In one of its most closely watched decisions of the year, the California Public Utilties Commission is scheduled to vote Thursday on one of two proposals dealing with the exit fees customers pay if they leave investor-owned utilities like San Diego Gas & Electric and opt for a government-run alternative.
“It’s a bigger issue that we all need to be talking about,” said Beth Vaughan, executive director of California Community Choice Association, a trade group dedicated to promoting what is called Community Choice Aggregation, or CCA, which allows any city, county or combination thereof to form an entity to take over the responsibility of purchasing power for their communities.
Under the CCA model, utilities like SDG&E still maintain transmission and distribution lines (such as poles and wires) and handle customer billing. But the CCA purchases the sources of electricity, with municipal government officials ultimately making the final decisions on power purchases.
Since the first CCA was established in the state in Marin County in 2010, the numbers have grown with many CCAs boasting they have greener portfolios than utilities. Last month, the 19th CCA in California went online and San Diego’s City Council and Mayor Kevin Faulconer are seriously considering adopting a CCA as well.
But once a CCA is established, its customers must pay an exit fee (called a Power Charge Indifference Adjustment) to the utility each month to offset the costs utilities have racked up building things like natural gas power plants over the years — all with CPUC approval. In addition, utilities have been directed to develop renewable energy projects to meet the state’s aggressive climate targets.
The exit fee is at the center of Thursday’s hearing in San Francisco.
Using a complex methodology, the CPUC determines the exit fee’s amount (which is different for each of the state’s three investor-owned utilities). The five members of the commission are adjusting the fee and will consider two different proposals.
The first, submitted by a CPUC administrative law judge, is lower than the other, which has been proposed by Commissioner Carla Peterman.
Roughly speaking, the current exit fee for SDG&E’s service territory is 2.5 cents per kilowatt-hour for residential customers.
Under the administrative law judge’s proposal, the fee for residential customers would go up to 3.46 cents per kilowatt-hour. Under Peterman’s plan, it would go up to 4.25 cents.
If the exit fees are too high, CCAs complain customers have less financial incentive to opt out of the utility model. If the fees are too low, power companies complain they are not being fairly compensated for their infrastructure costs.
CCA supporters have criticized Peterman’s proposal.
If passed, Vaughan said it “could have a sharp increase in costs from the CCA side of the equation. So when we look at what CCAs do and all the programs they bring and everything else, the question is, can CCAs still launch?”
Saying, “I’m optimistic CCAs will still persist,” Peterman pushed back on claims her plan is weighted toward utilities and said the commission is obligated to look out for customers who decide to remain with utilities as well as those who opt for community choice.
“Of course, if there is a cost that goes up that’s going to have some impact in terms of how an organization is going to decide to move forward,” Peterman said. “But based on the cost estimates that we have, we don’t think these costs are so extreme as to be the driving factor.”
Peterman said the two competing proposals were very similar. The difference, she said, lay primarily on her submission taking into account costs of utilities’ “legacy” projects — such as the soon-to-be shuttered Diablo Canyon Nuclear Power Plant and some natural gas facilities in SDG&E’s service territory.
“It is important to fix this now so that communities like San Diego can go forward with accurate information about their cost obligations and then form their CCA in a manner that is sustainable,” Peterman said. “It may not be the outcome some folks love, but I think it’s providing some certainty going forward.”
Vaughan wants Thursday’s vote to be delayed until Oct. 25, citing the fact that Peterman’s proposal was revised last Friday.
“We need some clarification” about the changes, Vaughan said.
The mayors of San Francisco, San Jose and Oakland also called for a delay, issuing a joint statement Tuesday that called the process “rushed, opaque and with little concern for rate-paying customers.”
In an email, Peterman said the revisions “make very limited substantive changes” to her proposal and mentioned the commission already postponed a previously scheduled vote last month.
“This proceeding has been an open and transparent process from the beginning with many parties poring over thousands of documents,” she said. “The evidence in the case has been submitted and the case has been closed for some time now.”
Proposed CCA Exit Fee (PCIA)
For San Diego Gas & Electric’s service territory
Administrative Law Judge proposal:
Residential forecast: 3.46 cents per kilowatt-hour
Medium to large commercial forecast: 2.17 cents per kilowatt-hour
Commissioner Peterman proposal:
Residential forecast: 4.25 cents per kilowatt-hour
Medium to large commercial forecast: 2.67 cents per kilowatt-hour
Here’s what customers might pay if they leave SDG&E for a community choice alternative, by Rob Nikolewski, The San Diego Union-Tribune, October 10, 2018.