Tag Archives: CCA

Opening up California’s utility procurement process could lead to lower power prices

auction

California passed AB 57 in 2002 to make the power procurement process for electric utilities confidential (as well as subject only to upfront review rather than ongoing prudence standards). The result has been overly high prices locked in for decades.  A new study on the relative gains to landowners who sell the development rights for oil and gas development in Texas shows that using auctions creates more competition among multiple bidders than bilateral negotiations. As a result, landowners get higher prices for their development rights through an auction. The corollary is that California’s electric utilities probably could lower their power purchase costs by moving to public auctions instead. Yet another reason to repeal AB 57.

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Proposed TOU rate revisions are “fighting the last war” in California

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California’s investor-owned utilities (IOUs) have asserted that the underlying costs molding time variant or time of use (TOU) rate structures should be largely, or even exclusively, derived based on conventional fossil generation costs. The IOUs rely on “net load” to determine TOU prices, calculated by subtracting all load met by renewables, nuclear and hydropower generation—the majority of the utilities’ generation fleets.

In theory, net load is the portion of the load served by fossil-fueled generation that has the highest short-run operating costs, and therefore is “marginal.” The infamous “duck curve” shown above depicts the net load (not the metered load.) Yet, the marginal energy generation for most load is no longer served by natural gas; it is now met by renewable energy contracts. The utilities’ net load approach ignores the bulk of their true marginal costs to serve added load, which arise from procuring renewables.[1] The IOUs’ resource procurement has been dominated by adding solar, wind, biofuels, and other renewables since at least 2006 to meet the state’s renewable portfolio standard (RPS), first at 20 percent, then 33 percent, and soon 50 percent.

The tunnel-vision focus on net, rather than the entire, load is especially problematic in the context of State policy to phase-down fossil fuel generation. Eventually, natural gas production will even more significantly diminish, and could disappear from the grid entirely, leaving no price-setting metric under this paradigm. Insistence on the net load approach in the face of this transformation is akin to evaluating the economics of ridesharing based on the exclusive cost of taxis, without consideration of Uber® and Lyft®.

Once fossil-fuel resources are used minimally – an explicit state goal reflected in SB 350 – and potentially no longer on the margin, it is unclear what price benchmark the utilities will propose to set time-variant rates.  Continuing the trend toward fewer fossil-fuel resources is already reflected in pending legislation in Sacramento that proposes a clean-peak standard – AB 1405[2] – and a 100 percent Renewable Portfolio Standard—SB 584.[3] Relying solely on the cost of generation resources that State policy plans to phaseout to define TOU periods is inconsistent with good, long-term, ratemaking principles.  Instead, marginal energy generation costs should be calculated, at least in part, from a set of recent RPS-eligible PPAs, weighted by time of delivery.

Likewise, the marginal energy costs derived using the net load method, which drive the proposed shifts in TOU periods, reflect less than one-third of total average utility rates. The IOUs do not explain why cost differences within a modest component of overall rates should steer determination of TOU periods.

Further, it is not clear why the California Public Utilities Commission (CPUC) should rely on a speculative forecast about load shapes in 2024—seven years from now—to set today’s TOU periods. As the CPUC is well aware, the electricity system is changing rapidly along many dimensions. Infusion of utility-scale renewables, which is driving the IOUs’ rate analyses, is but one factor. Increasing amounts of storage and electric vehicles, shifting work patterns, and other social and economic factors will substantially influence load profiles over the next decade. In 2006, few energy experts foresaw stagnant, or even falling, electricity demand; there is even greater uncertainty today.

[1]This perspective excludes contributions made by utility-scale renewables that meet most of the remaining load, and by customer-side resources.

[2] See http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1405

[3] See https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB584

Enlisting Davis’ Citizen-Analysts | Davis Vanguard

By Richard McCann

Why are we not using Davis’ wealth of human capital to our advantage? Why don’t we assign, and even hire or retain, these individuals to prepare these analyses for commission review?

Source: Enlisting Davis’ Citizen-Analysts | Davis Vanguard

Reblog: Why Tim Cook is Steve Ballmer and why he still has his job at Apple • The Berkeley Blog

This post seems particularly apt for the electricity industry. IOU CEOs typically are “executioners” not “visionaries,” and this is at the heart of their existential conumdrum.

What happens to a company when a visionary CEO is gone? Most often innovation dies and the company coasts for years on momentum and its brand. Rarely does it regain its former glory. Here’s why. Mi…

Source: Why Tim Cook is Steve Ballmer and why he still has his job at Apple • The Berkeley Blog

Will ‘Independence’ from PG&E Bring Cleaner and Cheaper Electricity? | Davis Vanguard

cce-picThis summarizes expected advantages of the Yolo-Davis Community Choice Energy (CCE) and how it will proceed.

By Leanna Sweha City staff briefed the Council at its last meeting on the timeline for the Joint Davis and Yolo County Community Choice Energy (CCE) progra

Source: Will ‘Independence’ from PG&E Bring Cleaner and Cheaper Electricity? | Davis Vanguard

Community choice spreading across California

Yolo County and the City of Davis became the latest community to approve a CCE (for community choice energy, an alternative moniker to the legalistic community choice aggregation). I sat on the advisory committee assessing options and the business case is strong for the viability of this option. This is the leading edge of a wave of CCEs across California. The combination of market conditions, falling renewable power costs, recognition of changes in the electricity market, and dissatisfaction with the incumbent utilities is pushing broad community coalitions to take the leap.

ca-cca-map-solo-10-10-16-e1476219431587To date three communities have operating CCE’s, with MCE starting first in 2010. MCE is made up of not only Marin County, but also Napa County, and the City of Richmond and Benecia. It also is considering adding new members. It currently has 17 voting communities. Sonoma Clean Power followed in 2014, and is considering adding Lake and Mendocino counties.  The City of Lancaster started in late 2015 in SCE’s service territory. Peninsula Clean Energy, composed of San Mateo County and its cities, kicked off service in 2016.  In addition, San Francisco has approved a CCE but has had various political barriers to getting off the ground.

Here’s a couple websites that show maps and lists of what counties and cities are pursuing CCAs (the lists are slightly different).

 

Other communities in the midst of either approving or implementing new CCEs include:

Alameda County

Contra Costa County – considering joining Alameda or MCE, or going it alone

Humboldt County as Redwood Coast Energy Authority – considering joining SCP or going alone

South Bay Cities of Los Angeles County as South Bay Clean Power

Los Angeles County

Monterey, Santa Cruz and San Benito Counties and their cities as Monterey Bay Community Power

Riverside and San Bernardino Counties – issued RFP for joint study

San Diego County

City of San Diego – issued RFP for a study

City of Solana Beach

Santa Clara County and 11 cities as Silicon Valley CCE Partners – starting late 2016

City of San Jose – exploring joining SVCCEP or going alone

Santa Barbara CountySan Luis Obispo County and Ventura County – released study on feasibility and options

City of Walnut Creek – considering joining with Contra Costa or going alone

 

All of this activity has serious implications for IOU purchasing and contract management going forward, CPUC regulation and overall procurement transparency. The IOUs and CPUC have operated in black box to date claiming that confidentiality is necessary to prevent market manipulation. Yet with all of these CCEs likely operating as open books, everyone will have the market information that the IOUs claim is so vital to protect. This is likely to open up IOU PPAs to greater scrutinty–attention that neither the IOUs or the CPUC probably want.

Looking at a locality’s options as the energy marketplace changes

Here’s the first in a series of articles that I am coauthoring about how the new direction in the energy utilities marketplace can affect the choices for a locality like the City of Davis. This one is with Gerry Braun. This first article reviews the findings of study conducted last year that focused on a more traditional utility models, and then sketches the most salient options. This and future articles with other co authors will include:

  • What are the options going forward for Davis and what have we looked at.
  • Describing decentralized energy systems
  • How a decentralized energy system might fit into achieving local goals (e.g., climate action plan) and affect economic activity.
  • Barriers to achieving local goals in this future scenario.
  • Comparisons of potential business models to overcome those barriers.