Overview
The History and Future of Direct Access
Resource Adequacy Requirements
Renewable Portfolio Standards
Market Updates
Overview
Prior to 2001, Direct Access (DA) was the energy deregulation program in California. On September 20, 2001, the California Public Utility Commission (CPUC) suspended DA, therefore the right of consumers to buy energy from Electric Service Providers (ESPs), like Strategic Energy, which buy and sell retail electric in a competitive, deregulated market. DA suspension applies to all customers in the three major utilities in California: Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. Current regulations allow Strategic Energy to service only those customers that are:
- Current Strategic Energy customers interested in extending or renewing their initial contracts;
- Current customers of other ESPs; or
- Customers who have valid contracts with an ESP executed on or before September 20, 2001.
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The History and Future of Direct Access in California In September 1996, legislation was enacted to restructure the California electric utility industry and implement retail access for electricity customers. In 2000 and 2001, California experienced a statewide electricity crisis. Falling reserves, rolling blackouts, escalating wholesale prices and financial instability of utilities resulted. The Department of Water Resources (DWR) was allocated $400 million to purchase and sell electricity to California customers and the responsibility for purchasing additional long-term power contracts. As a result of the power crisis, Direct Access was indefinitely suspended in California, leading to the current situation.
In October 2002, the California Public Utility Commission (CPUC) approved an order allowing Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric to buy their own power starting in January 2003. The operating order for which these utilities have taken over energy procurement may lead to more competitive opportunities in the future. A more efficient purchasing plan, along with a dedicated CPUC focus could provide progress to reopen Direct Access.
The recent defeat of Proposition 80 and the imminent repayment of the DA CRS are positioning the California marketplace for a reinstatement of Direct Access. Reinstating Direct Access is crucial to being able to offer customers choice and control of their own energy destiny.
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Resource Adequacy Requirements (RAR)
In October 2005, the CPUC issued Decision (D.05-10-042) which promulgated key policies for RAR that are applicable to the three major investor-owned utilities, Electric Service Providers and community choice aggregators (collectively, Load Serving Entities, or LSEs). In adopting these policies, the Commission said that it was “providing a framework to ensure resource adequacy by laying a foundation for the required infrastructure development and assuring that capacity is available when and where it is needed.” Among the RAR policies adopted in D.05-10-042 are the following:
Beginning in 2006
- Each LSE has an obligation to acquire sufficient resources and reserves to cover its customers' loads.
- Each LSE is subject to a planning reserve margin requirement of 15-17% for all months of the year.
- Each LSE must demonstrate forward contracting for 90% of its summer (May through September) peaking needs (loads plus reserves) a year in advance.
- Each LSE must demonstrate it has fully contracted for at least 115% of peak loads on a month ahead basis.
Additionally D.05-10-042 called for a local Resource Adequacy Requirement to begin in 2007 which would require each LSE to procure adequate resources within each load pocket to meet customer needs. This phase of the proceeding is ongoing with decisions expected in the second half of 2006.
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Renewable Portfolio Standards (RPS)
Senate Bill 1078, passed during the 2003 Legislative Session, calls for all Load Serving Entities (LSEs) to increase the percentage of renewables within their portfolio by a minimum of 1% each year beginning in 2006 and reaching 20% by 2017. This requirement has been accelerated for all LSE’s through CPUC decisions and policy statements made in the State’s Energy Action Plan to 20% by 2010. Compliance mechanisms for Electric Service Providers are in the process of being determined through California Public Utility Commission proceedings.
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Market Updates
For regulatory updates about California and other states, please sign up to receive Energy Outlook. Energy Outlook is a monthly e-newsletter featuring market updates, buying strategies, industry news and other information to support your energy strategy. Go to http://www.strategicenergy.com/Energy_Outlook.php to view current news or search articles.
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