SAN FRANCISCO — PG&E joined other California energy companies today (April 25) in proposing a plan that supports the state’s clean energy goals, protects customer choice and ensures that all customers are treated equally.
Together with Southern California Edison and San Diego Gas and Electric, PG&E filed a proposal with the California Public Utilities Commission (CPUC) on how to address costs associated with long-term contracts for clean energy in a manner that ensures all customers are treated equally. The contracts were entered into in support of the state’s clean energy policy objectives.
At issue is how communities that choose to implement Community Choice Aggregation (CCA) power arrangements and Direct Access (DA) customers pay for these clean energy purchases. Today, they are not paying their full share of costs associated with the long-term contracts, forcing other customers to pay more.
The proposed approach would replace the current system, which is known as the Power Charge Indifference Adjustment (PCIA), with an updated system known as the Portfolio Allocation Methodology (PAM).
“We can achieve the state’s clean energy goals while also supporting customer choice and treating all customers fairly and equally,” said Steve Malnight, senior vice president of strategy and policy for PG&E.
Why the system needs reforms
Over the past 15 years, state leaders, regulators and energy companies made a joint commitment to invest in clean energy and the infrastructure needed to deliver it, and all customers and communities have benefited from this investment. These responsible choices laid the foundation and forged a path forward for the state’s continued leadership in clean energy.
In a determined effort to help keep energy costs stable over time for all Californians, a commitment was made to purchase long-term energy contracts and investments, which must be paid for over the next 20 years.
Under the current formula, the cost allocations from these long-term commitments have become distorted and unbalanced over time due to the growth of CCAs; currently, CCA customers pay approximately 65 percent of these costs. This year, the cost shift for PG&E associated with the current system is projected to be $180 million. Assuming this trend continues, in 2020 this shift will grow to half a billion dollars, which is equal to the current PG&E low income subsidy.
This disparity was not significant when CCAs served only two-tenths of one percent of the state’s energy requirements. However, CCAs will serve 13 percent by the end of this year and are expected to serve at least 38 percent by 2020 in PG&E’s service area.
Proposed Portfolio Allocation Methodology
Today’s filing represents the first step toward the energy reform California needs to support the state’s clean energy future and to protect all customers. California’s energy companies believe this is the best path forward and remain committed to working with all parties to find the right balance for the state’s energy future.
The Portfolio Allocation Methodology will replace the PCIA with a system that supports continued CCA growth without burdening other customers. The new PAM proposal:
- Prepares for even more CCAs in the future by allocating resource adequacy and renewable energy credits to the CCAs to start or enhance their portfolios;
- Improves upon the current system by eliminating cost estimates, replacing it with actual costs of energy resources;
- Enables true-up forecasts so customer costs reflect actual energy prices;
- Ensures that low-income customers are treated fairly and aren’t disproportionately impacted by the evolving energy landscape over the next decade or longer; and,
- Protects customers who choose to remain with their energy company from paying much more than their fair share.
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