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Calif. nonutility players have major role in state's quest for 60% renewables

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Calif. nonutility players have major role in state's quest for 60% renewables

As California's investor-owned utilities lose customers to nonutility electric service providers and community choice aggregators, the latter in particular is expected to shoulder increasing responsibility for meeting California's renewable energy goals over the next 10 years.

However, the California Public Utilities Commission has expressed concern that many of those aggregators, or CCAs, have not disclosed how they will meet the state's renewable portfolio standard, which requires all retail electricity sellers to get 60% of their power from renewable resources such as solar and wind by 2030. State law requires that CCAs and nonutility electric service providers, or ESPs, participate in the RPS program subject to the same terms and conditions as investor-owned utilities.

Increased renewable procurement by CCAs and ESPs must occur in the near term to meet the RPS requirements, the CPUC told the state Legislature in a November annual report.

Despite the state regulators' somewhat gloomy assessment, the California Community Choice Association announced that as of Nov. 7, a total of 13 CCAs have signed 3,195 MW of power purchase agreements with terms ranging from 10 years to 25 years for new renewable energy projects. Approximately 1,000 MW of that total was added in the past 12 months, and five of those CCAs have only been serving customers since 2018 or later. In addition, more than 239 MW of long-term battery energy storage contracts have been signed.

But to put those numbers into perspective, more than 27 GW of new renewable generation capacity is needed to reach the 2030 RPS goal, according to S&P Global Market Intelligence estimates.

Currently, the CCAs' total annual load stands at about 45,000 GWh, which is approximately 25% of the combined load in the service territories of the big three utilities, said Beth Vaughan, executive director of the California Community Choice Association.

Publicly owned utilities, including municipal utilities and cooperatives, serve about 22% of customer load in California, according to figures compiled by the California Energy Commission. Just as the CPUC is responsible for overseeing RPS compliance by investor-owned utilities, CCAs and ESPs, the California Energy Commission does the same with respect to publicly owned utilities.

Noting that 30% of the power collectively delivered by the state's publicly owned utilities in 2018 was produced by renewable resources, California Municipal Utilities Association spokesperson Matt Williams said those utilities "are well on track to meet or exceed" California's RPS.

Investor-owned utilities still account for more than half of the electricity sold in the state. In 2018, the three biggest of those utilities — PG&E Corp. subsidiary Pacific Gas and Electric Co., Edison International subsidiary Southern California Edison Co., and Sempra Energy subsidiary San Diego Gas & Electric Co. — sold 181,000 GWh, according to the California Energy Commission.

Big utilities can coast without buying more renewables

As the investor-owned utilities lose customers to CCAs and ESPs, their existing renewable capacity stretches further to cover additional customer loads. Accordingly, the utilities have not had to procure renewables for the last five years and still have surpluses of such capacity relative to their RPS requirements.

In 2018, California Gov. Jerry Brown signed S.B. 100, which elevated the state's existing renewable portfolio standard from 50% in 2030 to 60% in 2030. The law also establishes a statewide planning goal of zero emissions from power by 2045.

The three large investor-owned utilities are forecast to continue to surpass RPS requirements and have excess procurement for the next six years. The investor-owned utilities may choose to apply excess renewable electricity procured in prior years to meet their RPS requirements in future compliance periods, according to the CPUC's proposed decision to accept their RPS plans.

Included in the RPS is a requirement that all load-serving entities must have 65% of their renewables under long-term contracts with terms of at least 10 years for a compliance period that begins in 2021. That requirement was set in Senate Bill 350, which was passed in 2015. In accordance with that law, the CPUC in early 2018 ordered CCAs to submit plans for acquiring sufficient energy resources to meet reliability and greenhouse gas reduction requirements as well as the RPS.

The CPUC already is fretting over how nonutility load-serving entities under its jurisdiction will get there.

Nearly all RPS contracts executed by the three investor-owned utilities for the purposes of complying with the RPS program have contract term lengths of 10 or more years. In contrast, only 40% of the CCAs' RPS contracting to date for the 2021-to-2024 compliance period meet the 65% long-term contracting requirement, the CPUC told the state Legislature.

Out of the 26 CCAs that plan to serve load in 2020, 11 have procured long-term contracts at or above the 65% requirement, and two have procured some long-term contracts. Thirteen CCAs have not procured any long-term contracts, and while six of those have procured some short-term contracts, the remaining seven have not procured any RPS energy at all, the CPUC said.

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ESPs — namely entities that serve large commercial and industrial customers with direct access energy contracts — also need to make more progress in meeting the 65% long-term contracting requirement, the CPUC said. Of the 13 ESPs that will be serving load in the 2021-through-2024 period, 10 have procured enough long-term energy to meet the 65% long-term contracting requirement. One ESP procured some long-term renewable energy but needs to procure more to meet the requirement, and two have not procured any long-term RPS energy.

"The CCAs' and ESPs' forecasted shortfalls in meeting the 65% long-term contracting requirement raises concerns for potential failure in meeting overall RPS requirements," the CPUC said. "Long-term contracts are often associated with new facilities which often take several years to be developed."

Also, new renewable project development may be delayed or terminated as a result of permitting or transmission delays, project failure or contract default, the commission said.

CPUC says it may impose fines

Many CCAs and ESPs continue to provide minimal information in their RPS plans. Some of those plans have improved immensely over time, but many others rely on limited, superficial information using generic boilerplate language, the CPUC said. By comparison, the investor-owned utilities have filed highly detailed investor-owned utility procurement plans that provide the state with a clear picture of how they will secure energy and address risk and reliability in their RPS portfolios.

Noting that it has collected about $4.1 million in penalties from retail sellers for failure to comply with a long-term contracting requirement for an earlier period, the CPUC said it can continue to seek penalties if inadequate filings persist.

"[G]iven some CCAs' and ESPs' views that they provide information to the CPUC only on a voluntary basis, enforcement and penalties for deficient filings may be necessary," the commission told the Legislature.

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California Community Choice Association's Vaughan acknowledged that the CPUC is following the letter of the law but said the requirement that all CCAs disclose long-term contracts to meet the RPS is unrealistic since many aggregators have not yet launched and therefore have not been able to sign up any customers. Without customers and revenue streams, the CCAs cannot sign long-term contracts, Vaughan said in an interview.

"They don't even know what their load is going to be, so they can't make long-term commitments for their communities," Vaughan said.

Since those CCAs have not yet procured renewable energy supplies, they have no information to report, Vaughan continued. In 2013, the CPUC decided to exempt ESPs from procurement plan compliance if they were not yet serving load. The same exemption should apply to CCAs that have not yet launched their services, Vaughan said. While 10 CCAs launched in 2018, they did so in phases and therefore did not roll out services to residential customers until more recently, she continued.

"I totally understand the CPUC is complying based on statutory requirements," Vaughan said. "I'm just saying that [the law] wasn't designed for new entrants."

In joint comments to the commission, seven CCAs, including Marin Clean Energy, the oldest and largest of the group, said numerous such entities are in the process of securing long-term procurement of energy supplies, and two CCAs the CPUC named in its noncompliance list have executed long-term contracts since the submission of their 2019 RPS procurement plans.

"By the time that the CCAs file their 2020 RPS procurement plans, there will be significant additional long-term procurement that should reduce concerns regarding the likelihood of non-compliance," the CCAs said.