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Calif. Assembly passes bill to plug possible power gaps with central buyer

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Calif. Assembly passes bill to plug possible power gaps with central buyer

California legislators passed a measure May 30 that would authorize an existing agency within the Office of the State Treasurer to act as a central buyer of electricity to provide "a backstop for addressing shortfalls or gaps" in power procurement.

Upon the determination of the California Public Utilities Commission that such shortfalls exist, Assembly Bill 56 would allow the state's Alternative Energy and Advanced Transportation Financing Authority to purchase electricity "to meet the state's climate, clean energy, and reliability goals that are not satisfied by load-serving entities."

Backers of the bill, which was passed by the State Assembly and now moves on to the Senate, cited the need for a central buyer amid a sweeping transformation of the state's electrical system as investor-owned utilities give way to local government-operated community choice aggregators, or CCAs, and uncertainty grows over the financial health of state's three largest investor-owned utilities.

PG&E Corp. subsidiary Pacific Gas and Electric Co., or PG&E, the state's largest utility, is considering canceling long-term contracts as part of its Chapter 11 bankruptcy proceeding brought on by potential wildfire liabilities in excess of $30 billion amassed over the past two years. Three energy storage developers holding resource adequacy contracts with PG&E have asked for and received permission from the U.S. Bankruptcy Court for the Northern District of California to cancel those agreements.

Without a central buyer, "we'll be forced to figure out how to ensure procurement continues when two or three large [investor-owned utilities] either can't or don't want to continue that role," Assemblyman Eduardo Garcia, the bill's author, said May 30 on the Assembly floor before a 41-21 vote passed the measure.

Bill Quirk, another supporter in the Assembly, cited the "extremely expensive" short-term contracts the California ISO issues when utilities and CCAs fail to procure enough power to ensure California's reliability needs are met. "We are in a transition from predominantly the investor-owned utilities to the community choice aggregators," Quirk said. "Sometimes things fall through the cracks."

'CPUC power grab'

In a parallel regulatory proceeding, the CPUC plans to issue its own decision on a central procurement model for its resource adequacy program in the fourth quarter of 2019. CPUC President Michael Picker called for a central buyer after the regulator granted 11 waivers to CCAs and small electricity providers in 2018 that failed to meet their resource adequacy requirements.

California's 19 operating CCAs, serving roughly 10 million customers, are on pace to seize 23.1% of investor-owned utilities' customer base, measured by electric demand, in 2019, up from 12.4% in 2018 and 6.3% in 2017, according to the CPUC's estimate. Picker has said defections could grow to about 80% by the early to mid-2020s.

The exodus, facilitated by a state law that allows investor-owned utilities' customers to automatically roll over to CCAs once the aggregators are formed by local governments, puts California at risk of "another crisis" similar to the 2000-2001 emergency that led to rolling blackouts and steep rate hikes, Picker warned in 2018.

CCAs view the bill and Picker's sentiments as alarmist. The California Community Choice Association, a group representing CCAs, opposes the bill and in an email called it "nothing more than a power grab by the CPUC."

"The new authority granted to the commission would significantly scale back local control" and create "significant problems" for CCAs that have emerged as major buyers of renewable energy, the group said.