CPUC Decision in Phase 2 of CCA Rulemaking

The California Public Utilities Commission (CPUC) issued a decision on the Community Choice Aggregation Rulemaking (R.03-10-003) on December 15, 2005. Four of the five commissioners voted in favor of the decision, with one commissioner recusing herself. A summary of the DECISION is included here. The full list of conclusions of law and the order to implement can be found at www.lgc.org/community.

Many of the issues in the case follow from the overarching issue of CPUC jurisdiction over Community Choice Aggregators (CCAs). The DECISION found that the CPUC’s authority over CCA is narrowly circumscribed by AB 117 and that the Commission’s primary role is to regulate the service the utility provides to the CCA and its customers.

Implementation Plan and CCA Registration

The DECISION found nothing in the statute that directs the CPUC to approve or disapprove an implementation plan or modifications to it. Nor does that statute provide authority to “decertify” a CCA or its implementation plan. It is not the CPUC’s job to determine what information should be disclosed in an implementation plan, but rather it is up to the CCA to comply with the statute.

The DECISION rejects the proposal for submission of an implementation plan to follow the advice letter process applicable to the utilities. In order to facilitate smooth operation of the CCA where its polices may affect the utility and its customers, the DECISION directs the CPUC’s Executive Director to develop an informal review process for the CCA and the utility to understand the implementation plan and the CCA’s ability to comply with utility tariffs. The process would be mandatory at the request of either the utility or the CCA; however it would implicate no approvals, either formal or informal, from the CPUC. Utilities are to include a description of the process in their tariffs.

The Executive Director is directed to prepare and publish instructions for CCAs and utilities regarding a timeline and procedures for submitting and certifying receipt of the Implementation Plan, notice to customers, notice to the CCA of the appropriate Cost Responsibility Surcharge (CRS), and registration of CCAs. An illustrative timeline is included as an attachment.

The CCA’s registration packet is to include the CCA’s service agreement with the utility and evidence of insurance, self-insurance or a bond that will cover such costs as potential re-entry fees, penalties for failing to meet operational deadlines, and errors in forecasting. Utilities are directed to cooperate fully with the CCA, as required by AB 117. The decision emphasizes the CPUC’s authority to impose substantial penalties on the utilities if they fail to do so.

Consumer Protection

The DECISION finds a very limited CPUC role for consumer protection other than those issues that would impact utility customers, such as requiring payment of a CRS. The CPUC would not intermediate between a CCA and its customers, finding no evidence that utility services provided by local governments lack in consumer protections. The CPUC will require certain types of information from CCAs, including annual reports such as those they would provide to their own local oversight agencies or bodies.

The DECISION finds the tariff should govern the relationship between CCAs and the serving utilities, not between CCAs and their customers.

Customer Notices

The DECISION finds that CCAs are responsible for ensuring customer notices comply with AB 117, and notes the CCAs’ willingness to work with the CPUC’s Public Advisor to assure notices are clear, complete and easy to understand.

Opt-out notices can be included in utility bills, at cost, but content is limited to the opt-out requirements of AB 117. The DECISION directs the utilities to include in their tariffs a cost-based service for including customer notices in utility bills.

Customer notices that are returned as unopened mail will not prevent the customer from being automatically enrolled in the CCA program. AB 117 requires that every customer be served by the CCA unless the customer opts-out. The DECISION rejects the utility proposal that customers with commodity contracts with the utility must opt-in to be served by the CCA, finding this proposal to be contrary to statute. Finally, utilities are prohibited from using ratepayer funds to market their services. They are not prohibited from using other funds to market their services.

CRS Vintaging

The CRS will be determined based on the utility supply portfolio that exists at the time the CCA either begins serving customers or the date stated in a binding notice of intent provided pursuant to the Open Season process. The Department of Water Resources (DWR) indifference fee method is adopted, consistent with the Phase 1 decision. The CRS will be adopted on a forecast basis once a year in the proceeding used to determine the DWR revenue requirement. It will be trued-up for the period two years prior as information about actual costs becomes available. Parties will have a chance to comment on whether changes in the CRS methodology that may be decided in the direct access proceeding (R.02-01-011).

The DECISION rejects CCA arguments that the utilities’ contracts executed to meet the renewable portfolio standards should be excluded from the CRS calculation. The DECISION finds that such a proposal would violate the principle that remaining utility customers are held indifferent to CCA formation.

The DECISION reiterates its finding in the Phase 1 decision that the statute does not restrict phasing of program implementation in any way. The utilities’ tariffs may not include any language limiting phase-ins. The tariffs should specify the reasonable costs of phase-ins and each utility’s obligation to cooperate with CCAs to cut-over groups of customers in ways that minimize utility and CCA costs.

The CRS vintage will apply to customers based on the year they begin receiving service under a CCA phase-in plan. IOUs had advocated the CRS vintage would be established based on the final year of any phase-in.

Cost increases related to renewals of contracts with Qualifying Facilities cannot be charged to CCA customers if the contract is renewed after the customer is taking service from a CCA.

The CRS should include no costs related to resource adequacy other than those that may have been incurred on behalf of CCA customers before the date specified in a binding notice of intent, or the date customers are actually cut-over to CCA service. The DECISION states its intent to disregard future attempts to re-litigate the elements of the CRS.

Open Season

The primary objectives of the open season process are to mitigate costs incurred by CCAs and the serving utilities and to provide a mechanism for coordinating a CCA’s cutover. The DECISION draws from language in the Long Term Resource Planning Proceeding (D.04-12-048) to allow the CCA to commit to a date on which responsibility for customer power purchases will transfer from the utility to the CCA. The Open Season is strictly voluntary and will occur annually from January 1 to February 15 or March 1, depending upon the timing when the CEC resource adequacy forecasts are due.

To participate in the Open Season, the CCA must make a binding commitment to serve customers on a specified date and be subject to costs if it fails to meet its commitment. The DECISION permits negotiated agreements between the CCA and the utility to assume some liability for power purchase strategies in exchange for relief from other risks. In all cases, the utility must manage procurement consistent with AB 117, which provides that CCAs must assume only the “net unavoidable costs” of utility power procurement.

The DECISION eliminates the requirement proposed by the utilities for a binding five year forecast. The Open Season rules should require the CCA to disclose which portion of each customer class would be subject to cut-over. The CCA will be required to disclose all relevant information about the number of customers to be cut-over, the rates, rate design and special contracts to facilitate forecasting. The information would be provided to the utility under confidentiality protections and subject to a nondisclosure agreement. If the collaborative forecasting process fails, the DECISION adopts TURN’s proposal to use default opt-out percentages for the first year of the CCA’s operations. Default opt-out percentages of 5% residential and 20% non-residential can be used to assess cost responsibility for failure to meet the service commencement date(s) specified in a binding notice of intent in the Open Season process.

CCAs will be liable for the utility’s incremental costs related to failure of the CCA to transfer customers on the dates included in its binding commitment, except for delays attributable to utility actions.

The notice of intent will be “self-executing” and relieve the utility of its power supply obligations. Additional CPUC orders to that effect are unnecessary.

The DECISION includes an Open Season Tariff as an attachment.

Renewable Portfolio Standard (RPS)

The CCA should identify in its implementation plan how it intends to comply with the
RPS, although the CPUC defers to statute on what the IP requires. The manner by which the CCA will participate in the RPS is being considered in R.04-04-026.

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