MCE and the other eight community choice aggregators in Northern California will be watching closely if Pacific Gas and Electric Co. files for bankruptcy as expected on Tuesday.
Assembly Bill 117, which made it possible for local governments in California to buy electricity directly from suppliers and sell it to their residents, was passed by the Legislature in 2002 on the heels of the state’s failed experiment with deregulation of the electricity market and PG&E’s related bankruptcy in April 2001.
Community choice aggregators in Northern California focus exclusively on securing electricity for their customers. Transmission and distribution of the electricity as well as meter reading, billing and revenue collection are left up to the investor-owned utility, PG&E.
“CCAs will want to make sure there is no interruption in that revenue collection and billing process, and the transfer of revenue that keep the CCAs operating,” said Shawn Marshall of Mill Valley, executive director of LEAN Energy U.S., a nonprofit organization that supports the formation of CCAs nationwide.
She said CCAs will also want to make sure they and their customers are not asked to pick up the tab from contract restructuring due to the bankruptcy that may result in some PG&E power vendors “being forced to take a haircut.”
Longer term, however, a PG&E bankruptcy could benefit CCAs, Marshall said.
For example, she said some of PG&E’s transmission and distribution could be municipalized, allowing CCAs to get involved in that end of the business.
In a release issued on Dec. 21, the California Public Utilities Commission, which regulates PG&E and the CCAs, said it is considering a range of possibilities in response to PG&E’s tarnished safety record and threatened financial state due to related lawsuits. Those possibilities include reconstituting the company as a publicly owned utility.
The San Francisco Public Utilities Commission, which operates CleanPowerSF, San Francisco’s Community CCA program, has said it is exploring the possibility of acquiring or building electrical infrastructure assets.
Marshall said longer-term CCAs could also benefit if the bankruptcy proceeding results in the restructuring of some of PG&E’s older, more expensive contracts. That might result in customers leaving PG&E to join a CCA having to pay lower exit fees.
When a PG&E customer switches to MCE or another community choice supplier, PG&E is permitted to charge that customer an exit fee to compensate it for the power contracts it previously entered into to supply that customer electricity. The fee was imposed by the California Public Utilities Commission to ensure that customers remaining with the utilities do not end up footing the entire cost of the contracts.
Dawn Weisz, MCE’s chief executive, said the main thing CCA customers need to know is, “There won’t be any impacts to community choice aggregation customers due to this potential bankruptcy filing.”
“PG&E has stated publicly that they will continue in a business as usual fashion,” Weisz said. “The lights will stay on. This was the case when PG&E filed for bankruptcy protection in 2001, and we don’t expect anything different to happen here.”
Severin Borenstein, a business professor at the University of California, Berkeley, and faculty director of the Energy Institute there, said, “The bankruptcy itself is not going to change PG&E’s function as a transmission and distribution provider so it’s not going to hurt CCAs in an actual delivery sense.”
He doubts that many CCAs will want to get into the transmission and distribution business.
“They are not in a physical energy business, and I’m pretty sure they don’t want to be,” he said.
Borenstein, however, sees PG&E’s bankruptcy as an opportunity for CCAs to woo new customers. He said the filing will be a blow to PG&E’s reputation.
“Part of what has made the CCAs so attractive is they are viewed more positively by people in the towns which have joined,” Borenstein said. “So I think the bankruptcy will accelerate interest in CCAs.”
In addition, Borenstein said, “There is a real question regarding the investment of PG&E in renewables if they’re in bankruptcy.”
He said if PG&E has to cut back on investments in renewables that could serve to further differentiate the CCAs’ product.
“They already make a big deal of being much greener that PG&E, and the reality is the difference isn’t that large,” Borenstein said. “It could potentially become larger.”
MCE says 61 percent of its energy comes from renewable sources, while PG&E says 33 percent of its energy comes from renewable sources.
Weisz said MCE signed three new contracts with renewable energy producers at the end of the year. The producers — solar farms in Fresno County and Lancaster and a wind farm in Mohave – will deliver 728,000 megawatt hours of electricity annually.
If the PUC gives PG&E permission to pass along costs to ratepayers both PG&E and CCA customers will feel the pain equally. PG&E and CCAs charge different rates for their electricity, but all customers pay the same amount to maintain the electrical grid.
In December 2003, the PUC approved a bankruptcy plan that required PG&E’s customers to pay the company $7 billion to $8 billion over nine years. PG&E’s shareholders were required to contribute $2 billion in lost dividends.
“The collection of fees is bifurcated so customers are billed directly by PG&E for the transmission and distribution activity separate from the generation activity,” Weisz said.
Marshall said that also means that PG&E can’t blame increased competition from CCAs for its maintenance issues.
“The reason that PG&E is in the spot that it is in has nothing to do with emergence of community choice,” Marshall said. “It has everything to do with their maintenance of infrastructure, or lack thereof.”
Marin energy aggregator could benefit from PG&E bankruptcy, by Richard Halstead, Marin Independent Journal, January 27, 2019.