RESA Proposes Full Arizona Market Opening By July 1, 2023

RESA: Community Choice Aggregation, As Currently Structured In Several States, "Is Not Real Competition Or True Customer Choice"

RESA Recommends Using CCAs, Subject To Sunset Date, During Four Year-Transition Phasing Utilities Out Of Default Supplier Role

February 3, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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The Retail Energy Supply Association has filed with the Arizona Corporation Commission a "guidebook" for retail electric choice that includes a proposed timeline which anticipates full market opening by July 1, 2023.

RESA said that its newly filed comments are intended to serve as a "guidebook" for implementing a competitive market -- identifying elements necessary to achieve a robust competitive market as well as offering some interim steps which may be taken which lead to that goal.

RESA's guidebook is notable for including a specific proposed timeline for implementation of electric choice and specific recommendations on market design.

RESA's proposed schedule includes the following milestones:

• Promulgation of Regulations by ACC: July 1, 2020

• Restructure Wholesale and Retail Market: January 1, 2021

• Licensing of Competitive Suppliers: July 1, 2021

• Launch Consumer Education Campaign: September 1, 2021

• Pilot Project: March 1, 2022

• Full Competition: July 1, 2023

RESA also included an "alternative" approach to municipal aggregations (community choice aggregations or CCAs)

In its comments, RESA stated, "Community choice aggregation, as currently structured in several states, is not real competition or true customer choice."

In its comments, RESA stated, "Government officials and their consultants choose suppliers for customers. Customers are unlikely to know the company supplying their electricity. Further, aggregated customers are unable to avail themselves of additional value-added products because the supplier is most often limited contractually from communicating and establishing a direct relationship with customers."

In its comments, RESA stated, "Finally, the traditional opt-out government aggregation model results in fewer options for customers, as the monopoly (the local distribution company) is substituted by a sole winning aggregation supplier. To amplify the point, in Illinois where approximately 600 communities have implemented aggregation for their residents, 81 percent of the programs are concentrated among three suppliers, of whom two companies are affiliates of the in-state Local Distribution Companies (LDC) [sic], and the third is an affiliate of the LDC in a nearby state."

In its comments, RESA stated, "Despite these shortcomings, CCA, properly structured, can be a catalyst to greater competition as well as more choices and benefits for Arizona residential energy customers. The Commission has the opportunity to boldly propel Arizona to a fully competitive retail energy market unrivaled almost anywhere in the western U.S., by using CCA as the transition mechanism."

In its comments, RESA stated, "RESA encourages the Commission to adopt an approach to the effect that the objective of CCA is to facilitate the transition to full retail energy competition in Arizona by engaging mass market customers in the energy market, migrating residential customer load to qualified Energy Service Providers (ESPs), transitioning LDCs from the role of providing default generation supply service, and animating the market to deliver a wide array of distributed energy resources, renewable energy and innovative energy management products to residential customers."

RESA proposed the following guiding principles for achieving this objective.

• CCA should only be implemented as a temporary bridge for transitioning the Arizona market from utility-provided default service to full retail competition.

• The residential customer market should be declared "fully competitive" when a majority of the customers and load is being served by ESPs [retail suppliers].

• Utility-provided default service should be replaced with Provider of Last Resort (POLR) service, provided by qualified ESPs as a temporary backstop for customers.

• ESPs serving CCA should be provided the opportunity to establish a direct relationship with participating customers.

• CCA programs should be required to furnish distributed energy resources (DER) and services for the benefit of participating customers, from either the winning ESP or other competitive DER providers.

RESA further proposes that CCA programs sunset four years after a Commission order enabling government aggregation programs

"Four years also allows ample time for utilities to phase out of the default supply service role," RESA said

"During the CCA period, upon 51 percent of residential customers being served by ESP's, through a combination of organic switching and government aggregation, the Commission should declare the residential customer class 'fully competitive.' This milestone would trigger the commencement of a defined process for relieving the distribution companies of the obligation to provide default service for residential customers, to be completed at the end of the CCA period," RESA said

"At the end of the four-year transition period, customers served under CCA may choose to accept an offer from their aggregation program ESP or switch to another ESP. Default supply service from the distribution companies would not be an available option," RESA proposed

RESA said that EDC-provided default service should be replaced with Provider of Last Resort (POLR) service, provided by qualified ESPs as a temporary backstop for customers. RESA cited the Texas POLR mechanism as an example

Aside from the CCA mechanism, RESA said that there are two reasonable alternatives to facilitate a transition to a competitive market. One alternative is the Texas model which starts with all customers on the utility affiliate or designated provider and charges a Price to Beat (PTB), with the PTB eliminated once the market is proven to be robust and large enough to support competition. A second potential model utilizes an assignment process whereby customers are assigned to different competitive providers via some neutral mechanism. For example, to facilitate the timely and smooth transition of all consumers from the current monopoly market structure to the new restructured market, under this approach the ACC should establish a 180-day period prior to the opening of the market during which consumers are allowed and encouraged to select a competitive supplier, RESA said. "Importantly, assigned customers could all receive a fixed-price product for a time certain and the providers who receive the assignments should be allowed to request security deposits or perhaps transfer existing deposits with the utility to the new supplier. Also, while the assigned customers are being served by the competitive supplier to which they have been assigned, these customers (assuming they are current on their bill) should be permitted to switch to a different competitive supplier at any time without penalty," RESA said

Docket RE-00000A-18-0405

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