Calif. Draft Would Adopt Calculation to Implement Lower Direct Access Exit Fees

A California PUC comment (draft) resolution would adopt data filed by the utilities, and a methodology proposed by retail suppliers, to implement the new Renewable Portfolio Standard (RPS) adder as part of a modified Market Price Benchmark (MPB) used in setting exit fees applicable to direct access customers.

Specifically, the resolution would adopt the input for the Renewable Portfolio Standard (RPS) adder for 2011 and 2012 to reflect the market value of RPS-compliant resources in the cost responsibility assigned to departing customers necessary to maintain bundled customer indifference.

The Market Price Benchmark determines whether the utilities' power supply portfolio is above market, and what costs shall be applied to exiting direct access customers. Previously, the Market Price Benchmark did not account for the market value of renewable resources, while the costs of renewable resources were included in the utilities' total portfolio cost.

This led to the Market Price Benchmark understating the value of utility resources and overstating the utilities' above-market costs, leading to an inflated Power Charge Indifference Adjustment (PCIA). Including an RPS adder, as the PUC ordered in a December decision (see prior story) revising the Power Charge Indifference Adjustment, will have the effect of reducing any applicable PCIA, all other components equal.

Utilities were ordered to file various data to establish the RPS adder; however, such data has been sitting at the PUC for three months, while higher PCIA charges are applied to direct access customers in the interim.

The resolution would adopt this filed data, and would also adopt a proposed formula to calculate the market price benchmark filed by various direct access parties.

The only contested part of the formula, disputed by a single utility, was the capacity value to be subtracted from the total cost of the portfolio of RPS-compliant resources. SCE proposed converting the annual RA capacity adder adopted in D.11-12-018 to monthly values based on shaping factors.

However, the draft resolution would reject this shaping, since D.11-12-018 did not adopt a method for determining capacity value using shaped capacity values.

Instead, the value of capacity to be subtracted from the total cost of the portfolio of Renewable Portfolio Standard-compliant resources will be computed as the adopted Resource Adequacy capacity value of $50.17 (subject to updates in future years) times the average of the monthly net qualifying capacity of RPS-compliant resources.

The draft resolution would adopt a statewide utility RPS adder of $87.07/MWh for 2011, and $104.25/MWh for 2012. This utility adder is weighted 68% in the ultimate RPS Adder.

The draft would require each utility to use these Renewable Portfolio Standard Adder inputs in their Energy Resource Recovery Account applications to compute specific Market Price Benchmarks by vintage and the applicable departing load charges.

The utilities and direct access parties agree that due to the varying proportions of RPS-compliant resources, the Market Price Benchmark will vary by vintage.

The draft resolution would require that, by October 1 of each year, PG&E, SCE, and SDG&E shall file Tier 1 advice letters to update the applicable percentage weightings used the RPS proxy price (currently 32% for Department of Energy data and 68% for utility data).

Using the confidential data provided by the utilities in their October 1 advice letters on their RPS-compliant resources, the PUC Energy Division would calculate the average energy cost of the utilities' RPS-compliant resources to incorporate into the Market Price Benchmark as adopted in D.11-12-018.

Each utility would then use the Energy Division's results in its Energy Resource Recovery Account (ERRA) application to compute specific Market Price Benchmarks by vintage and the applicable departing load cost responsibility surcharges.