Calif. Draft Would Set Applicability, Amount of Retail Supplier Security Requirement

A proposed California PUC decision would adopt a formula to determine the amount of financial security and re-entry fee requirements applicable to Electric Service Providers (ESPs), and would also define the size of customers for which security must be provided (R. 07-05-025).

A prior order (D. 11-12-018) held that ESP financial security requirements shall include incremental procurement cost risks covering the involuntary return of direct access (DA) residential and small commercial customers not affiliated with a large customer to bundled service. However, that order did not define small customer, and did not adopt a specific formula for incremental procurement costs associated with such involuntary returns.

The newly proposed decision issued by the PUC would define a small commercial customer as a customer having load demand of under 20 kW. The requirement for ESPs to provide security for incremental procurement costs would be limited to residential and such small commercial customers not affiliated with a large customer.

For customers with load demand of 20 kW or greater, or smaller customers affiliated with larger customers, the applicable ESP financial security requirements would be limited to administrative costs only, as previously specified in D.11-12-018.

The draft order provides that, for purposes of measuring customer load demand to implement the above requirement, the customers' status shall be determined on an annual basis in connection with the advice filings on ESP security amounts that are due in May and November of each year. If a commercial service customer account showed demand of 20 kW or greater for three consecutive months, it would not be considered small for purposes of the ESP financial security requirement for incremental procurement costs, the draft states.

In order to determine whether small customers are affiliated with a large C&I customer, the draft would adopt an approach placing the responsibility on the ESP to certify the applicable information for its customers.

For this purpose, the ESP could utilize data filed with the Commission as part of each ESP's Standard Service Plan (SSP) submission. The SSP, as originally adopted in D.98-03-072, is a report submitted annually by ESPs to the Commission's Energy Division. The SSP provides information about the ESP's standard service plan offerings pursuant to requirements of § 392.1(a). The SSP includes information regarding the number of customers served that can be used to identify the number of DA residential and small commercial customers served, and their related load and energy usage, the draft states,

"We conclude that ESPs, in their SSP filings, should be able to identify and certify the customer accounts and related energy usage that apply to small commercial DA customers that are not affiliated with a large customer. Large DA customers typically have a number of customer accounts, some of which potentially include small residential and small commercial accounts. Thus, those affiliated small customer accounts would be classified with the large commercial customer contract, and thus not included in the small customer account categories. We believe, therefore, that by segregating the large customers (which include small affiliated customer accounts), the remaining small customers and related energy usage will identify customers who are not affiliated with large customers," the draft states.

The draft would adopt the utilities' proposed methodology for calculating ESP financial security requirements for incremental procurement costs for residential and small commercial DA customers, with some modifications.

The formula for the security requirement may be found starting on page 41 of the proposed decision (link)

Among the modifications adopted by the draft would be limiting the security calculation to cover a six-month period, rather than an eight-month period.

The draft would also eliminate the stressed market factors and related confidence interval calculations originally proposed.

The draft would modify the directive in D. 11-12-018 to call for the ESP security amount to be recalculated twice each year, in November and May, by the tenth day of each month, and with any adjustments to the security amount implemented on the following January 1 or July 1, respectively

The draft would also adopt a 20% deadband for purposes of requiring any adjustments to the ESP posted amounts. "A 20% deadband will avoid undue frequency in administering changes to the posted amounts, while providing reasonable safeguard against insufficiency in the level of ESP posted amounts," the draft provides.

Under the proposed order, the weighted-average generation rate for the customer mix being served by the ESP would be used to determine the ESP financial security calculation (rather than the utility system average rate). For purposes of the calculation, the bundled generation rate would include the generation rate component and any applicable unbundled generation components such as the Competition Transition Charge and Cost Allocation Mechanism rate elements.

ESP security amounts would be posted with the Commission rather than the utilities.

The draft would permit the financial security amount to be calculated by netting any negative procurement costs against incremental administrative costs, with a floor of zero.

The negative incremental procurement costs shall be allowed to offset up to 100% of the calculated incremental administrative costs.