Fair ‘exit fee’ critical to renewable energy future

A concentrated solar energy thermal plant in the Mojave Desert. (Photo: Piotr Zajda, via Shutterstock)

While utility responsibility related to California’s devastating wildfires is dominating headlines and the agendas of policymakers, flying below the radar is a pending decision from the California Public Utilities Commission to change the formula for a fee charged to energy consumers who leave the power supply of investor-owned utilities (IOUs) like PG&E and instead get power from local community choice aggregation programs, also known as CCAs. The new formula could radically alter consumers’ energy choices.

CCAs are increasing in popularity in California and for good reason. Authorized by the Legislature to help prevent another energy crisis, CCAs are created and run by local governments to provide clean, affordable energy that meets specific community needs. Unlike the IOUs, CCAs are transparent entities accountable to local policymakers and community members, and available funds are reinvested in local projects, rather than filling the pockets of shareholders.

An alternate proposal, however, would deal a devastating blow to the flourishing CCA movement in California, while undermining the legislative intent to foster CCAs.

The PCIA, or Power Charge Indifference Adjustment, is an “exit fee” charged by IOUs to customers that switch to another provider of electricity like community choice aggregation. The charge compensates the utilities for electricity they bought in the past at prices that are now above-market.

How the CPUC designs the new PCIA fee will greatly impact the CCAs’ ability to compete on a level playing field against these titans of energy. For months, key stakeholders have weighed in with their own proposals. The California Community Choice Association, which represents CCA programs in California, designed a win-win proposal that would lower costs for both IOU and CCA electricity customers by $2 billion through smarter, and more accountable portfolio management.

There are now two final proposals before the Commission.  The first proposal, crafted by an administrative law judge, represents a reasonable balance of competing interests by providing IOUs with an incentive to manage their energy portfolios in a more prudent manner.

An alternate proposal, however, would deal a devastating blow to the flourishing CCA movement in California, while undermining the legislative intent to foster CCAs.

The alternate would significantly jeopardize CCAs’ ability to invest in long-term renewable resources, local programs for electric vehicles and energy efficiency, and those targeted for disadvantaged communities. Whereas the first proposal benefits all ratepayers and reduces costs for everyone, the alternate protects the IOUs and their shareholders, allowing them to continue their mismanagement of resources, in spite of knowing that communities have departed for CCA energy programs.

California continues to lead in innovative clean-energy technology and carbon-reducing energy policy, and CCAs are playing an increasingly vital role in achieving local and state climate goals. CCA expansion across the state speaks to the community interest in having choice and diversifying the state’s energy portfolio to prevent over-reliance on IOUs. Regulators should facilitate this progress, not impede it.

Consumers benefit when they have alternatives and a fair and balanced PCIA assures those options across California. The state should adapt its regulatory structure to encourage investments in clean energy, support local governance (that is people, not profits, focused) and foster competition to keep costs down. A reasonable PCIA is an essential component to a fair and balanced energy market.

Ed’s Note: Beth Vaughan is the executive director of the California Community Choice Association.

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