California has put multiple major energy policies into law
this year: SB
100 and its new 100 percent clean energy mandate, SB
700 and its extension of behind-the-meter energy storage incentives,
and wildfire utility relief bill AB
901. So it was easy to overlook another piece of legislation, signed
into law last week, that will expand the state’s competitive energy market,
known as direct access.
To be sure, SB 237 only slightly increases the cap in place since
the state’s 2001 energy crisis on how much energy big commercial, industrial,
government or institutional customers can buy from competitive energy
providers, instead of their local investor-owned utility.
But it also sets a course for the California Public
Utilities Commission (CPUC) to start a proceeding on whether to expand the
direct access program. This will bring it under the direct focus of regulators
like CPUC
President Michael Picker, who has identified direct access (DA), along with
the burgeoning community-choice
aggregation (CCA) movement, as key
challenges facing the state.
Expanding DA is also unpopular with some environmental
groups that opposed SB 237, on the grounds that it could actually
undermine CCAs with another non-utility option that merely meets the state’s
renewable energy and carbon reduction goals, rather than pushing to exceed
them, as most CCAs are.
But for its supporters, SB 237 is a logical and conservative
step forward for customer choice in how they procure energy.
“Direct access really gives our customers both access and
control over their energy choices,” said Caitlin Marquis, federal and
state policy manager for Advanced Energy Economy (AEE), which represents major
corporations and energy companies. “Whether that’s renewable energy, energy
storage or other pieces, every customer is different, and direct access gives
them the flexibility to meet their goals on their own timeframe. That’s the
primary appeal.”
SB 237 actually started out with language that would have
completely opened up the DA market, she noted. That was a politically
improbable proposal, but one that was able to be scaled down to a level that
earned the support of labor groups as well as large energy buyers, she
said.
Most critically, investor-owned utilities have opposed DA
and CCA expansion in the past didn’t put their lobbying energy behind opposing
SB 237 this year, said Amisha Rai, AEE’s senior director of California
policy. “The utilities had their eye on wildfires, wildfires, wildfires, so
they were not weighing in on this bill,” she said. “That’s a change — in
previous years, this was a very difficult conversation to have with IOUs.”
“The constraints on DA in California stem from historic
concerns around the energy crisis,” Rai noted. The program was suspended in
2001, and was only reopened on a limited basis with the 2009 passage of SB 695. “There’s always been concern at the Capitol
and amongst the regulatory community that there have to be some restraints on
DA, and if it’s opened, it has to be narrow and measured.”
That’s a good description of SB 237’s immediate increase in
the current DA cap. The bill will add 4,000 gigawatt-hours to an existing
24,000 gigawatt-hours of load that can be served by electric service providers
(ESPs), a move that will increase the share of statewide load in the DA market
from about 13 percent today to about 15.5 percent. That’s a slow growth
rate compared
to CCAs, which account for about 10 percent of statewide load today but
added nearly 1 million customer accounts over the past year, and are projected
to reach 16 percent of the state by 2020, including large swaths of Pacific Gas
& Electric territory.
But for the big energy buyers represented by AEE’s Advanced
Energy Buyers Group, any increase is welcome, Marquis said. As of March 2018,
the waitlist for DA was about 8,000 gigawatt-hours of load, all waiting for an
existing DA customer to leave the program before they could get in, Rai said.
While an additional 4,000 gigawatt-hours is a small increase, “certainly for
some companies or customers on the waiting list, this will get them off
it.”
The more lasting effect of SB 237 will be its directive to
the CPUC to submit to the legislature by July 2020 a report on whether it
should consider a reopening of the DA program, she said. That’s where the
potential conflict between expanding DA, maintaining a reliable and financially
stable utility sector, and meeting the state’s wide-ranging energy and
environmental policies will come into play, according to Rai.
ESPs already have to comply with the state’s renewable
portfolio standard, which has now been boosted to 60 percent by 2030 under SB
100, Marquis noted. The companies making up AEE’s membership are interested in
DA largely to seek out competitive offers that can increase their share of
renewable and low-carbon energy, and “there are definitely companies that are
using direct access to sign long-term renewable contracts and to make purchases
like that through direct access.”
ESPs providing energy under DA also have to procure resource
adequacy (RA) to meet peaking capacity, usually by contracting with
natural-gas-fired power plants, just as investor-owned utilities, municipal
utilities and CCAs do. Arguably, the energy companies contracting with C&I
customers under DA are well equipped to handle this — a factor that may
stand in contrast to the struggle some CCAs have had in meeting RA
requirements.
SB 237 sets several additional requirements for the CPUC to
consider in making its recommendations on reopening DA. Those include assuring
that it’s consistent with the state’s greenhouse gas emission reduction
goals, doesn’t increase air pollution, ensures electric system
reliability, and doesn’t cause undue shifting of costs to “bundled service
customers,” or those customers who remain with investor-owned utilities.
These are the same concerns that CPUC President Picker has
expressed about CCAs, which along with DA are expected to serve a stunning 80
percent of the state’s load by 2030, according to CPUC projections. As Rai
noted, AEE’s members “do business with [investor-owned utilities], they do
business with CCAs. We don’t have a ball in either court. But it’s our job to
figure out how this will all work, and how it fits into our members’ energy
futures.”
That includes addressing the concerns of SB 237 opponents
that expanding DA will increase the share of energy supplied by companies that
aren’t as closely regulated as IOUs, potentially leading to an erosion of the
state’s ability to meet its long-range energy and carbon goals, she
said. “How do we ensure that the state standards are met across the board,
whether it’s a direct access provider or a CCA? How do we maintain transparency
and accountability and all the other metrics that are important to the ratepayers?”
“All of these issues, I think, are coming to a head,” Rai
said. “For the next governor, this is going to be probably the biggest issue
they’re going to have to figure out. It hits on every side of the energy
debate.”
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