A group of almost 100 board members from 11 different community choice aggregators sent a letter to the California Public Utilities Commission Sept. 24, asking it to take prompt action to resolve the Power Charge Indifference Adjustment fee.
The PCIA is the mechanism that calculates the fees customers pay when they leave investor-owned utility service for CCAs and direct-access providers, and is frequently cited by CCA staff and board members as the root of higher utility fees.
The fee "has risen more than 600 percent since 2013 in the Pacific Gas & Electric service area, and nearly doubled since the CPUC changed the rules in 2018," according to the letter. "Raising exit fees by hundreds of millions of dollars a year, now in the middle of a global pandemic and its accompanying economic crisis, is entirely unacceptable.
"The 2018 PCIA decision promised stakeholders transparency and stability," the letter continues. "Neither outcome has occurred. The heart of the problem is that the current regulatory structures governing exit fees provide no incentive for the IOUs to reduce their portfolio costs—an outcome that hurts all energy consumers in the state, customers of the IOUs and the CCAs . . . [W]e call on the Commission to immediately take actions to reduce the PCIA for all customers (IOU & CCA) and smooth PCIA volatility."
Specifically, the CCAs want the CPUC to adopt a recommendation proposed by the California Community Choice Association and Southern California Edison that would require utilities "to allocate resources to load serving entities whose customers pay for them, and to encourage the optimization of supply portfolios." They also want the commission to institute transparency measures regarding the PCIA fees so consumers understand what they are paying for.
The CPUC in October 2018 issued a decision modifying the PCIA methodology [D18-10-019]. Simultaneously, it opened a second phase in the proceeding. The commission on Feb. 1, 2019, then issued what it called the Phase 2 scoping memo, which directed the various parties in the matter to convene three working groups to develop new PCIA-related proposals that the commission could consider.
The proposal to which the letter refers is an order instituting rulemaking to review, revise and consider alternatives to the PCIA [R17-06-026]. A final report by Working Group 3 was filed to the commission Feb. 21, which was later than the original deadline "[d]ue to the complexity and number of issues to be resolved."
A proposed decision on PCIA alternatives is expected in the third quarter of 2020.
That the PCIA issue has not yet been resolved has presented several CCAs with challenges.
Each of the aggregators has a subtly different issue with the PCIA, but San Jose Mayor Sam Liccardo, a signatory to the letter, said in a conversation with California Energy Markets that there are "three issues that are relatively universal" for CCAs within PG&E's service area. The first is that fees have skyrocketed and are due to increase again. "The problem is that rate of increase is not correlated with any market factor." Instead, the increases are political, Liccardo said. There is also "no guardrail for the exit fee," and the public should be able to have access to and understand how the fees are assessed.
"The nature of the exit fee does not give utilities any market-based incentives to reduce the cost of operating older assets," Liccardo said. This "saddles the ratepayers with the burden" of aging, inefficient generation, which some who signed the letter say poses a major impediment to transforming the electric grid as well as CCA operations.
"My objection to how PCIA has been administered—and I've said this publicly on several occasions—is, to oversimplify it, a question of 'moral hazard': the way they've been handled, IOUs—and PG&E in particular—have no incentive to manage their portfolios or to pursue the best contracts," Portola Valley Mayor Jeff Aalfs, who is also chair of the Peninsula Clean Energy board, said in an email to CEM. "PG&E knows they'll get almost anything they ask for back from PCIA, so why renegotiate contracts or divest from generation assets?"
Unique to San Jose and a few other jurisdictions are "issues around resource adequacy," Liccardo said, adding that PG&E has "withheld capacity from the market precisely when they know CCAs will need to be in the market acquiring that capacity." He said this has triggered fines ranging in the "millions of dollars" against San Jose Clean Energy, even though the city is paying for the same energy through the PCIA.
The PCIA was mentioned in the Solana Energy Alliance board of directors' April decision to reduce the discount for generation relative to that of San Diego Gas & Electric. City Manager Greg Wade said that since 2017, the PCIA or "exit fee" charged to SEA's customers has increased by slightly more than 52 percent—from 2.095 cents/kWh to 3.187 cents/kWh.
In response, SDG&E spokesperson Helen Gao said in an email to CEM that the PCIA is not set by the IOU and is "designed to minimize cost shifts between CCA customers and customers who remain with their traditional utility." She said any changes to PCIA fees are made by the CPUC. The most recent changes were made "in an open and transparent process that involved all interested parties including Solana Beach, to adjust the PCIA to ensure customers who are not in a CCA are not forced to pay higher costs as a result" (see CEM No. 1588).
San Jose Clean Energy residential customers pay $14 per month in PCIA fees, on average, while small businesses pay $68 a month. Combined, the city pays roughly $125 million a year in PCIA fees. For perspective, Liccardo said that in a city of 1 million residents, every person living in San Jose is paying $125 per year in PCIA fees, including children.
The PCIA charge that PCE customers pay varies. Currently, it's typically between a quarter and a third of a customer's total generation charge.
In 2021, Aalfs said, "there is a 'trigger' that could more than double [the PCIA], as PG&E claims it is undercollecting." He said PG&E doesn't share all of the data needed to assess that and the utility's other claims.
Aalfs said CCA customers should pay an exit fee to compensate IOUs for their early investments in solar, but added that IOUs must also "face more substantive consequences for what have proven to be poor decisions in their procurement."
The letter reportedly gained additional signatories following its formal release. Members of the East Bay Community Energy board were among them, according to EBCE Executive Director Nick Chaset.
A news release accompanying the letter states that "[t]he elected officials signed as individuals and their activities should not be construed as official actions or representations of the cities or municipalities that they represent."
There are currently 21 CCAs in California, serving more than 10 million customers.
Liccardo said he hopes the CPUC "will take the enlightened path and consider these proposals." If their pleas are unsuccessful, the CCAs will be forced to turn to legislators such as Ash Kalra (D-San Jose) for help, he said.
Aalfs said his priority is ensuring that clean electricity is provided to Californians at the lowest possible price. "I think CCAs are an effective part of that mission, and the PCIA as currently administered creates unnecessary barriers to delivering clean energy to state residents at the lowest price possible," he said. "It's complicated, but I believe that there is a better resolution if all parties, and the CPUC in particular, are willing to work toward it."