Draft Decision on Departing Load Charges

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Feb. 14, 2003 Share this on FacebookTweet thisEmail this to a friend

First, bundled utility customers got a big rate increase. Next, direct access customers got hit with an exit fee. Now, it's the on-site generators' turn to pay.

The California Public Utilities Commission recently issued a proposed decision establishing a "Cost Responsibility Charge" or exit fee for "departing load" (DL) (customers installing on-site generators). The proposal lists the categories of costs that DL customers are on the hook for and which customers are exempt from these charges. The specific DL charges will be determined later this year when the CPUC decides various exit fee implementation issues for direct access (DA) customers and DL.

The proceeding started last spring to ensure that both DA and DL customers pay their fair share of DWR and utility power costs and that bundled customers "not be burdened with additional costs" due to the significant migration of customers to DA between July, 2001 and September, 2001. Last fall, the CPUC established a DA exit fee, capped at 2.7 cents per kilowatt hour, to recover these costs from DA customers. The recently issued Proposed Decision addresses DL cost responsibility.

Under the proposal, distributed generation (DG) installed on or after Jan. 17, 2001 would pay the Department of Water Resources bond charge, and continue to be subject to the Southern California Edison Historical Procurement Charge. The bond charge goes toward paying off DWR's historical or past costs (incurred between Jan. 17, 2001 and Sept. 20, 2001), while the Edison HPC is aimed at recovering the utility's past undercollection. The proposal does not address Pacific Gas and Electric's past undercollection. (PG&E filed for bankruptcy protection in 2001, putting resolution of cost recovery issues on a different, and slower track.)

The proposal exempts existing DG customers, and new DG load up to a megawatt limit, from paying on-going DWR power costs. (In 2004, 125 MW in the PG&E and Edison service territories and 34 in the SDG&E area.) The MW cap would vary in future years based on DWR forecasts of available generation.

Pursuant to the Proposed Decision, DG load (except for co-generation units) would also be on the hook for competition transition ("tail-CTC") costs. DG units existing as of January 17, 2001 (the date DWR began procuring power for retail customers of PG&E, Edison, and San Diego Gas and Electric) would be exempt from any charges. This makes sense given that DWR incurred no costs to serve these customers.

In issuing the draft order, the CPUC has missed a great opportunity to promote DG. And the timing couldn't be worse, as more proposed generation projects around the state are canceled and the energy supply forecasts grow increasingly bleak. There is little doubt that the cumulative effect of the proposed DL charges - HPC, tail CTC, and 100 percent of the bond charge - would be to discourage construction of new DG by customers.

CMTA will file reply comments at the CPUC noting that the proposal imposes an unnecessary barrier to entry for new DG projects and fails to fully reflect the benefits associated with investments in new generation. The CPUC should do more to encourage badly needed generation in this state, and recognize that an important part of the solution to the state's energy needs is to encourage new investment in DG at the customer level.
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