passed by the Legislature is September 30.

SB 100 (de León) Establishes the “100 Percent Clean Energy Act” which increases the Renewables Portfolio Standard (RPS) requirement from 50% by 2030 to 60%, and creates the policy of planning to meet all of the state’s retail electricity supply with a mix of RPS-eligible and zero-carbon resources by December 31, 2045 for a total of 100% clean energy.

Status: This bill has cleared the committee process and is now on the floor of the Assembly.

SB 237 (Hertzberg) This bill directs the California Public Utilities Commission to remove the cap on “Direct Access” participation so that by July 1, 2022, all non-residential end-use customers of the state’s investor-owned utilities (IOUs) may acquire electric service from a provider other than the incumbent IOU.

Status: This bill has made it through the committee process in the Senate and now in the committee process in the Assembly.

SB 700 (Wiener) This bill extends the Self Generation Incentive Program (SGIP) for five years, from December 31, 2019, to December 31, 2024. The legislature intends this extension of SGIP to increase deployment of clean distributed generation and energy storage systems. It also intends that the program facilitate the optimal integration of these resources into the electrical grid to improve efficiency and reliability of the distribution and transmission system, and reduce greenhouse gas emissions, peak demand, and ratepayer costs. It is the further intent of the Legislature that the California Public Utilities Commission provide for an equitable distribution of the costs and benefits of the program.

Status: This bill was voted out of committee in its last committee hearing unanimously on August 16. Two Center for Climate Protection staff members, Barry Vesser and Susan Shelton (our new Solar+ Energy Program Coordinator) were in Sacramento on August 15 to urge “yes” votes.

AB 813 (Holden) This bill would establish a pathway for the California Independent System Operator (CAISO) to transform its governance structure to operate as a multi-state western regional transmission system organization contingent on several specific requirements being met.

Status: On august 13, this bill was referred to the Senate Rules Committee. It requires a 2/3 “aye” vote to move forward.

For more info and the full list of bills we are monitoring, please visit our CPX Legislative Page.

 

Just Released – CPUC Customer Choice Paper

On Tuesday, August 7, just one day before CPX E-News deadline, the CPUC’s final Customer Choice Paper was published. This has not given us enough time to read and report on the contents, which we will do in our next installment. But for now, we want to make sure you know about it and can access it. The CPUC’s statement that accompanied the publication and project contact info are below. For our previous comments on this matter, click HERE.

 

CALIFORNIA CUSTOMER CHOICE PROJECT FINAL CUSTOMER CHOICE PAPER ISSUED

The California Public Utilities Commission (CPUC), after extensive public input, today issued the final version of its customer Choice Paper.  The Choice Paper addresses the changing electric market in California and resulting new challenges that are confronting the state’s energy future and reliability. The purpose of the Choice Paper is to raise awareness of the challenges and opportunities in California’s rapidly changing electricity market, engage stakeholders, and advance a public dialogue to ensure continued reliable, clean, and affordable electricity for customers and equitable treatment for all market participants. Today’s release is the culmination of more than a year of stakeholder input and guidance from the Choice Paper’s Ad Hoc Advisory Committee of nationally recognized energy experts.  The final version includes non-material changes inspired by written comments submitted from numerous stakeholders and the remarks of participants at public workshops and En Bancs.  The final report includes an expanded discussion of the types of Load Serving Entities (LSEs), updated tables/figures on policy implementation, procurement, resource adequacy and information on a central buyer and customer data.

As next steps, the CPUC will continue to work with stakeholders and other state leadership in planning for California’s energy future and reliability. The CPUC will perform a gap analysis that will examine the fundamental questions raised in the Choice Paper to identify critical issues requiring solutions and create a draft Choice Action Plan. Additionally, a public workshop is being scheduled in mid-October, 2018, to discuss the CPUC’s findings in the gap analysis and a draft action plan as the framework for addressing these gaps.

Link to Choice Paper and Next Steps:  www.cpuc.ca.gov/CustomerChoice.

Contact Information:  For further information and any questions about the California Customer Choice Project, please email customerchoice@cpuc.ca.gov

Intersolar 2018 – An Unexpected Take-away

I attend Intersolar in San Francisco every year. Intersolar is one of the largest annual solar trade shows in the U.S. Attending is one of the ways I stay abreast of larger trends and developments in the solar and related industries sector. I use the opportunity to talk to the folks at the booths about what they see as the big trends, technology advances, and of course, challenges and threats to the industry.

In the past it has been things like the emergence of practical, affordable storage, microinverters, and improved solar carport installations techniques that have been the buzz. For me, the big takeaway came as something of a surprise, in a brief conversation.

I had come upon a company called “HOTSTART” on the second floor, the battery and storage level of the event (there were three levels, photovoltaics, balance of system, and storage). My typical interaction is to first find out the basics of what the company is all about, whether they are currently active in the California market or hoping to get into the California market, and depending on their initial answers, question them about the trends they see.

Upon learning that HOTSTART is an engine heater manufacturer for gas and diesel-powered generators out of Spokane, Washington, the wheels in the back of my head said: keep walking, this is not a company that you have anything in common with. After this quick hello, I said a polite “thank you have a great show” type of departure statement. I took about three steps and then stopped in my tracks. “Wait a minute,” I thought. What the heck is a company that sells to gas and diesel-powered generator manufacturers doing here at Intersolar?

I walked back to the table, and asked the representative, a genial fellow named Chris Oxford, Innovation Designer – New Market Development, what the heck they are doing at Intersolar. Chris quickly acknowledged that it is an unusual thing and that they are the only business of their type at the event. He explained that while a majority of their business is centered around a combustion engine powered by fossil fuels, as a company, HOTSTART sees “how the renewable energy industry will continue to grow with practical, affordable energy storage being a significant percentage of the overall power generation industry.” While they don’t yet have a specific product or solution that directly applies to solar, storage or some other kind of advanced clean energy technology, HOTSTART acknowledges the need to evolve their offerings to match the growing renewables market.

On the left, Chris Oxford, Innovation Designer – New Market Development; On the right, Josh Erickson, Product Manager – New Market Development

Then Chris said the thing that stuck in my mind resulting in this brief interaction being the most memorable moment of Intersolar 2018, and the inspiration for this little blog. Chris said: “look, in 25 years, maybe sooner, gas & diesel generators will play a smaller role in the overall power generation industry. It’s already happening with generators in microgrids serving as the secondary or tertiary power source to solar/wind generation paired with battery storage.” Full stop. This is a statement coming from a company that works closely with generator manufacturers whose products are currently the dominant technology for emergency, islanded, or remote generation needs.

I asked about Chris’s colleagues at the company and how the decision came about to attend Intersolar. He said “after HOTSTART experienced a downturn a few years back, leadership of the company saw the need to find new opportunities to grow as a company. That resulted in the creation of the team that I’m part of that is tasked to look at industries like renewable energy and see what was possible.” For a 75-year-old company, they aren’t so set in their ways that they can’t make a proactive decision to try to adapt to changing realities. Bravo.

I asked about other similar companies in the industry. Chris said that yes, it is a highly unusual thing that HOTSTART is at Intersolar. “We are the only ones from our industry at this show. The gas and diesel generator market and the companies that supply to them can be slow to change but we’ve seen some of our customers, like Caterpillar, working to develop microgrid solutions that incorporate solar, wind and storage with their standard generator product.” Chris and HOTSTART do not see business as usual as a successful or sustainable business model.

This is the kind of revelation that underscores in a real-world way the veracity of the assertions those of us in the renewable energy sector say repeatedly – real change is happening right now and more change is coming in the not-too-distant future.

Here’s to looking forward to Intersolar 2019 and ever more surprises.