Transcript Direct Access Presentation - Power Association of Northern

The History of Direct Access
“How Did We Get Here?”
Presentation by Dan Douglass
Douglass & Liddell
PANC 2010
Annual Seminar April 19, 2010
What is Direct Access?
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 Direct access is the right for electricity end-users to choose
their own supplier
 First granted by AB 1890 (Statutes of 1996)
 Implemented April 1, 1998, along with other
restructuring features, such as:
 The creation of the California Independent System
Operator and California Power Exchange
 The divestiture of gas-fired power plants by the utilities
 The freezing of retail rates with certain mandatory rate
reductions
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Why was Direct Access Suspended?
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
A number of developments led to DA suspension
 DA customers received a credit from the utilities equal
to the amount they would have paid the utility had they
remained on bundled service.
 When the utilities faced severe financial stress during
the energy crisis of 2000-2001, they stopped paying this
“PX Credit,” causing customer return to bundled
service.
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Why was Direct Access Suspended?
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 Further, the State, through the DWR, had commenced
buying power at what was considered to be high prices.
 There was fear that customers would flee back to direct
access in order to avoid the “high costs” of the DWR
power, so legislation authorizing these purchase directed
the CPUC to suspend direct access until “the department
no longer supplies power.”
 The CPUC therefore commenced a rulemaking to
determine whether and how direct access should be
suspended.
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How Was Suspension Implemented?
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

There were proponents of retroactive suspension
 This would have made the effective suspension date
occur at the nadir of statewide DA participation
 So a fundamental deal was struck:
 DA would be suspended prospectively as of 9/20/01
 But DA customers with contracts in effect prior to
that date retained the right to be on direct access so
long as they paid an “exit fee” to represent their “fair
share” of the DWR contracts costs.
DA subsequently declined from 16% to about 9% statewide
with no new customers allowed, with some exceptions.
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Efforts to Restore Competition
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
200+ parties filed unique petition at CPUC in December
2006, seeking rulemaking on restoration of choice
 CPUC responded with opening of Rulemaking R.07-05025, “Regarding Whether, or Subject to What Conditions,
the Suspension of Direct Access May Be Lifted” (the DA
OIR).
 Proceeding divided into three phases:
 Legality of reopening market
 Public Policy ramifications
 Rules of the game
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DA OIR – Phase 1
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First phase decision D.08-02-033 determined “the
Commission does not have authority to lift the suspension at
present.”
However, decision decided to explore alternatives to satisfy
the statutory requirement a precondition to reopening was
that the DWR no longer provide power.
 Novation of the DWR contracts would mean the state
was no longer providing power
 Thus the statute would be satisfied and the suspension
could be lifted.
 Lengthy novation process has ensued.
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DA OIR – Phase 2(a)
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


D.08-11-056 established Working Group to handle
contract novations
 Utilities
 CPUC Staff
 DWR
Goal was to complete novations by January 1, 2010
 Obviously not achieved and largely made irrelevant by
SB 695
Phase 3 to come next regarding market rules
 Switching rules
 Exit fees
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CPUC – Legislature Dynamic
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 Action moved to Sacramento in the last legislative session
 Opponents have inaccurately contended that direct

access was somehow a cause of the energy crisis.
 Direct access thus became a bit of a “third rail” for
politicians who don’t take the time to become fully
informed.
 There were efforts to get original statute amended to
provide that only the Legislature can reopen the market.
However, negotiations ultimately led to a compromise
whereby the market could be reopened sooner with
volumetric limitations on the amount of load that could
move to direct access.
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SB 695
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
Approved by Governor on October 11, 2009
 Chapter 337, Statutes of 2009.
 Classified as urgency legislation, meaning it became effective
six months after signature, or April 11, 2010.
 Provided for phased, 3-4 year reopening of direct access,
commencing this year.
 Total DA load to be capped, based on the historical highest 12month DA load in each utility’s service territory
 CPUC directed to implement reopening

Any further reopening shall be at the direction of
Legislature.
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DA OIR – SB 695 Implementation
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Joint Parties proposed rules for market reopening that are
largely adopted in D.10-03-022.
 Four-year phase-in: 35% in 2010; 35% in 2011; 20% in
2012 and 10% in 2013.
 Switching rules waived for first year.
 NOIs for 2010 filed April 16; awaiting IOU review and
notice to customers.
 Excess of demand anticipated.
 Wait list for up to 25% of amount available under the
cap.
 Petition for modification pending regarding 2011 timing.

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Applicable Load Cap in GWh
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SCE
Load Cap Pursuant to SB 695
PG&E
SDG&E
11,710
9,520
3,562
Existing Base Line DA
7,764
5,574
3,100
New DA Load Allowance
(Line 1 less Line 2)
3,946
3,946
462
 The new load eligible for DA service represents a relatively
small portion of each of the utilities’ portfolios, involving less
than 10 million MWh of annual usage across the entire state.
 This amount is less than 6% of the entire load served, and is
much less than the annual variation in electricity consumption
across the state due to the weather and the economy.
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For More Information:
______________________________________
Dan Douglass
Douglass & Liddell
21700 Oxnard Street, Suite 1030
Woodland Hills, California 91367
Telephone: (818) 961-3001
Facsimile: (818) 961-3004
[email protected]
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