California Extends Time Period Covered by Retail Supplier Security, Uses Utility-Supported Proxy Generation Rate

The California PUC adopted a formula to determine the amount of financial security and re-entry fee requirements applicable to Electric Service Providers (ESPs), and also defined the size of customers for which security must be provided.

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 customers, and did not adopt a specific formula for incremental procurement costs associated with such involuntary returns.

The new rules 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 is 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 will be limited to administrative costs only.

The size of a commercial customer will be determined annually. Additionally, the final order places the responsibility on the ESP to certify applicable information about its customer to determine whether the customer is affiliated with a large C&I customer. ESPs are to use the information contained in their Standard Service Plan (SSP) submissions to determine customer affiliation.

The PUC's final order adopted the utilities' proposed methodology for calculating ESP financial security requirements for incremental procurement costs for residential and small commercial DA customers, with some modifications

Departing from a draft order, the PUC found that the ESP security calculation shall cover incremental procurement costs for an eight-month period, rather than a six-month period.

The final order eliminated the stressed market factors and related confidence interval calculations originally proposed.

ESP security amounts are to be updated semi-annually. However, the PUC adopted a 10% deadband for purposes of any adjustments to the ESP posted amounts.

The PUC's final order adopted the use of the system-average generation rate, as proposed by the utilities, for purposes of calculating the ESP financial security requirements. Departing from a draft order, the PUC decided that the use of a weighted-average generation rate for the customer mix being served by the ESP would be too administratively burdensome.