Shell Proposes Removing Pacific Gas & Electric From Supply Procurement Function

Shell Energy North America (US), L.P. filed comments with the California PUC last week proposing removing energy procurement-related responsibilities from Pacific Gas & Electric

Shell's comments were filed in a California proceeding on PG&E's ability to offer safe and reliable service (Investigation 15-08-019). As previously reported, a group of community choice aggregations (CCAs) have proposed in such proceeding that CCAs should have the ability, "to be the only provider of retail electric service to all customers" (see our story here for details)

In its comments, Shell stated, "PG&E should not continue to provide procurement-related services for or on behalf of its gas or electric customers. Rather, non-IOU LSEs and other third parties should be allowed to offer competitive options in energy, demand response, energy efficiency, and other supply-related and behind-the-meter services, subject to light-handed Commission regulation, as necessary. Limiting the scope of PG&E's activities will enable the Commission to regulate PG&E's monopoly functions more effectively. Procurement is not a monopoly function. PG&E's participation in gas and electric procurement distracts the Commission from focusing on the safety and reliability of PG&E's gas pipelines and its electric transmission and distribution systems."

"PG&E's gas and electric procurement contracts and electric generation operations require extensive Commission oversight. The Commission's focus on PG&E's procurement activities and generation operations diverts staff resources and attention from the Commission's review and assessment of PG&E's transmission and distribution operations," Shell said

"The Commission should separate PG&E's procurement function from its regulated utility functions. The Commission should adopt a transition plan that eliminates PG&E from procurement-related activities within six years (by January 1, 2025). On both the gas side and the electric side, the Commission should establish rules for one or more provider(s) of last resort ('POLR') to serve customers that do not otherwise select a retail supplier. When POLR service is assigned to one or more third parties, PG&E can and should exit the energy procurement/generation business," Shell said

NextEra Energy Resources, LLC also separately filed comments in the docket, raising concerns about existing and new long-term contracts for state policy goals under any change in the supply procurement mechanism

NextEra Energy Resources stated in its comments that, "consideration of any structural change to PG&E should: (1) preserve contractual commitments that the Commission has already approved in the form of PG&E’s existing long-term PPAs with owners of renewable generating facilities that were built in reliance on those PPAs; and (2) ensure that the resulting framework encourages and facilitates continued development of new renewable and zero carbon generating resources in California."

"To promote a cohesive policy for all IOUs’ service areas, ideally consideration of procurement alternatives for PG&E would be addressed in the context of a procurement framework that might be adopted more broadly for all load-serving entities in California. To the extent that the Commission proceeds to consider alternatives for PG&E in this proceeding, the following are considerations for encouraging continued private investment in the State," NextEra said

"To the extent that the Commission considers a transfer of future procurement responsibilities to a different entity, it will be critical to ensure that the purchaser meets creditworthiness standards and has the overall financial and operational wherewithal to act as the purchaser under a long-term contractual commitment. In this regard, ensuring that existing PPAs are preserved and survive PG&E’s bankruptcy would help build confidence in the stability of a Commission-supervised electricity procurement framework," NextEra said

"Another important consideration is the Commission’s ability to continue to oversee a new procurement framework to achieve the requirements and goals now embodied in state law. The Commission has already recognized that growth in CCAs will tend to reduce the Commission’s ability to monitor energy procurement activities. The Commission should evaluate and consider the extent to which a change to PG&E’s procurement function—including the potential municipalization of PG&E or creation of a new procurement entity—might affect the Commission’s ability to ensure that state goals are being met in a consistent and cohesive way," NextEra said