California Sets New Rules for Community Choice Aggregatorsby firstname.lastname@example.org added on 14 February 2018, Comments Off on California Sets New Rules for Community Choice Aggregators , posted in Grid Edge, Regulation & Policy, Utilities, News,
Community choice aggregators, or CCAs, have become a force that cannot be ignored.
In California, CCAs are cities or counties that have taken over key aspects of their own electricity and natural gas procurement, distribution and sales from one of the state’s three big investor-owned utilities. From a slow start in 2010, the ranks of CCAs have grown to include eight operational entities with more than a dozen more being formed or expanded at present, representing 1.85 million customer accounts.
According to the advocacy group CalCCA, this growing trend can claim credit for saving tens of millions of dollars in customer energy costs, and nearly 1 million megatons of carbon emissions in renewable energy purchased, on an annual basis. These kinds of benefits have led to CCA legislation in states including New York, Massachusetts, Illinois, New Jersey, New York, Ohio and Rhode Island.
But to the state’s investor-owned utilities Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric, CCA's are an existential threat to their business models -- a mechanism that takes away their customers, while leaving them with the burden of managing the power lines, maintenance crews, and the customer service platforms that keep the system running. How those costs are shared between CCAs and utilties has been a longstanding point of contention between the two, with the California Public Utilities Commission serving as the referee.
Last week, the CPUC adopted a resolution that will force future CCAs to take up at least one part of this common burden -- resource adequacy, or the need to procure enough energy to meet the grid’s need when energy demand is peaking.
“This has been a long time coming, but was not easy to come to a resolution,” said Elta Kolo, grid edge analyst for GTM Research. “Over the years there has been heightened tension between CCAs, utilities and the commission.”
The problem lies in the gap between how CCAs are created and how utilities procure resource adequacy. Utilities and other load-serving entities, or LSEs, have to procure resource adequacy for the year ahead, starting with an annual load forecast in April of their expected monthly peak load for the following year. Working with the CPUC and state grid operator CAISO, these are turned into RA obligations that are allocated in July, giving LSEs until October to contract for what they’ll need next year.
CCAs have been exempt from RA requirements to date, leaving utilities to include their customers as part of their load forecasts. “This scenario occurred in 2017 and will likely occur in 2018 when CCAs submitted Implementation plans and began serving customers out of sequence with the Resource Adequacy timelines,” the CPUC wrote.
When CCAs were few and small, that wasn’t such a big problem. But the exploding number and size of CCAs over the past two years have led to a significant cost shift from CCAs to the utilities, according to the CPUC’s resolution.
There are mechanisms in place to allocate longer-term utility costs to new CCAs, under the Power Charge Indifference Adjustment (PCIA) that recovers utility costs from CCA customers that were entered into on CCA customers’ behalf. But resource adequacy costs of less than one year aren’t captured by the PCIA, leaving remaining utility customers to foot the bill for their share of procuring RA.
“Energy Division has confirmed this cost shift, but that data is market-sensitive and confidential,” the CPUC’s resolution noted. But according to GTM’s Kolo, the figures add up to “stranded costs in the tens of millions of dollars for IOU customers due to submissions of load forecasts and allocations for resource adequacy.”
To fix this gap, CPUC’s resolution requires a new or expanding CCA to submit its implementation plan no later than January 1 of the year before it intends to start serving new customers, aligning its timeline with utility RA timelines. That proposal led to an outcry from CCA advocates when it was unveiled in December, since it would constitute a de-facto freeze on new developments for a year or more.
To avoid this effect, the revised resolution exempts all plans submitted or approved before December 7, 2017. That list includes the cities of San Jose, Solana Beach and Rancho Mirage, multi-city aggregations such as East Bay Community Energy and Los Angeles County Community Choice Energy, and plans by existing CCA’s Marin Clean Energy and Sonoma Clean Power to expand to surrounding communities, and represents about 3,600 megawatts of load.
Five other plans, representing about 1,700 megawatts of load, will get an expedited review to meet the April 2018 load forecast deadline, the CPUC resoltuon noted. Those include Desert Community Energy, King City and Riverside CCAs, and planned expansions by Silicon Valley Clean Energy to Milpitas and Los Angeles Community Choice Energy’s to an additional 21 cities. Other plans that meet a March 1 deadline will also have a chance to comply with rules for serving in 2019.
These rules only apply to the 2018-2019 period. In the longer term, the CPUC plans to address the issue of CCAs and resource adequacy through other formal proceedings. “Regardless of when a CCA Implementation Plan is submitted, all prospective and expanding CCAs are still subject to the Commission’s Resource Adequacy Requirements,” it wrote.
That’s in line with the CPUC’s expectation that up to 85 percent of California’s retail load could be served by CCAs or direct access providers by 2025. That will make them a critical part of the state’s energy landscape. GTM Research has pointed to CCAs as a major new market for utility-scale solar PV over the next five years, taking up the slack from utilities that have met their near-term renewable portfolio standard targets to represent up to to 45 percent of California’s utility PV demand over the next five years.
“With California’s rapidly changing resource mix and increased penetration of renewable and distributed generation, transparency and equitable allocation of costs is crucial -- especially when grid reliability is at stake,” Kolo said.
The eight operational California CCAs are Marin Clean Energy, Sonoma Clean Power, Lancaster Choice Energy, CleanPower San Francisco, Peninsula Clean Energy in San Mateo County, Apple Valley Choice Energy, Silicon Valley Clean Energy and Redwood Coast Energy Authority. Other CCAs expected to launch this year are East Bay Community Energy in Alameda County, Los Angeles Community Choice Energy and Valley Clean Energy Alliance in Yolo County and Davis.