Calif. PUC Adopts Final Rules on Retail Supplier Security, Nonbypassable Charges

The California PUC adopted as final new rules governing security requirements applicable to electric service providers, and adjustments to the Market Price Benchmark (MPB) used to determine the nonbypassable indifference charges assigned to customers leaving bundled utility service (Rulemaking 07-05-025).

By statute, electric service provider security requirements must cover re-entry fees for customers involuntarily transitioned to bundled utility service (such as through supplier default).

As only reported by Matters (11/22), the final decision adopts the most recent draft's distinction in the composition of re-entry fees depending on the class of customer.

Under the final decision, the re-entry fee applicable to large commercial and industrial customers (a class which will be defined in a later proceeding) shall only include the administrative costs to the utility resulting from executing an involuntary transition of direct access customers to utility supply. While the precise definition of a large customer was deferred, the PUC did order that any account which would otherwise be defined as a small volume account will be considered a large customer if the account is part a larger group of accounts which meets the forthcoming definition of a large customer.

The currently applicable administrative fees per involuntarily returning customer account would be for PG&E, $3.94; for SCE, $1.49; and for SDG&E, $1.12.

When such large customers return to utility supply on an involuntary basis, they shall be charged the market-based transitional bundled service rate, and not the standard bundled service rate.

For small commercial and residential customers only, re-entry fees shall also cover incremental procurement costs incurred by the utility to serve these customers at the standard bundled service rate, in addition to administrative costs.

As this suggests, such small volume customers will be served on the standard bundled service rate, and not the market-based transitional bundled service rate, upon an involuntary return to utility supply.

The PUC deferred to a subsequent decision the determination of how incremental ESP bond amounts limited to procurement costs for involuntarily returned small commercial and residential customers should be determined.

Electric service providers may meet the security requirements by posting a bond or demonstrating insurance sufficient to cover re-entry fees of the ESP, through comparable financial instruments that provide equivalent coverage. Acceptable instruments include surety bonds, letters of credit, cash deposits or third party guarantees with a credit worthy entity. An ESP will not be permitted to meet the security obligation simply through use of self-insurance or by showing that it has an investment grade credit rating.

The amount of an electric service provider's bond or shall be calculated once annually, by April 10 of each year.

Minimum Stay, Indifference Charges
The PUC's final order also reduces the minimum stay applicable to customers returning to bundled utility supply from direct access to 18 months, versus the current three years.

The six-month notice requirement to take direct access, or return to the standard bundled service rate, was not altered. The current "safe harbor" provision meant to allow a customer to briefly take utility supply in between switching suppliers was maintained, and the PUC affirmed that the six-month notice period to re-take direct access shall not begin until after expiration of this safe harbor period.

Regarding the nonbypassable indifference charge assigned to customers leaving for direct access, meant to keep other utility customers harmless for prior procurements undertaken by the utility for the departing customer's load, the final order establishes a proxy to serve as a RPS value for the Market Price Benchmark used in the indifference charge calculation. The RPS proxy will be weighted such that 68% reflects investor-owned utility (IOU) costs for RPS based on the methodology from several joint direct access parties, with the remaining 32% of the RPS adder reflecting data from non-IOU LSEs, based on U.S. Dept. of Energy data.

Regarding the capacity costs in the Market Price Benchmark, the final order adopts SCE's proposal to update the Resource Adequacy (RA) capacity adder using the California Energy Commission's estimates of the going forward costs of a combustion turbine, which is updated biannually, including the Net Qualifying Capacity of all generation resources in the utility portfolio.

Finally, the decision removes all load-driven California ISO costs from the total portfolio calculation used for the indifference charges.