As a California Public Utilities Commissioner, I am obligated to ensure that the choices made by one group of electric customers don’t have adverse financial impacts on other customers who lack similar available opportunities. In the competitive, complex and technical world of electricity generation that’s not a simple task. But that’s what the CPUC will vote on this Thursday.
By Carla J. Peterman
Carla J. Peterman is a California Public Utilities Commission member. Her email is email@example.com. She wrote this commentary for CALmatters.
I support the increasing number of choices that consumers and businesses have to more directly manage the electricity they need to thrive.
In fact, by next year, nearly half of Pacific Gas & Electric Co.’s customers will be served by alternative providers.
As a California Public Utilities Commissioner, I am obligated to ensure that the choices made by one group of electric customers don’t have adverse financial impacts on other customers who lack similar available opportunities.
In the competitive, complex and technical world of electricity generation that’s not a simple task.
Those obligations have been my main focus as the Public Utilities Commission approaches an important vote Thursday to update an arcane financial formula known as the Power Charge Indifference Adjustment or PCIA for short.
I know that’s a mouthful. Most people have never heard of the Power Charge Indifference Adjustment. Simply put, the PCIA protects against unfair cost shifts as some customers seek alternative sources of electricity.
One of the main alternatives is community choice aggregators. From San Francisco to Davis, municipalities are establishing these entities to buy and supply electricity, bypassing traditional utilities such as PG&E.
The Power Charge Indifference Adjustment ensures that customers who leave traditional utilities for community choice aggregators do not pay more than their fair share of costs for power that was bought on their behalf before they left their utility.
The PCIA works the other way, too. Customers who stay with a utility don’t get stuck paying back the costs for power that was bought for customers who now are served by community choice aggregators.
Let me explain this more.
Since most utility planning happens on 10 and 20-year horizons, a utility must anticipate what customers will demand far in the future and make investments based on that planning.
The majority of existing costs were incurred to bring online thousands of megawatts of renewable solar and wind energy in the early years of California’s groundbreaking renewable energy program.
These investments created California jobs and are producing renewable energy that benefits our entire state. Because these projects were financed with long-term power purchase agreements, the obligation to pay for them and the benefits they provide remain, even as customers transition to other providers.
That brings me to the issue before the Public Utilities Commission on Thursday.
Everyone versed in the Power Charge Indifference Adjustment formula agrees it is not working as intended. Over time, the formula got out of line with today’s prices for solar, wind and other renewable energy, and other electricity needed to ensure lights come on when you flip the switch.
My colleagues and I have spent the last year analyzing what is wrong with it and developing a plan to fix it. As the lead commissioner assigned to this issue, I have examined an unprecedented amount of data on procurement costs and cost shifts.
On Thursday, my fellow commissioners will consider two proposals to set the new PCIA. One is by an administrative law judge and one is my alternate proposed decision.
Both find that the current Power Charge Indifference Adjustment methodologies overestimate the market value of the utilities’ portfolios. That unfairly reduces the fee customers are charged when leaving a utility for a new electricity provider.
Neither the judge’s proposal nor mine would increase overall costs or allow the utilities to increase their profits.
Rather, the proposals seek to resolve which customers should pay which costs. As with everything the CPUC does, both proposals consider the impact on our state environmental targets and vulnerable populations.
For residential customers in PG&E’s territory, the expected bill impacts from either proposal would be modest. Further, neither proposal would increase costs disproportionately for low-income customers. And neither would compromise California’s aggressive environmental goals.
The main difference between the two proposals is that mine finds that utility-owned generation, such as the soon-to-close Diablo Canyon Nuclear Power Plant and large hydroelectric facilities, should remain in Power Charge Indifference Adjustment calculations.
My job is not to pick winners or losers. It’s to do what’s fair for all customers while providing stability for California’s electric grid and communities as they exercise their right to choose.
Collectively, we have a lot to accomplish to serve all of California with clean and reliable power. By addressing the PCIA, we will be one step closer to having a fair playing field for different customer service models to flourish for many years to come.