As California customer choice options expand, regulators work to ensure grid costs are equitable

Dive Brief:

Community choice aggregation (CCA) is growing rapidly in California, and a new report estimates that at current rates the alternative providers will serve more than half the state's customers within a decade.
The new analysis from Next 10 finds CCAs are currently serving an average of 52% renewable power, while the state's investor-owned utilities (IOU) are aiming for 50% by 2020. CCA offerings range from 37% to 100% renewables, while IOU plans range from 32% to 44% renewables.
Because of the rapid growth, state regulators are working to ensure grid costs are equitable and that customers remaining with an IOU don't wind up paying more as a result of CCA attrition. The California Public Utilities Commission (CPUC) on Wednesday issued a proposal to reform the amount that CCA and Direct Access customers pay in order to protect remaining customers.

Dive Insight:

More than half the state's CCAs have launched in the last two years, according to the Next 10 analysis, which helped set the state about 10 years ahead of its renewable energy goals.

But the report also finds that despite CCA's renewables use, they have yet to have a significant impact on the grid. When a CCA starts, it often gets power from existing power plants. In the longer-term, CCA power procurement practices will have a larger impact.

But as customers defect from IOUs for alternative suppliers, regulators are focusing on ensuring the costs of actually owning and managing the grid remain fair.

The CPUC could consider a proposal at its Sept. 13 meeting to alter the Power Charge Indifference Adjustment (PCIA), which is currently calculated as the difference between an IOU's portfolio costs before its customers left for a CCA, and the current market value of those contracts. The proposal would reform elements of how the current market price of the contracts is determined, and adds a true-up which would correct any errors based on actual market results.

To add stability, the proposal would also adopt a cap on the annual change in the PCIA rate; costs above or below the caps would be tracked for later collection.

New rules would also permit alternative suppliers and IOUs to negotiate a pre-payment of a departing customer's PCIA, which would terminate future responsibility. Regulators would need to approve the payment.

The CPUC proposal would also open a new phase in the proceeding to examine proposals to reduce the size of utility portfolios.