Action

Tell Governor Newsom to hold energy providers accountable for protecting the environment and ratepayers’ interests.

Call or Write Governor Newsom

  • Tell him how happy you are that your local electricity provider (East Bay Community Energy [EBCE] or Marin Clean Energy [MCE]) is providing you with electricity that is cheaper and cleaner than that provided by PG&E.
  • Ask him to urge the US Bankruptcy Court to appointment a Ratepayers Committee for PG&E’s bankruptcy case. This Committee could help PG&E reduce losses from past electricity procurements that we are still paying for even though we are no longer buying our electricity from PG&E.
  • Ask him to hold Commissioners of the California Public Utilities Commission (CPUC) responsible for upholding the interests of ratepayers and the renewable energy goals of our state rather than the interests of the shareholders of PG&E–or appoint new commissioners who will do so.

Contact Info

  • PHONE: 916-445-2841. Someone from Constituent Affairs will note down your comments.
  • WRITE: Governor Gavin Newsom, Office of the Governor, State Capitol, Sacramento, CA 95814
  • EMAIL: Website contact form. Select Energy Issues to describe your comment.

Background Information

Most of us now buy our electricity from East Bay’s new EBCE or Marin’s established MCE, the Community Choice Aggregations (CCAs) in our area. CCAs are local government agencies that aim to procure electricity with a higher renewable content than the local Investor Owned Utility (IOU) like PG&E and sell it at a lower rate. Their mission also includes developing local renewable energy projects like MCE’s 2017 solar project on a 60 acre remediated brownfield site in Richmond.

Delivery and transmission of the electricity purchased by EBCE and MCE as well as billing remain PG&E’s responsibility.

Our newly launched EBCE’s default power mix already includes 38% renewable content compared to 33% for PG&E at rates 1.5% below PG&E’s. (EBCE is committed to rapidly increasing its renewable content.) MCE’s default power mix is currently 60% renewable (meeting the state’s RPS [Renewable Portfolio Standard] mandate for 2030 already!), 20% large hydro and 20% other (mostly natural gas) at rates 5.5% below PG&E’s.

CCAs have been growing exponentially. The first CCA to launch was MCE in 2012. By mid 2018 40% of PG&E’s accounts were receiving electricity purchased by the 12 CCAs within its territory. The CPUC has estimated that 85% of the state’s retail demand for electricity could be supplied by CCAs by 2025.

We need to encourage this rapid growth of CCAs. They will help California meet its mandates for 60% RPS by 2030 and 100% Clean Energy by 2045.

The CCAs’ reputation for innovation and their close proximity to their customers also make them well situated to make the changes that higher renewable content electricity require. These include increasing battery storage, expanding EV charging options and improving building efficiency and other ways to reduce peak demand.

The CPUC is responsible for making certain that electricity rates are fair and reasonable for customers of CCAs as well as those of IOUs.

While EBCE or MCE supplies us with the electricity we consume we also pay PG&E for our share of the unrecoverable cost of electricity that was purchased for us in the past mostly through long term contracts (PPAs). Because the prices of solar, wind and natural gas energy have dropped considerably over the last few years PG&E can not cover these contracted costs by selling this electricity in the market today. These losses make up the PCIA (Power Charge Indifference Adjustment) that we pay PG&E monthly. Losses from some of its own natural gas power plants are also included in the PCIA.

The CPUC sets the PCIA annually in a process that lacks both transparency and accountability and has created great uncertainty for the CCAs. The CCAs are not granted access to the IOU contracts that identify the extra generating costs their customers pay through the PCIA so it has been difficult to determine if these costs are truly unavoidable. Nor do the CCAs have much input into how the PCIA changes from year to year and in some years the change has been very large. This is unfair.

The PCIA fee is almost 50% of the generating charge that EBCE or MCE charges us for the electricity we actually consume. In 2018 MCE customers’ PCIA rate was 3.35¢ per kWh of electricity consumed compared to 6.83¢ per kWh for generation, while EBCE customers’ PCIA rate was 3.40¢ per kWh and its generation cost 7.22¢ per kWh. Clearly the PCIA has a considerable impact on our electric bill.

A new methodology for calculating the PCIA was adopted by the CPUC in October 2018. If applied as suggested the PCIA fee will jump to over 50% of the CCA’s own generating cost later this year! The fact that the CCAs have had little input into how the PCIA changes from year to year and yet now this fee constitutes such a large part of their customers total generating cost is unreasonable.

Reduction of the assets of PG&E (and the other IOUs) that are unneeded for current supply or reserve capacity requirements would make it possible to reduce the PCIA. PG&E’s recently declared bankruptcy would seem to make now a good time to reduce these assets. It could renegotiate some contracts, reallocate others to the CCAs or auction off assets. The rapid growth of CCAs and growth of the PCIA’s share in the total generating costs of CCA customers make this a high priority.

The CPUC has been discussing the reduction of PG&E’s energy assets for some time but no action has been taken. Appointment of a Ratepayers Committee by the US Bankruptcy Court overseeing PGE’s bankruptcy might accomplish this. A Ratepayers Committee would have the power to investigate PG&E’s plans for ending bankruptcy and the opportunity to offer its own suggestions about how PG&E might reduce its energy portfolio.

The wildfire costs will certainly result in higher electric rates for all of us—making it that much more important that we reduce the PCIA fee.

A Ratepayers Committee was appointed for PG&E’s 2001 bankruptcy but unfortunately was dismissed by the judge overseeing the case. The same judge is overseeing the current bankruptcy but if a Ratepayers Committee is appointed the pressure to ensure that it is not dismissed should be greater this time round.

The CPUC has suggested that a central procurer of electricity may be necessary to ensure that adequate reserves are in place for emergencies as customers shift from the IOUs to the CCAs. The need for this is questionable as California’s recent problem has been one of excess supply not inadequate supply.

The recent Wildfire Report from the Governor’s Office suggested that a back up central procurer might provide credit to CCAs or other suppliers of electricity for purchases. Again the need for this is unclear. MCE received an investment grade credit rating with a stable outlook from Moody’s in May 2018, a first for a CCA. Moody’s cited MCE’s established operating record as the now third largest municipally governed electric entity in California. And Moody’s declared its support for the CCA business model.

Additional Background Information on PCIA

The PCIA rate setting process has been contentious with both the IOUs and the CCAs claiming that they are paying more than their fair share of these costs. The process has at times created volatility for the CCAs. For example, MCE’s PCIA rate unexpectedly nearly doubled from 2015 to 2016 and MCE did not learn about this large increase until 2 months before it was due to take effect! MCE’s attempt to substantiate the unreasonableness of the increase was difficult because PG&E’s contracts were not available to MCE for inspection. Unlike the local government-run CCAs which are required to make their contracts available to the public the IOUs as private companies have the right to keep their contracts confidential.

PG&E has not had sufficient incentive to sell its excess electricity at the highest price possible because it can pass so much of its loss onto its departed customers. Also the more PG&E can include in the PCIA the more difficult it is for its competitors (the CCAs) to lower their rates and to fund local renewable energy projects.

On the other hand, PG&E has had an incentive to over-invest in new generating plants of its own because it is guaranteed a profit rate of 10.5 % on the cost of these plants. Utilities are required to have supply available to meet their peak demand plus 15% for reserve requirements. In 2017 the LA Times identified instances where PG&E developed natural gas plants beyond these needs. The costs of such mismanagement should not be borne by CCA customers but by PG&E shareholders.

Since 2010 renewable energy has accounted for 80% of new electricity capacity in California, spurred on by our RPS. As long as contract costs were not inflated these are costs that appropriately belong in the PCIA though more effort should be made to reduce losses from the earlier contracts.

The market price benchmarks used to calculate the losses that make up the PCIA have also drawn criticism from the CCAs.

References

  • Bushnell, James, “Breaking News! California Electric Prices are High”, Energy Institute Blog at Haas, 2/23/17.
  • CalCCA, Application of CalCCA, Clean Power SF and Sonoma Energy Alliance for Rehearing of Decision18-10-019, 11/19/2018.
  • Chediak, Mark, “California Puts Another Nail in Fossil-Fuel’s Coffin”, bloomberg.com, 2/12:2019.
  • East Bay Community Energy, Community Choice Aggregation Implementation Plan and Statement of Intent, August 2017.
  • Governor Newsom’s Strike Force, Wildfires and Climate Change: California’s Energy Future, 4/12/19.
  • greentechmedia.com, “How Community Choice Aggregation Fits into California’s Clean Energy Future”.
  • MCE, 2019 Integrated Resource Plan, November 2018.
  • Penn, Ivan and Menezes, Ryan,” Californians are paying billions for power they don’t need”, LA Times, 2/5/17.
  • Peterman, Alternate Proposed Decision Modifying the Power Charge Indifference Adjustment, CPUC, 10/18/2018.
  • CPUC, Phase II Scoping Memo and Ruling of Assigned Commissioner, 2/1/2019.
  • Roscow, Ali, Proposed Decision Modifying the Power Charge Indifference Adjustment, CPUC, 10/1/2018.
  • San Francisco Chronicle Editorial Board, “Editorial on the Utility’s Bankruptcy: Ratepayers need voice in PG&E”, 4/20/22, San Francisco Chronicle.
  • Specht, Mark, “Natural Gas Power Plant Retirements in California”, Union of Concerned Scientists blog, 2/25/2019.
  • Swaroop, Shalini, Policy Update on Regulatory and Legislative Items, MCE, 3/21/2019.
  • Waen, Jeremy, Response of Marin Clean Energy and City of Lancaster to Optional Homework Assignment in Preparation for March 8 Workshop on PCIA Reform, CPUC, 2/16/2016.