On Wednesday, Stephen Roscow, the Administrative Law Judge of the California Public Utilities Commission (CPUC) handed down its draft decision on the exit fee that will be charged by monopoly utilities in California to customers that switch to Community Choice Energy programs. This is the long-anticipated blueprint for ensuring ratepayers aren’t unfairly burdened with rising electricity bills as popularity soars for CCEs as alternatives to investor-owned utilities. Lobbyists for San Diego Gas & Electric’s parent company, Sempra Energy, have repeatedly argued that adoption of the public-energy program in San Diego, also known as community choice aggregation, could pose significant financial risks to cities, as well as residents and businesses.
Major highlights of the ruling include a cap on changes in the PCIA to provide greater stability for all customers; a measure to ensure that electricity market value forecasts are current; a proper valuation of renewables; and the ability of CCEs to negotiate prepayment of the exit fee with SDG&E.
Lobbyists working with Sempra to challenge the adoption of community choice in San Diego County said they were still reviewing the state’s proposal. “We look forward to weighing in on this critically important issue for ratepayers,” said Tony Manolatos, spokesman for the Clear the Air Coalition. (note added: see our previous reports on Clear the Air Coalition as a front for Sempra's lobbying arm, Sempra Energy here, here, and here). SDG&E has yet to respond to the Union-Tribune's request for comment.
Specifically, the commission’s proposal would refine how utilities are compensated for customers who join a community choice program — overhauling a highly technical formula for calculating the so-called exit fee, also known as the power charge indifference adjustment.
Under community choice, an electrical utility, such as SDG&E, continues to operate the electrical grid and charge for delivering power. However, once a program is approved, elected officials assume control of the buying and selling of electricity for customers in their jurisdiction — inking new contracts for generation from everything from natural gas to wind and solar power. The Legislature has maintained that ratepayers are automatically enrolled in a community choice program once it’s formed, despite numerous attempts by utilities to change the state rule. Consumers can choose to opt out if they prefer the rates of their local utility company.
Community choice programs pay the exit fee to their local utility on behalf of households and businesses that join the government-run operation. This is to ensure that customers who remain with a utility don’t end up paying higher rates as a result of long-term investments by the utility, most notably for contracts with power providers. The commission said last year that it planned to tweak the formula after both utilities and community-choice advocates complained about its structure.
The outcome of this week’s proposed ruling has been the subject of much debate, especially in the city of San Diego as officials weigh adoption of community choice to help meet its legally binding goals to slash greenhouse gases. The city is expected to vote on whether to adopt community choice by the end of the year as part of its effort to use 100 percent renewable energy by 2035. SDG&E is offering a competing proposal, but so far details have been scant.
Supporters of community choice agree it’s a tremendous positive outcome for community choice aggregation programs, and an annual cap on adjustments to the fee outlined in the new proposal should provide financial assurances for cities such as San Diego that are considering CCE. “The sooner the city council votes for local choice, the sooner families and businesses will finally be able to choose their electricity provider, retain revenue for the public good and grow our local economy,” said Benjamin Eichert of San Diego Community Choice Alliance. Mayor Kevin Faulconer’s office has yet to comment on the commission’s proposed ruling.