SB 612 creates fair system for managing legacy energy resources and reducing costs for all ratepayers
(From press release) State Senator Anthony Portantino (D-La Cañada-Flintridge) has introduced SB 612 which requires that California electric ratepayers have fair and equal access to benefits associated with investor-owned utility (IOU) legacy energy resources and that the resources are actively managed to maximize their value. The bill, sponsored by the California Community Choice Association (CalCCA), will have its first hearing on April 26 before the Senate Energy, Utilities and Communications Committee. The bill would benefit community choice aggregators such as Valley Clean Energy, which serves electricity customers in Woodland, Davis, Winters and the unincorporated areas of Yolo County.
Legacy energy resources are a major concern because they account for billions of dollars in above-market costs in IOU energy portfolios, and the utilities rely on California ratepayers to pay the costs. They include capital-intensive utility-owned generation facilities and expensive long-term renewable energy contracts with third parties.
Under SB 612, legacy energy resources would be handled in more prudent ways that reflect new market realities and that reasonable steps are taken to minimize above-market costs that accrue to ratepayers.
“With millions of Californians struggling to meet their monthly expenses it is more critical than ever that we put forth solutions to scale back ratepayer costs,” said Sen. Portantino. “SB 612 does just that by creating a more equitable system for managing legacy energy resources and ensuring costs to ratepayers are justified.”
What Problem is SB 612 Addressing?
There are electricity policies in California that were put into place long ago that no longer reflect current market realities. One policy area that requires immediate attention due to ratepayer impacts concerns legacy energy resources.
Over the last decade, more than 11 million utility customers, about a quarter of California’s population, have transitioned from IOU electric service to Community Choice Aggregators (CCAs), local publicly-owned energy providers that purchase electricity on behalf of the residents and businesses in their communities. This month the total number of California cities and counties with CCA service exceeded 200.
As part of this transition, CCA customers continue to share with IOU customers cost responsibility for power supply commitments made by IOUs – Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison – prior to their departure for CCA service. CCA customers continue to pay for legacy resources through the Power Charge Indifference Adjustment (PCIA) fee.
Legacy resources are a burden because the electricity they generate is very expensive compared to today’s market prices, resulting in billions of dollars in above-market costs that fall to all ratepayers. However, there are also valuable products associated with the electricity produced by legacy resources – such as resource adequacy, RPS attributes, and GHG-free attributes – that can be used by energy providers to meet their clean energy goals and reliability requirements. But under the current structure, these products are retained by IOUs. So, while CCA customers must pay their fair share for legacy resources, CCA customers do not have equal and timely access to the beneficial products they are paying for. Additionally, legacy energy resources are not managed in a way that maximizes their value and minimize costs for all ratepayers.
How is SB 612 a Solution?
SB 612 resolves the inequities by ensuring all customers have equal access to the benefits of the resources they are paying for, while maximizing their value. The bill stems from a consensus proposal that was developed by a group representing CCA, IOU, and direct access energy providers.
“Everyone agrees that California’s system for managing legacy energy resources is long overdue for an overhaul,” said CalCCA Executive Director Beth Vaughan. “SB 612 puts into place common sense changes that will benefit all ratepayers.”
SB 612 resolves inequities and maximizes value to ratepayers by:
- Providing IOU, CCA, and direct access customers equal right to receive, on a voluntary basis, legacy resource products that were procured on their behalf in proportion to their load share if they pay the full cost of those products
- Requiring the CPUC to recognize the value of GHG-free energy and any new products in assigning cost responsibility for above-market legacy resources, in the same way value is recognized for renewable energy and other products
- Requiring IOUs to offer any remaining excess legacy resource products not taken by IOU, CCA, or direct access customers to the wholesale market through regular solicitations
In addition to Sen. Portantino, SB 612 has 20 co-authors and counting. Additional information about the bill can be found on the SB 612 website here. Responses to frequently asked questions can be found here.
About CalCCA: Launched in 2016, the California Community Choice Association (CalCCA) represents California’s community choice electricity providers before the state Legislature and at regulatory agencies, advocating for a level playing field and opposing policies that unfairly discriminate against CCAs and their customers. There are currently 24 operational CCA programs in California serving more than 11 million customers.
For more information about CalCCA and community choice visit, www.cal-cca.org.