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CPUC Comments on FCC Ending Net Neutrality Protections

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The Federal Communications Commission (FCC) voted last week to repeal net neutrality rules that require Internet service providers to treat websites and online services equally. In essence, the FCC's rollback means that Internet service providers can control Internet traffic and have the ability to charge certain websites for faster download speeds. 

 

In July and August 2017, the CPUC submitted comments in response to the FCC's Notice of Rulemaking that resulted in Thursday's FCC decision. The CPUC urged the FCC to keep the non-discriminatory rules adopted in 2015, which are consistent with California's continued efforts to promote fairness in the telecommunications market.

 

The CPUC further urged the FCC to ensure States' abilities to promote competition and advance universal service in the telecommunications market, preserve public safety, and ensure the continued quality of telecommunications services. The CPUC's comments raised concerns regarding possible consequences to the federal Lifeline program, utility pole safety, consumer privacy rights, and access to the Internet by persons with disabilities.

 

Shortly after the FCC's vote on Thursday, California state senator Scott Wiener announced that he intends to introduce legislation that would require net neutrality rules in California.

 

"Repeal of net neutrality is egregious because it leaves customers without protections - it's a disservice for democracy," said CPUC Commissioner Martha Guzman Aceves.

 

The CPUC  continues to be committed to the notion that consumers should have fair and equal access to the Internet.

CPUC Proposal Would Place Winter Moratorium on New Commercial and Industrial Natural Gas Hooks Ups for Service From Aliso Canyon

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Today we issued a proposal that, if approved by our Commissioners at our January 11, 2018 Voting Meeting, would order Southern California Gas Company (SoCalGas) to implement an emergency moratorium on new commercial and industrial customer connections in areas of Los Angeles County that would rely on Alison Canyon Natural Gas Storage Facility for service. The moratorium, which is being proposed in order to ensure reliability for existing customers, would last from January 11, 2018 until further CPUC action or March 31, 2018 (the end of the natural gas heating season), whichever is earlier.

 

The moratorium would help avoid increased demand for natural gas by new commercial and industrial customers until such time as the CPUC is assured by SoCaGas that there is adequate capacity in the system to meet foreseeable need.

 

The proposal is available at www.cpuc.ca.gov/Aliso.

 

The CPUC's Aliso Canyon Winter Risk Assessment Technical Report 2017-18 Supplement issued on November 28, 2017, identified an emergency moratorium on new connections as a potential measure to avoid increased demand for natural gas. The report described a series of outages on the SoCalGas system that includes all of the major system elements: storage facilities, pipelines, and compressor stations. The outages collectively put SoCalGas' system reliability at risk this winter and jeopardize reliability of natural gas service to customers.

 

The moratorium would only affect new connections for industrial and commercial connections. It would not affect residential connections or the transfer of existing connections.

 

The typical 30-day comment period for this proposal has been reduced due to the unforeseen emergency situation caused by unplanned gas system outages and maintenance issues detailed in the Technical Report that threaten to severely impair public health and safety. Comments are due January 4, 2018.

Proposal Would Require PG&E to Seek Bids for Energy Storage to Replace Three Fossil Plants

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We have issued a proposal (Resolution E-4909) that, if adopted at our January 11, 2018 Voting Meeting, would require Pacific Gas and Electric Company (PG&E) to solicit bids for battery storage or other preferred resources to replace three fossil fuel power plants to meet specific local area needs. Energy storage is a clean energy resource that can be fast-responding, reliable, and constructed in a short timeframe. 

 

The battery storage projects would replace three Calpine fossil fuel plants (Feather River, Yuba, and Metcalf) that do not have long-term contracts with utilities but that have been identified by the California Independent System Operator (CAISO) as needed to serve local reliability needs. If successful, PG&E's Request for Offer (RFO) would replace the three gas-fired plants.

 

Calpine and the CAISO have requested that the Federal Energy Regulatory Commission approve the CAISO's designation of the three plants as "must run" for reliability purposes, which would mean that the plants would get paid to operate on an expensive cost of service contract. The CPUC and PG&E have opposed this, in part because a lack of competition can lead to market distortions and unjust rates for power. The CPUC believes there are better alternatives, including battery storage. 

 

The CPUC proposal does not require PG&E to sign contracts; it requires the utility to ascertain whether there are competitive offers for battery storage within 30 days, and if there are PG&E will execute contracts. 

CPUC Proposal Would Require CCAs to Coordinate with Resource Adequacy Program

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UPDATE

On Feb. 2, 2018, the CPUC issued a revised proposal after an extended period for public notice and comment in response to comments that takes into consideration public comments that were received on the draft proposal. 

The revisions adopt most of the flexibility options requested by Community Choice Aggregators.

The revisions extend the submission date of Resource Adequacy Implementation Plans to March 1, 2018, in order for prospective or expanding Community Choice Aggregators to serve customers in 2019. 

Second the revisions creates two waiver options by which any new or expanding Community Choice Aggregator may request a waiver from the timelines in the proposal in order to begin service in that new or expanded territory prior to January 1, 2019:

  1. Under the first waiver option, the Community Choice Aggregator and utility in whose service territory the Community Choice Aggregator intends to begin service must jointly submit a Tier 1 Advice Letter to us no later than 75 days prior to the Resource Adequacy compliance month in which the Community Choice Aggregator wishes to begin service. This Advice Letter must provide notification that the utility and Community Choice Aggregator mutually agree (via payment, allocation of Resource Adequacy, or a combination thereof) that they have addressed Resource Adequacy requirements and cost responsibility.
  2. Under the second waiver option, if no agreement is reached, the Community Choice Aggregator must file a Tier 1 Advice Letter with us no later than 75 days prior to the Resource Adequacy compliance month in which the Community Choice Aggregator wishes to begin service.  This Advice Letter must provide notification that the utility and the Community Choice Aggregator are unable to reach agreement to address the Resource Adequacy requirements and cost responsibility concerns, and must state that the Community Choice Aggregator agrees to be bound by a future CPUC determination in the Resource Adequacy proceeding (R.17-09-020) regarding cost responsibility.
The proposal is scheduled to come before our Commissioners at our Feb. 8, 2018, Voting Meeting.

 


CPUC Proposal Would Require CCAs to Coordinate with Resource Adequacy Program

The California Public Utilities Commission (CPUC) today issued a proposal that, if adopted at the CPUC's January 11, 2018 Voting Meeting, would require Community Choice Aggregators to fully comply with CPUC Resource Adequacy rules before they can start serving customers in order to ensure that sufficient energy supply for customers is being procured by the appropriate utility.

The proposal (Resolution E-4907) is available at http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M200/K492/200492306.PDF.

Community Choice Aggregation allows local government entities to purchase power for their communities from non-utility power suppliers. The CPUC's Resource Adequacy program ensures sufficient generation resources are under contract to meet peak customer demand for the coming year.

Many emerging and expanding Community Choice Aggregators are not incorporated in the required annual Resource Adequacy program because the timelines for Community Choice Aggregator creation are not coordinated with annual Resource Adequacy program timelines.  

The proposal issued today addresses this issue by modifying the existing timelines for the creation of a Community Choice Aggregator so that they are coordinated with the annual Resource Adequacy program timelines of the CPUC and California Independent System Operator.

The annual Resource Adequacy program timelines ensure that all load serving entities (utilities, Community Choice Aggregators, and Energy Service Providers) have procured sufficient resources to meet their customers' demands. Community Choice Aggregator participation in the Resource Adequacy program ensures that the Community Choice Aggregator is procuring enough energy for its customers while reliving the customer's prior utility of that responsibility. This helps prevent over-procurement or under-procurement and cost-shifting.

Under the proposal, a new or expanding Community Choice Aggregator must submit its implementation plan no later than February 1, 2018, to start serving new customers on or after January 1, 2019.  In subsequent years, implementation plans must be received by January 1 of the year before a Community Choice Aggregator intends to start serving new customers and must complete a registration packet within 90 days of filing its implementation plan. This timeline will ensure timely Community Choice Aggregator participation in the annual Resource Adequacy process.

Read more about the resolution in our FAQs below.

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Frequently Asked Questions
Resource Adequacy and Resolution E-4907 

 


  1. Does Resolution E-4907 place a "freeze" on CCA formation or expansion?

No. The resolution addresses a gap in the state's rules to ensure all retail electricity sellers buy enough electricity to meet their demand. Currently a CCA can start serving new customers without complying with all statutory and regulatory requirements, particularly requirements involving "Resource Adequacy." 

Resource Adequacy is a program that has become a critical component of the regulatory tools California uses to prevent a repeat of the energy crisis and avoid the risk of blackouts. With multiple entities providing retail power, a system must be in place that requires all retail sellers of electricity to be able to meet the demands of their customers.  Public Utility Code 380 requires that all load-serving entities, including CCAs, meet the same Resource Adequacy Requirements. Specifically, PU Code 380(e) states:

The Commission shall implement and enforce the resource adequacy requirements established in accordance with this section in a nondiscriminatory manner. Each load-serving entity shall be subject to the same requirements for resource adequacy and the renewables portfolio standard program that are applicable to electrical corporations pursuant to this section, or otherwise required by law, or by order or decision of the Commission. The Commission shall exercise its enforcement powers to ensure compliance by all load-serving entities.

The resolution simply requires CCAs to comply with the same timelines that existing retail sellers must meet to show that they have sufficient resources under their control to meet demand.  This timeline could delay the start date for some CCAs if they are trying to serve customers before they make the regulatory showings, but they will be authorized to serve load once they have participated in the annual Resource Adequacy requirements.

The new rules only apply to CCAs who had not filed an implementation plan with the CPUC by December 8, 2017. The following CCAs submitted Implementation Plans before December 8, 2017 and did not participate in the Year-Ahead Resource Adequacy process.

They include:

  • Monterey Bay Community Power
  • Los Angeles County Community Choice Energy
  • East Bay Community Energy
  • Pioneer Community Energy
  • San Jacinto Power
  • City of Rancho Mirage
  • Valley Clean Energy Alliance
  • City of Solana Beach (San Diego County)
  • City of San Jose
  • MCE Expansion

 

Those CCAs can start serving customers as soon as the CPUC certifies the implementation plans. These CCAs represent approximately a combined 3,500 MW of peak load that will shift from IOU service to CCA service in 2018.

 

The new rules would apply to five communities that have filed new or amended Implementation Plans since December 8th. These Implementation Plans represent approximately 1,700 MW of peak load that will shift from IOU service to CCA service. These include:

  • King City
  • Desert Community Energy
  • Riverside County
  • Silicon Valley Clean Energy Expansion to Milpitas
  • Los Angeles County Expansion  

Under the new rules, if the CPUC certifies their Implementation Plans, these five CCAs would then participate in the year-ahead Resource Adequacy planning process and could start serving new customers by January 1 2019.  

 

  1. What is the purpose of Resolution E-4907?

Community Choice Aggregation (CCA) is a program authorized by Assembly Bill 117 (Migden, Chapter 838, Statutes of 2002), and Senate Bill 790 (Leno, Chapter 599, Statutes 2011) that allows local government entities to purchase power for their communities from non-utility power suppliers.

CCA programs have experienced rapid growth in recent years. The first CCA came into formation in 2010 with the launch of Marin Clean Energy.  From 2010 to 2015, two CCAs launched serving approximately 135,000 customer accounts statewide. From 2016 to 2017, CCA formation accelerated and 12 more communities launched or submitted CCA Implementation Plans to the Commission.

This rapid expansion of CCAs creates new challenges in implementing the CPUC's Resource Adequacy program, established under Public Utilities Code Section 380, which ensures sufficient generation resources are under contract to meet peak demand for the coming year. The CPUC's RA program is closely coordinated with the California Independent System Operator's (CAISO) reliability requirement tariff to ensure that enough resources are under contract to meet forecasted demand and ensure reliability. The largest challenge is that many emerging and expanding CCAs are not participating in the required annual RA program because the timelines for CCA creation are not coordinated with annual RA program timelines. 

This Resolution addresses this challenge by modifying the existing timelines for CCA creation so that they are coordinated with the annual RA program timelines reflected in the CPUC and CAISO rules. The annual RA program timelines ensure that all load-serving entities (utilities, CCAs, and Energy Service Providers) have procured sufficient resources to meet their annual RA obligations. Specifically, a new or expanding CCA must submit its implementation plan no later than January 1 of the year before it intends to start serving new customers and must complete a registration packet within 90 days of filing its implementation plan. This timeline will ensure timely CCA participation in the annual RA process.

 

  1. Why is this change being considered through a resolution and not decided in a proceeding?

The rapid growth of CCAs was not anticipated by the CPUC, the California Independent System Operator (CAISO), or the utilities. From 2010 to 2015, two CCAs launched serving approximately 135,000 customer accounts statewide. After 2015 the growth rate accelerated and the planning agencies began a number of processes to better handle this growth, but the speed of CCA creation continues to grow exponentially. Now with an estimate of over 5,200 MWs of peak load shifting from IOU service to CCA service in the next 12 to 18 months, the CPUC cannot wait to address potential cost shifting and reliability issues associated with rapid load migration.

The charts below show the magnitude of the load movement caused by CCA growth and how it is currently not fully accounted for in the reliability planning process. For 2018 load forecasts that were filed with the CEC in 2017, CCAs indicated that they would collectively serve 6.2% of the load, but based on load forecasts from implementation plans filed as of January 4, 2018, CCAs are expected to serve approximately 19% of the load. IOUs, the CAISO, and the CPUC have already made planning decisions based on forecasts that were required to be filed by all load serving entities, but since approximately12.8% of that load was not properly accounted for those planning decision are incorrect. This will shift costs to bundled customers of the IOUs. 

The resolution process is a regular procedure at the CPUC. The CPUC agreed to requests from parties to extend comment periods and delay a final decision to allow additional public participation.

2018 CEC Year Ahead - image 1   Potential 2018 Year Ahead forecast - image 2  Potential 2018 forecast - image 3

 

 

  1. What is the real world impact to most ratepayers if the proposed changes are not made?

If an existing or pre-operational CCA does not submit an annual load forecast, it is not allocated a year-ahead Resource Adequacy obligation for the following year. In this scenario, the incumbent utility remains responsible for that load and procures Resource Adequacy capacity for those customers, even if those customers are about to be served by a CCA. Having the IOU procure more electric capacity than necessary can lead to unintended consequences, such as stranded assets or increased costs to some ratepayers. If the volume of this procurement remains unpredictable, it could destabilize the capacity markets. To date, the known impact is a cost shift to bundled utility customers since the utility is not able to pass all of the costs of this capacity procurement on to the new CCAs. As a result, the IOU customers will likely need to absorb some of these contract costs. While there is a mechanism to allocate longer term utility costs to the new CCA, Resource Adequacy costs of less than one year are not captured by the Power Charge Indifference Adjustment (PCIA), which recovers utility costs from CCA customers that were entered into on CCA customers' behalf. Therefore, such costs are borne by the remaining (non-CCA) utility customers. At this point, Energy Division can only forecast the cost shifts but estimates that it could be as high as $38 million for PG&E customers.

 

  1. What is the purpose of the Resource Adequacy program?

The Resource Adequacy program is mandated by Public Utilities Code Section 380. It was developed as a response to electricity shortages during and after the energy crisis in 2001. The program requires all retail sellers of electricity (IOUs, ESPs, and CCAs) to provide the CEC with year-ahead load forecast of their expected electricity demand and then to provide monthly showings to the CPUC that they either own or have contracts for sufficient electric generation to meet their peak demands.

This program has become a critical component of the regulatory tools California uses to prevent a repeat of the energy crisis and avoid the risk of blackouts. With multiple entities providing retail power, a system must be in place that requires all retail sellers of electricity to be able to meet the demands of their customers.

 

  1. Why are CCAs required to comply and coordinate with Resource Adequacy requirements?

All Load-Serving Entities, including CCAs, are subject to Resource Adequacy obligations required under Public Utilities Code 380. These requirements are a critical component of ensuring that sufficient resources are procured to meet peak electricity demand and ensure reliability.  As more CCAs begin serving customers, it is important to ensure that forecasts of the load they will serve are accounted for in the Resource Adequacy process. The process is dependent on all load-serving entities filing an annual load forecast in April of their expected monthly peak load for the following year. These load forecasts are used to develop each load-serving entities annual RA obligations, which are allocated in July. Following the allocation of RA obligations load-serving entities are required to submit compliance filing in October, demonstrating that they have resources under contract to meet their forecasted load.

If an existing or pre-operational CCA does not submit an annual load forecast, it is not allocated a year-ahead RA obligation for the following year. In this scenario, the incumbent utility remains responsible for that load and procures Resource Adequacy capacity for those customers, even if those customers are about to be served by a CCA. This scenario occurred in 2017 and will likely occur in 2018 when CCAs submitted Implementation plans and began serving customers out of sequence with the Resource Adequacy timelines.

 

  1. When are the deadlines for Resource Adequacy program compliance?

The Resource Adequacy program has compliance filing deadlines for both the year-ahead and month-ahead compliance filings. The year-ahead filings are due on or around October 31st of each year (e.g., the 2018 Year-Ahead filing was due on October 31, 2017). The month-ahead compliance filings are due 45 calendar days prior to the compliance month (e.g., the January 2018 month-ahead filing was due on November 17, 2017).

 

  1. What are the Monthly and Annual Resource Adequacy Requirements?

For the annual filings, LSEs are required to show that they have sufficient resources to meet requirements for system reliability, reliability in specific local areas they serve, and flexible resources.  For the system showing, LSEs are required to demonstrate that they have procured 90% of their system Resource Adequacy obligation for the five summer months (May-September) of the coming compliance year. Additionally, each LSE must demonstrate that they have purchased 90% of its Flexible requirements and 100% of its local requirements for each month of the coming compliance year.

For the Month-Ahead filings, LSEs must demonstrate they have procured 100% of their monthly System and Flexible RA obligation.  Additionally, on a monthly basis from May through December, LSEs must demonstrate they have met their revised (due to load migration) local obligation.

 

  1. Are CCAs already participating in the Resource Adequacy program?

Once a CCA is registered, it participates in the Resource Adequacy program. However, new and expanding CCAs that register after the Resource Adequacy forecast deadline in April of the year ahead are not fully participating in the first compliance year.

Although the month-ahead requirements capture new and expanding CCAs, the year-ahead requirements are based on the load forecasts submitted in April and in August. This means that new CCAs or expanding CCAs that do not submit load forecasts in April and August cannot be captured by the year-ahead. As a result, new and expanding CCAs are participating in the month-ahead but are not participating in the year-ahead process in their first year serving new load.

 

  1. Can the year-ahead process be adjusted to capture CCAs that register after the load forecast deadlines?

No, there is currently no way to capture new and expanding CCAs in the year-ahead system after the load forecast deadlines. The CPUC's year-ahead process assigns year-ahead Resource Adequacy obligations only to LSEs that submit year-ahead load forecasts. The load forecasts are used as the basis to develop the individual LSE year-ahead allocations. These allocations inform LSE of their year-ahead obligations. Once an entity has been assigned its year-ahead allocations they must enter into Resource Adequacy contracts in order to meet their obligation. Currently, there is no mechanism to transfer those contracts or assign all of those costs to CCAs that register after the load forecast deadline.

 

  1. Why are utilities participating in the year-ahead resource adequacy requirements on behalf of customers that are soon to be CCA customers?

If a CCA has not yet been certified and registered and does not submit a load forecast for the future customers it plans to serve in the following year, then the incumbent utility is automatically assigned that customer load forecast and the year-ahead requirements associated with it. All load within the CPUC's jurisdiction and within the California Independent System Operator's (CAISO's) control area must be accounted for in the year-ahead process to ensure that sufficient contracting has occurred for the reliable operation of the electrical grid. 

 

  1. If CCAs miss the year-ahead process, can they make it up in the monthly RA filings?

No, not completely. If a CCA misses the year-ahead process, there is an opportunity to make up for system requirements in the month-ahead filings. However, local and flexible requirements are allocated as part of the annual RA process. Consequently, a CCA that did not participate in the year-ahead process would not be assigned a local or flexible RA requirement for the first 6 months of the year. If a CCA became registered prior to mid-March of the compliance year they would receive local and flex requirements for the last 6 months of the year. The process of reallocating the local and flexible requirements is known as the local and flexible RA true-up.    

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