Direct Access Parties Seek California Rulemaking on Nonbypassable Charges, Generation Cost Allocation

Several direct access (DA) parties in California have petitioned the California PUC for a rulemaking relating to nonbypassable charges and utility generation and procurement cost allocation issues in light of certain directives contained in SB 790.

Among other relief, the DA parties seek an order from the Commission finding that all utility applications for supply or supply-related programs have a presumption of cost allocation to the generation function, unless they have met a specific burden of proof to functionalize costs in the transmission or distribution rates.

Commission-initiated rulemakings should also adopt a standard that all generation-related charges will presumptively be allocated to utility generation rates, DA parties said.

Additionally, the DA parties requested that the Commission initiate an Order Instituting Rulemaking (OIR) proceeding to pursue the following objectives:

• Develop cost allocation and cross-subsidization principles that align with the requirements of SB 790;

• Phase-out stranded cost recovery by the IOUs;

• Reform the calculation of non-bypassable charges that are imposed on departing load customers;

• Impose new transparency requirements on IOUs to ensure against improper cross-subsidization;

• Adopt a formal requirement that any new OIR that may impact community choice aggregation (CCA) and competitive retail markets must identify potential cost allocation and cross-subsidization issues;

• Impose a burden of proof on the IOUs to demonstrate, in any application proceeding, that a proposed allocation of costs to non-utility generation customers through distribution rates (or other non-bypassable charges) complies with the Commission's standards pertaining to cost causation; and

• Incorporate rules that are necessary to facilitate the development of CCA and retail choice programs, to foster fair competition, and to protect against cross-subsidization paid by ratepayers, as set forth in SB 790.

DA parties sought the rulemaking under SB 790's provision that, "Except for nonbypassable charges imposed by the commission pursuant to subdivisions (d), (e), (f), and (h), and programs authorized by the commission to provide broader statewide or regional benefits to all customers, electric service customers of a community choice aggregator shall not be required to pay nonbypassable charges for goods, services, or programs that do not benefit either, or where applicable, both, the customer and the community choice aggregator serving the customer."

Subdivisions (d), (e), (f), and (h) relate to DWR power and bond charges, and supply previously procured on behalf of the now-migrated load.

Although SB 790 largely relates to community choice aggregations, the DA parties sought a rulemaking addressing nonbypassable cost issues with respect to both CCAs and retail electric service providers, arguing that, "SB 790 mandates that the Commission ensure that cost allocation is 'fair and equitable' for all customers, whether they are on bundled, CCA or DA service. This means that the concerns expressed herein with respect to cross subsidization and non-bypassable charges are equally applicable to all customer groups."

DA parties cited language in SB 790 which provides:

"If the commission authorizes or orders an electrical corporation to obtain generation resources pursuant to subparagraph (A), the commission shall ensure that those resources meet a system or local reliability need in a manner that benefits all customers of the electrical corporation. The commission shall allocate the costs of those generation resources to ratepayers in a manner that is fair and equitable to all customers, whether they receive electric service from the electrical corporation, a community choice aggregator, or an electric service provider." [emphasis by DA parties]

Parties seeking the rulemaking include the Marin Energy Authority, Alliance for Retail Energy Markets, City and County of Santa Cruz, Climate Protection Campaign, Direct Access Customer Coalition, Constellation NewEnergy, Inc., Direct Energy, LLC, Energy Users Forum, IGS Energy, Retail Energy Supply Association, Sam's West, Inc., Shell Energy North America (US) L.P., South San Joaquin Irrigation District, Texas Retail Energy, LLC, and Wal-Mart Stores, Inc.