California SB 286 (2015) would allow non-residential customers “direct access” to purchase electricity from other than utilities

Posted by Laura Arnold  /   March 05, 2015  /   Posted in Uncategorized  /   No Comments

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Bill would boost green power by expanding access to utility competitors

The biggest electricity users in California could buy power from a seller other than one of the three big utilities under legislation offered yesterday that was framed as a way to expand renewable energy.S.B. 286 from Sen. BobHertzberg (D) would lift a limit on the share of the Golden State's electricity market that canparticipate in a program called "direct access," where electricity customers contract with an energy service provider. Theportion that canparticipate last yearwas capped at about 12 percent of statewide electrical demand.Hertzberg said eliminating the cap would allow more businesses to take part in a system that's benefiting customers like Google and the University of California. He added that the legislation would allow energy users to reduce energy costs, make the state more business-friendly and increase access to renewable energy.

"The concept is simple and proven: Give energy users more choices and they'll have greater control over costs," Hertzberg said in a statement.

The bill comes as California is seeking to shrink its greenhouse gas emissions and grow the portion of power it makes from green sources. Right now, the state requires the largest utilities by 2020 to generate one-third of their power from green sources. Gov. Jerry Brown (D) wants that to climb to 50 percent by 2050.

The bill is likely to face significant opposition, said V. John White, director of the Center for Energy Efficiency and Renewable Technologies, or CEERT. Utilities dislike these kind of programs because they threaten utilities' market share, he said.

"They're very aggressive in arguing why it shouldn't be allowed," or if it is, why big payments are needed to cover their costs, White said. "Direct access represents an ideological challenge to the utility business model."

Utilities Pacific Gas and Electric Co. and Sempra Energy, parent of San Diego Gas & Electric Co., said they could not comment because they needed to fully review the new measure. Southern California Edison Co. did not respond to requests for comment.

Consumer groups have also opposed direct access, White said, because they fear it will load added costs on ratepayers who stay with the utilities. The legislation limits the program to commercial and industrial customers.

Technology companies support bill

The program has been restricted in California as a side effect of the 2000-01 energy crisis, when there were rolling blackouts. The state with a few exceptions barred electricity customers from contracting with providers other than utilities. It was opened up partly through legislation in 2009. That measure put the cap in place, however.

In other states where direct access exists, there are protections built in to protect utilities and residential consumers, said Andrea Deveau, executive director of TechNet, a trade group that represents about 70 companies, including energy service providers and technology giants like Google and Apple. Utilities in those states typically bill energy service providers an amount meant to cover potential losses for utility investments in infrastructure they need to pay off, Deveau said.

But White said that usually makes it more expensive for energy service providers, which want to have lower prices in order to compete with utilities. Energy service providers already are required to meet the same mandates as the utilities in terms of the portion of renewable power and cutting greenhouse gas emissions.

"This has been a source of contention," White said. "It becomes quite a barrier."

TechNet wants the cap lifted. There's a lengthy waiting list of companies that want to participate, Deveau said. In addition to the energy service providers that are part of the trade association, there are companies with investments in clean technology that could be packed with electricity sales, she said. There could also be packages that included energy storage, she said.

The waiting list for direct access is 6 billion kilowatt-hours, which represents about 25 percent of California's power load, Hertzberg's office said.

How much should be green?

Companies like Apple and Google, which have made hefty investments in building clean power plants, also could obtain for their own use the electricity generated at one of the facilities they've helped fund. Those companies could also sell the excess power, though they would have to become energy service providers and follow state rules on those to do so.

Deveau previously worked for Direct Energy, an energy service provider. When she was there, she said, there were customers that included universities and large retailers that expressed interest in becoming energy service providers.

"There's a variety of entities asking for the bill," Deveau said. "We're supporting that effort."

Through direct access, companies could buy 100 percent clean power, something they can't do with the utilities right now, Deveau said.

But White noted that there is nothing in the measure requiring green power or limiting the expansion to companies that contract for renewable energy. He argued that there's not much reason to expand the program without the green component.

"Why do you want to allow this if the customers aren't going to do any more to clean up the grid, meet climate goals?" White said.

He said CEERT would favor a measure that would lift the cap on direct access but require that energy service providers sell energy that's greener than what the utilities offer. He said some companies that are electricity buyers are less interested in price and more in the value of trying to obtain a better product.

"If it were framed that way, there might be more appetite for it," White said.

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CA bill would let non-utilities sell electricity to commercial, industrial customers

| March 5, 2015 

Dive Brief:

  • California non-residential energy customers could be free to purchase electricity from companies that are not electric utilities if a new bill in the state legislature succeeds in removing caps on direct access. ClimateWire reports that backers are pushing the bill as a way to boost clean energy in the state.
  • The just-introduced California Senate Bill 286 would remove a 12% electric demand limit on direct access, through which non-residential power customers buy directly from energy service providers (ESPs) instead of from utilities. A waiting list of 6 billion kilowatt-hours, or about 25% of the state’s load, presently wants at the savings that companies and institutions like Google and the University of California now get.
  • Utilities are expected to oppose the bill because competition would compromise their revenues. Ratepayer advocates are expected to oppose it because utility losses could be shifted to non-participating utility customers. The tech community, however, supports it, as it could give them an outlet for excess renewable energy generation.

Dive Insight:

The direct access program was restricted in California after the 2000-01 energy crisis. In response to ratepayer furor over rolling blackouts, regulators became more concerned about reliability than competition and limited electricity sales to utilities. Senate Bill 695 opened it in 2009 to non-residential customers on a limited basis.

"Direct access represents an ideological challenge to the utility business model," said Center for Energy Efficiency and Renewable Technologies Director V. John White. That is why they are “very aggressive in arguing why it shouldn't be allowed."

Protections for utilities and ratepayers in other states with direct access require ESPs to use some of their revenues to reimburse utilities for transmission and distribution system costs, but observers note that the practice can increase prices.

Tech giants like Apple are anxious to participate. Many have invested in renewables and could sell the power to themselves through direct access. They could also become ESPs and market unused renewables.

ESPs already must meet California’s 33% by 2020 renewables mandate. Because many California companies will buy renewables regardless of the price and want the opportunity to do so directly from ESPs instead of going through utilities, White proposed legislators pass SB 286 but impose a higher renewables mandate on them.

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