Staff Recommends Calif. PUC Oppose Bill Increasing Direct Access, Unless Bill Modified

Staff of the California PUC have recommended that the Commission oppose SB 286, which would increase the amount of load permitted to take direct access service, unless the bill is amended

SB 286, which passed the Senate, would raise the cap on the amount of electricity transactions that can be served by direct access (DA) by 8,000 gigawatt-hours (GWh) (from 24,792 GWh to 32,792 GWh). This would amount to total potential DA load reaching approximately 17% of total utility load in the state. The bill also requires that at least 100 percent of the new direct transactions must be for electricity products from eligible renewable energy resources

However, Staff noted that forthcoming amendments to this bill that have not been placed in print but have been widely circulated state that IOUs shall continue to own and operate all equipment on the distribution grid and provide DA customers with support functions, including, but not limited to, billing, customer service, call centers, support services, and line clearance tree trimming, through its own employees, except that construction of distribution system equipment and line clearance tree trimming may be performed pursuant to contracts between the electrical corporation and another entity.

"The forthcoming amendments appear to undermine several key programs the CPUC is developing under specific statutory directions. This includes the Distribution Resource Plans, customer-owned generation using the Net Energy Metering Tariff, and storage," Staff said

Staff said that the new language could limit the ability of third-parties to own, construct, and operate Distributed Energy Resources (DERs) that meet the "distribution system equipment" or provide "distribution system support functions." Such DERs are aimed at developing non-wires solutions that substitute for traditional distribution system upgrades

Contrary to the new language to be inserted into the bill, Staff noted that a PUC rulemaking contemplates, "significant involvement of both customers and third-parties in developing de-centralized, two-way power flows in the distribution system that are based on the provision of services such as voltage regulation, reactive power management and other functions that have been traditionally reserved to the utility."

Putting aside concerns regarding the new language, Staff also raised concern generally with DA expansion.

"[T]he CPUC does not have jurisdiction to review or approve the resource procurement of the DA providers. The more DA that departs from CPUC-jurisdictional utilities, the greater the chance that grid reliability could be negatively affected," Staff said.

"Further, there is a concern that since ESPs [retail suppliers] are historically hesitant to invest in physical generation, due to the potential for customers to shift to other ESPs, CCAs or to incumbent utilities, even if the ESPs comply with RPS and RA [resource adequacy] requirements, the resources they procure (logically, they would buy the cheapest they could get) may not help, and may actually hinder short and long-term grid reliability," Staff said.

"The CPUC does not have the authority necessary to assure that DA providers buy portfolios of resources that are operational. The CPUC does not have the broad scope of review of DA procurement that it does over the IOUs. Thus, the legislation may still inadvertently exacerbate operational issues arising from renewables integration that the CPUC and CAISO are trying to address because it does not specify that the DA RPS portfolios must meet some yet-to-be-defined standard or approval process," Staff said.

Staff recommended that the PUC oppose the bill but suggested amendments which would allow eligible third-party ownership of various distribution equipment and support functions

Staff also recommended an amendment providing that load serving entities shall provide the data necessary for the commission to ensure compliance with the provisions of the bill, with such data including customer-specific data in order for the Commission to track the differential renewables portfolio standard obligations for new direct access customers

Still, Staff acknowledged a "pent-up" demand for DA, citing 845 customers with 6,131 annual GWh who were left on the waiting list as of December 31, 2013