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PGE Seeks To Offer Voluntary Bundled Renewable Energy Program To Customers, Says No Changes To Direct Access Needed

May 30, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Portland General Electric has petitioned the Oregon PUC for approval of a tariff offering customers a voluntary renewable energy purchase program, and said that changes to the state's direct access rules and charges are not required due to the proposal.

The PUC had previously established (in Order No. 16-251) nine conditions with which a utility voluntary renewable program should comply. Notable among these conditions were (numbering included for reference, but listed out of order):

5. Voluntary renewable energy product design should be sufficiently differentiated from existing direct access programs.

6. Voluntary renewable energy product offering terms and conditions (including the timing and frequency of offerings), as well as transition costs, must mirror those for direct access. PGE may propose terms and conditions that differ from current direct access provisions but must propose changes to their direct access programs to match those changes.

2. Voluntary renewable energy options should only include bundled REC products. Any RECs associated with serving participants must be retired by or on behalf of participants, unless the participants consent to RECs being retired by the utility or developer.

3. The year that a voluntary renewable energy program eligible resource became operational should be no earlier than 2015.

4. The voluntary renewable energy program size is limited to 300 aMW for PGE.

8. All direct and indirect costs and risks are borne by the participating voluntary renewable energy customers, shareholders of the utility or third-party developers and suppliers with provisions allowing independent review and verification by Commission Staff of all utility costs. Costs include but are not limited to ancillary services and stranded costs of the existing cost of service rate based system

1. Renewable portfolio standard (RPS) definitions that must apply to voluntary renewable energy products are for resource type, location, and bundled renewable energy certificates (RECs).

PGE said in testimony that its proposed program would acquire bundled renewable energy and RECs for customers through power purchase agreements (PPAs) with specified, incremental renewable resources as defined in Condition 1 of Order No. 16-251 (resource brought online no earlier than 2015)

Notably, customers under the voluntary green program would remain customers of PGE under its cost of service supply tariff (e.g. default service)

PGE said that the program will be flexible enough to meet individual customer needs, consistent with overall program parameters and design elements. "We plan to supply the green product in this filing through PPA(s) with expected contract terms between 10 and 20 years, while providing subscription options to retail customers who choose to enroll in the program. Currently, PGE plans to offer 5, 10, 15, or 20 year enrollment options," PGE said in testimony

PGE is proposing to structure the initial green tariff offering through PPA(s) with a third-party. PGE plans to secure PPA(s) to support the green tariff by leveraging competitive procurement processes.

Under the program, PGE will enter into a PPA(s) with a renewable resource, with any premium above the energy and capacity value of the resource to be paid by subscribers to the green tariff program. The green energy and capacity acquired from the renewable resource will be delivered to PGE’s grid. The RECs will be retired on behalf of subscribers, while all customers will benefit from the energy and capacity additions to the grid, PGE said in testimony

Under the proposed green tariff construct, subscriber customers would receive a credit for the incremental value of energy and capacity provided by renewable resources secured for the program. Both the system load-resource balance requirements (sufficiency or deficiency) and value of incremental capacity and energy would be determined at the time of program fulfillment. When PGE is resource sufficient, PGE proposes that subscribers be credited only for the value of energy in accordance with IRP methodology (market price forecast). If PGE is resource deficient at the time of program subscription/resource fulfillment, PGE proposes that participating customers be credited the value of capacity according to the then approved Schedule 201, in addition to the value of energy based on the market price forecast.

As noted above, the subscribers will remain on PGE’s cost of service system, and will continue to pay all applicable rates, riders, supplemental schedules, and regulatory adjustments as they do currently. Any program costs associated with the green tariff will be borne by subscribers and/or PGE shareholders

PGE said in testimony that energy and capacity from the renewable projects under the voluntary program will flow to all customers, and all cost-of-service customers will credit only the value of energy and capacity to subscribers. The RECs associated with the green tariff facility will not be used for general RPS compliance purposes, unless that use is specifically requested by the subscriber (per Order No. 16-251). RECs obtained on behalf of program subscribers will be solely for the use/benefit of subscribers to the program, PGE said in testimony

Cost-of-service customers (including renewable subscribers) will pay a per-kWh charge for energy and capacity value associated with the green tariff PPA(s) which is then credited to subscriber customers. Both the charges and credits will then be calculated through the Annual Update Tariff (AUT), similar to how PPA costs are allocated currently. The values of the per-kWh charge will be determined at the time at which the green tariff resources and subscriptions are fulfilled, and will represent an energy value calculated using a model in accordance with the methodologies from PGE’s Integrated Resource Plan (IRP), updated with current assumptions. If the utility is in a period of resource deficiency -- as defined in PGE’s most recently acknowledged IRP -- subscribers will also receive a capacity credit based on the resource capacity contribution as determined in accordance with IRP methodology and valued in the then current Schedule 201. No capacity credit will be applied during periods where PGE’s system is resource sufficient

Other than crediting subscribers for the energy and capacity added to the grid, PGE said in testimony non-subscribing customers will not be subject to any costs associated with the green tariff, and will be insulated from risks associated with the green tariff project(s).

PGE said that subscribers to the green tariff will not pay transition adjustments, which direct access customers must pay.

"The green tariff is a supplemental product, meaning that it serves only as an addition to the subscriber’s current cost of service rate schedule. Subscribers to the green tariff will continue to pay their share of the costs of PGE’s system, eliminating the risk of stranded assets borne by a reduced number of cost-of-service customers. We understand and share the Commission’s concern about transition adjustments and the need to avoid stranded costs for any proposal that allows customers to leave cost-of-service pricing/tariffs for a green product. That is not the case here," a witness for PGE testified

"The transition adjustments in direct access represent the proportional share of the fixed costs of PGE’s power supply portfolio associated with the customer(s) that leave PGE’s cost of service rates to receive energy service from an alternative supplier. These adjustments can be either positive or negative and are designed to neutralize the cost or benefit impact to remaining cost-of-service customers caused by direct access customers leaving PGE’s system for energy supply. Since the green tariff subscribers remain energy customers on their applicable cost-of-service rate schedule, they are not subject to transition adjustments. The subscribers instead continue to contribute to fixed power supply costs through their cost of service schedule," PGE said in testimony

Referencing condition 6 of Order No. 15-405, PGE said in testimony that it will not be proposing a crediting mechanism by which cost of service customers pay a credit to exiting direct access customers, because, "this structure exists already."

"When a direct access customer exits PGE’s system, the customer temporarily pays their cost of service costs that are functionalized to generation, minus the value of market energy. The remainder is known as the transition adjustment. Deducting the forward market price of energy represents a crediting mechanism that the direct access customer receives for the energy that PGE no longer uses to serve the direct access customer," PGE said in testimony

"Following the five year transition adjustment period, the direct access customer pays no generation costs to PGE, instead paying generation costs to their selected supplier," PGE said in testimony

PGE said that the voluntary renewable program would not be open to direct access customers. "As this green tariff product was specifically designed to comply with the nine conditions and thus has a unique framework -- that it is supplemental in nature, sufficiently differentiated from direct access, and is designed to avoid stranded costs on the rate based system -- subscribers will be required to be receiving base service from a PGE schedule that includes generation service," PGE said in testimony

"A customer who is already on direct access has the ability to purchase supplemental renewable energy through their Electricity Service Supplier (ESS)," PGE said in testimony

Furthermore, PGE said that a subscriber to the green tariff would not be able to elect direct access service during the term of their renewable contract. "PGE has specifically designed this program to be supplemental to PGE’s base retail service, and to eliminate risk of cost-shifting to nonsubscribing customers. The crediting mechanism is based on a customer that is receiving PGE generation, and has locked in credits based upon the time the PPA was executed. If that customer elected to obtain base service from an electricity service supplier while simultaneously receiving service through the green tariff, PGE’s portfolio position would change, and the credit values may no longer be accurate and insulated from cost shift. If a customer elects to join the direct access program, the customer will be removed from the green tariff," PGE said in testimony

PGE said in testimony that, "PGE’s voluntary green tariff program is designed to be significantly different -- and complementary to -- the direct access program that exists in Oregon. Our goal is to provide customers increased choice regarding their energy supply."

As noted above, key differences between direct access and the proposed utility renewable program are that, under the PGE program, the subscriber stays on PGE cost of service schedule and continues to pay all applicable PGE rates and riders. As noted above, subscribers to the PGE renewable program will not pay any transition adjustments

PGE testified that, "No changes to the direct access program are necessary based on PGE’s Green Tariff filing."

Regarding the need for the utility green program PGE said in testimony that, "PGE acknowledges that certain renewable options are available to customers through Oregon’s direct access program. However, direct access is not always the preferred choice for customers, nor do all customers want to be forced to leave the utility’s generation system in order to procure renewable energy. Allowing customers to have increased choice for renewables will put Oregon in the company of states such as Michigan, Maryland [sic], and California, which all have both retail choice and approved utility green tariffs."

The tariff that PGE filed with its petition outlines the proposed characteristics of the green tariff program and the rules by which PGE will enroll customers in a voluntary renewable energy program, if approved. Specific agreements and pricing information, between PGE and participating customers, will be filed upon completion (assuming tariff approval), and will comply with the rules and program parameters outlined in the tariff

PGE's petition was filed in UM 1690, but a new docket UM 1953, was opened to address the petition

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