ACTION ALERT: Oppose CPUC Undermining Community Choice

The California Public Utilities Commission (CPUC) is scheduled on October 11 to consider a dramatic increase in the on-going departing load charge levied on Community Choice customers. This change threatens the viability of Community Choice programs in favor of the monopoly utilities and is therefore contrary to California Community Choice law. It is urgent to write legislators and CPUC commissioners to oppose this pending action.

UPDATES (details below)

  • On October 9, the Mayors of San Francisco, San Jose and Oakland issue a Joint Request for delay in the PCIA proceeding.
  • On October 5, the CPUC released a revised “Alternate Proposed Decision” (APD).  The new APD is no better than the original.  Read more below.  Last chance to STOP this action.

Please use our Action Network link to send a letter to Legislators’ energy staffers and CPUC Commissioners opposing the APD.

For more information, read on…

Background

The Power Charge Indifference Adjustment (PCIA) is an on-going fee imposed by the CPUC. It is levied by Investor-Owned Utilities (IOUs) on customers of Community Choice energy programs. The PCIA threatens to undermine the viability of Community Choice.

The PCIA is a departing load charge: it passes on higher costs to Community Choice customers for renewable and brown power contracts IOUs incurred for customers who departed to Community Choice programs—energy that the IOUs can no longer sell to those customers at competitive market prices. According to statute, this monetary “loss” to the IOUs must be calculated as the difference between the actual costs of procurement minus the current market value of these stranded energy resources.

Regrettably, the determination of the PCIA charge is anything but transparent. It relies on IOU information that is not public. As such, it is not known if IOU procurement costs are unavoidable or incurred fairly, how these were calculated, or how the market value of these “stranded” energy resources is established. Evidence presented in the California Public Utility Commission (CPUC) PCIA proceeding makes clear the IOUs often paid exorbitantly high amounts for solar and wind contracts in the years that these resources were contracted, much higher than the competitive market price at the time. Much of the PCIA cost burden is associated with these excessively high contract payments.

As presently implemented, PCIA charges continue indefinitely. No matter how long ago a customer choice a Community Choice program, the IOU will continue to pass on departing load charges for electricity that the customer is not using.

The impact of the PCIA is considerable. It already hits Community Choice programs with growing, unpredictable charges, undermining their competitiveness relative to the IOUs. These unpredictable charges also threaten the stability and financial viability of Community Choice programs. The CPUC’s PCIA implementation has consistently favored the IOUs, leading to a wave of calls to abolish the PCIA entirely. Or, if not, to at least reform it to ensure a level competitive playing field.

Current Status

In June 2017, the CPUC launched an examination of possible PCIA reforms. IOUs, Community Choice programs and advocates, and many other parties have participated; comment rounds, workshops, extensive financial modelling, have all been part of this proceeding. On August 1, 2018, Administrative Law Judge Roscow issued a “Proposed Decision” (PD). Shortly thereafter, on August 14, CPUC Commissioner Peterman issued a competing “Alternate Proposed Decision” (APD).

While neither draft gets rid of the PCIA, the PD provides more balance to PCIA determination per statutory requirements and so is significantly less damaging to Community Choice programs than current methodologies. In contrast, the APD dramatically increases cost shifting from IOUs onto Community Choice. In the words of the California Community Choice Association (CalCCA), the APD would deal a “devastating blow” to Community Choice programs, both existing and planned.

A revised APD released October 5 corrects none of these flaws. See the redlined version and the clean version, here. Even worse, the CPUC effectively precluded any comment on these revisions, by releasing them during the so-called “quiet period” prior to the October 11 decision.  Unless action is delayed, these changes will be rammed through without any comment from the Community Choice agencies.

Position of the California Alliance for Community Energy

The Alliance calls on the CPUC to comply with AB 117 and soundly reject the APD.

The Alliance first released a position paper in opposition to the PCIA in March 2016, as a comment letter to CPUC commissioners, calling for the phasing out of the PCIA entirely. It seems that legislative action will be necessary to achieve that result.

In the meantime, the Alliance is opposed to any implementation of the PCIA that is structured to disadvantage Community Choice programs vis a vis the IOUs. We also oppose PCIA charges that undermine the ability of Community Choice programs to deliver environmental, economic, and social justice benefits to the communities they serve.

In particular, the Alliance calls on the CPUC commissioners to reject the APD as an explicit effort on behalf of the IOUs to undermine Community Choice programs.

The APD represents an aggressive attack on Community Choice programs in the following ways:

  • It increases PCIA charges by including as allowed procurement costs, utility-owned generation, contrary to legislative statute and for a potentially unlimited time period;
  • It fails to provide an absolute cap on PCIA charges, eliminating the predictability and stability of PCIA charges that is essential for Community Choice planning and viability;
  • It increases PCIA charges by replacing the statutory valuation of “estimated” losses with a formula that includes only losses from the actual sale of stranded resources. This means there is an incentive for the IOUs to maximize losses by selling off stranded resources cheaply or not at all.
  • It represents CPUC shielding IOU shareholders from all risks and responsibility regarding the procurement practices of the IOUs, passing the burden of IOU malfeasance onto Community Choice customers.

The APD would force Community Choice customers to pay for IOU commitments that are: a) unpredictable and non-transparent; b) above market price; c) made after the Community Choice program is established; d) made through a non-competitive processes; and/or e) at prices hidden behind layers of IOU confidentiality requirements.

California now has 18 operational Community Choice programs in 160 communities across California, serving eight million customers. These programs are leading the way to a future in which our State’s aggressive greenhouse gas reduction targets are not just met, but are met ahead of schedule, cost-effectively, and with economic and social benefits to their communities. To comply with the Legislature’s intent in AB 117, creation of the Community Choice option for local governments, the CPUC must ensure that avoidable, unfair, anti-competitive costs are not shifted to these programs.

CPUC’s adoption of the APD would undermine Community Choice programs, in direct violation of the AB 117. This action would showcase yet again the CPUC’s bias toward the IOUs and against Community Choice programs.

Alliance Action So Far

  • Action Alert: Reject the Alternate Proposed Decision, September 2018
  • Position Paper Our Position on PCIA , March 2016

What You Can Do

First – Send an email through the Alliance’s Action Network link, here. It’s addressed to the energy staffers of legislators with Community Choice in their Districts, with copies to the CPUC commissioners. You can edit the letter as you like. Then share it with your friends, Facebook and Twitter followers. This is a campaign about numbers – the MORE constituents weighing in, the better.

Second – Send a second email to additional Legislators, those just learning about Community Choice.  Here’s the Action Network link to that letter – same wording, different mailing list.

Third – If you are a member of an organization, urge your organization to take Steps 1 and 2.  Or adopt the letter (below) as you see fit, and to get your members to act.

Finally — Copy the Governor on your letters.  Send to Catalina.Hayes-Bautista@gov.ca.gov; Alice.Reynolds@Gov.ca.gov or jerry.brown@gov.ca.gov.  Make sure he knows that choosing a PCIA methodology that undermines Community Choice is:

      • Not acceptable.
      • Against the Legislature’s intent to create and maintain Community Choice programs as competitive alternatives to IOUs, and
      • Damaging to all the clean energy progress made thus far, undermining the 100% renewable objectives just passed in SB 100, and NOT in the State’s best interest.

Additional Resources

  • Statement by the Mayors of San Jose, San Francisco and Oakland, requesting a delay in PCIA proceeding — October 9, 2018
  • “120 Elected Officials Urge CPUC to Issue Fair and Equitable PCIA Decision” – CalCCA Press Release September 14, 2018
  • “CalCCA Calls on Commission to Reject Alternate PCIA Proposal” – CalCCA Press Release September 7, 2018
  • Legislative letter to CPUC Commissioners urging rejection of Alternate PCIA Proposal — August 31, 2018
  • “CalCCA Responds to Commission’s PCIA Proposal” – CalCCA Press Release August 3, 2018.

Sample Letter

Dear California legislator,

I’m writing to urge you to call on CPUC commissioners to comply with AB 117, the Community Choice law, and soundly reject Commissioner Peterman’s Alternate Proposed Decision regarding the Power Charge Indifference Adjustment (PCIA), which would undermine Community Choice energy programs across California.

The Alternate Proposed Decision represents an aggressive attack on Community Choice:

  • It increases PCIA charges by including as allowed procurement costs, utility-owned generation, contrary to legislative statute and for a potentially unlimited time period;
  • It fails to provide an absolute cap on PCIA charges, eliminating the predictability and stability of PCIA charges that is essential for Community Choice planning and viability;
  • It increases PCIA charges by replacing the statutory valuation of “estimated” losses with a formula that includes only losses from the actual sale of stranded resources. This means there is an incentive for the IOUs to maximize losses by selling off stranded resources cheaply or not at all.
  • It represents CPUC shielding IOU shareholders from all risks and responsibility regarding the procurement practices of the IOUs, passing the burden of IOU malfeasance onto Community Choice customers.

The PCIA methodology imposed via the Alternate Proposed Decision would be extremely damaging to Community Choice programs throughout California.

Please oppose any PCIA methodology that disadvantages Community Choice programs vis a vis the IOUs. Please also oppose any CPUC action that undermines the ability of Community Choice programs to deliver environmental, economic, and social justice benefits to the communities they serve.

California now has 18 operational Community Choice programs in 160 communities across California, serving eight million customers. These programs are leading the way to a future in which our State’s aggressive greenhouse gas reduction targets are not just met, but are met ahead of schedule, cost-effectively, and with economic and social benefits to their communities. To adhere to the Legislature’s intent in AB 117 (2002), which created the Community Choice option for local governments, the CPUC has a duty to ensure that unfair, anti-competitive costs are not shifted to these programs, undermining their financial viability.

CPUC’s adoption of the APD would undermine Community Choice programs, in direct violation of of AB 117. This action would showcase yet again the CPUC’s bias toward the IOUs and against Community Choice programs.

We therefore ask you to call on the CPUC to comply with AB 117 and soundly reject the APD.

Sincerely,