As California Mulls Retail Electricity Choice, Utilities Are Losing Customers in Droves
According to California regulators, 85 percent of customers in the state will source electricity from entities other than investor-owned utilities by 2020. It’s forcing them to take a hard look at retail choice.
Back in March, GTM broke the news that California regulators are considering some big changes to the state’s energy landscape, including the possibility of returning to some form of competitive retail choice for electricity — as long as it doesn’t repeat the mistakes that led to the Enron-engineered energy crisis in 2001.
This week, the California Public Utilities Commission and California Energy Commission will be holding their first hearing to talk through this contentious but timely issue. To guide that discussion, the CPUC and CEC released a white paper to “frame a discussion on the trends that are driving change within California’s electricity sector and overall clean-energy economy.”
The joint white paper doesn’t give any answers to the questions it raises — that’s coming later. But it does lay out a compelling case for why California must act soon to deal with the issue.
While California’s big three investor-owned utilities remain the provider of last resort for the state’s energy consumers, an increasing share of their customers are being lost to existing retail energy access programs, to city and county community-choice aggregators (CCAs), and of course, to the rising share of power generated by rooftop solar and other distributed energy resources.
Between rooftop solar, CCAs and large “direct access” customers that work with energy service providers, as much as 25 percent of retail electric load will be effectively unbundled and served by a source other than an investor-owned utility sometime later this year, the paper noted. And these trends are only accelerating. Over 85 percent of retail load could be served by sources other than the investor-owned utilities by the mid-2020s — effectively putting the state on a path toward a competitive market for consumer electric services.
But this change is now occurring “without a coherent plan to deal with all the associated challenges that competition poses, ranging from renewable procurement rules to reliability requirements and consumer protection,” the paper noted. That means California must “now look at long held assumptions in their regulatory frameworks and examine the role of the electric utility at the center of this system.”
CPUC President Michael Picker shared his thoughts on this imperative on GTM’s The Interchange podcast back in March, when he first floated the idea of looking at retail energy access. Compared to the state’s previous “top-down” attempts at deregulation between 1995 and 2001, today “we’re starting to see retail choice come into being simply because of technology and the commodity on renewable electricity allowing it to take place,” he said. “It’s being hollowed out by innovation and technology rather than by policy regulation.”
California’s current struggles are a byproduct of the success of its energy-efficiency policies, which have have sharply reduced growth in demand for electricity, and its policies supporting utility-scale solar and rooftop solar. The state’s net energy metering regime has helped more than 550,000 customers to go solar since 2007, adding about 4,500 megawatts of generation on the edges of the grid.
Programs like the Self-Generation Incentive Program have “furthered market transformation for additional technologies like fuel cells, thermal storage and lithium-ion battery storage, allowing customers to produce their own power and/or to reduce their peak energy consumption,” the paper noted.
