Originally published on August 6, 2021. Updated to include statements from Mayor Diana Mahmud.
South Pasadena’s electric ratepayers, its mayor, state senator and assembly member are at the center of an ongoing battle in the electric utility industry worth tens of millions of dollars in annual benefits. The funds are tied to “exit fees” paid by customers of the state’s growing, renewable energy-focused community choice aggregators (CCAs), including the Clean Power Alliance (CPA) that serves South Pasadena residents and is chaired by South Pasadena Mayor Diana Mahmud.
The most recent iteration of the conflict took place a month ago when the Assembly’s Committee on Utilities and Energy chaired by Asm. Chris Holden (D-41) unexpectedly canceled a June 30 hearing on reform legislation authored by Sen. Anthony Portantino (D-25), likely killing its chances for success this year.
Over the past few years, over 4 million customers have migrated to the CCAs from Southern California Edison and the state’s other investor-owned utilities (IOUs), PG&E and San Diego Gas & Electric. Under the law, these departing customers must pay a fee to cover certain costs associated with the long-term fossil and renewable electric resource investments the IOUs made to serve them. But these resources also have certain benefits which represent savings that can offset the costs.
The dispute which Portantino’s Senate Bill 612 seeks to settle is over how to allocate these benefits under the fee, obtusely known as the Power Cost Indifference Adjustment (PCIA), which can be found as a line item on CPA and other CCA customer bills. Part of the solution includes a market-based allocation of the resources’ renewable and grid reliability benefits.
The Clean Power Alliance “has played a leading role in advancing support for the bill,” said Leora Broydo Vestel, director of communication for the California Community Choice Association (CalCCA), whose vice president, Ted Bardacke, is CPA’s executive director.
At stake for CPA, Bardacke told the South Pasadenan News, is up to $20 million per year in benefits, about 2.4 percent of CPA’s annual energy costs. CPA, whose more than 1 million customers make it the largest CCA in the state, represents just under a quarter of the 50,000 gigawatt-hour load served by CCAs statewide.
The total annual savings at stake for the CCAs is estimated at $50 million, Broydo Vestel said.
“I am deeply disappointed SB-612 didn’t receive a hearing, Mayor Mahmud said in a statement. “Clean Power Alliance and other CCAs benefit the public and we rely on our elected leaders to do the right thing, like Senator Portantino did when he authored this bill to ensure millions of Californians aren’t charged for energy they don’t get to use,” She said the bill “would simply enable CCA customers to obtain the same value for utility owned resources that utility customers receive. As elected officials, we should make decisions that benefit the people that we serve. Sadly, pulling the bill before it could be heard by the relevant Assembly policy committee is neither in the best interest of those served by CPA nor the millions of other CCA customers across the state paying the PCIA with no access to the energy resources they’re paying for.”
“I am very disappointed that Assembly Member Holden is refusing to schedule this important consumer bill for a public hearing,” Portantino told the South Pasadena News. SB-612 would give CCAs the ability to buy power and to be more competitive, breaking the traditional utilities’ monopoly, he said.
The bill “has strong local and statewide support.” Over 150 communities, environmental justice organizations, environmental groups, and clean energy providers back the bill. Its opponents are PG&E, Edison, their employees and a consumer group. Their principal objection is based on a desire not to undermine the ongoing work of the California Public Utilities Commission (CPUC), which has overseen changes to the PCIA via a carefully laid out proceeding involving dozens of players who’ve put considerable time into it.
Now in its fifth year, the CPUC’s PCIA work has been carried out in a mind-numbingly complex regulatory proceeding — the docket includes over 900 documents — that has gone on much longer than planned. In 2019, the CPUC carved out some of the tougher issues and charged a working group to resolve them. CalCCA and Edison were among the three co-chairs of the group. After more than a year of diligent negotiating, they produced a 350-page consensus proposal.
But CPUC sat on the proposal for over a year, Bardacke said. Meantime PCIA rates continued to climb and benefits that would have accrued to CCA customers were lost.
To break the log jam, CalCCA sponsored SB 612. According to CPA regulatory affairs director C. C. Song, the bill was “based on the idea that the CPUC has failed to act. [It] requests that the legislature weigh in.”
“Lo and behold,” the CPUC awoke and “rushed out a decision,” Bardacke said. The 5-member board voted unanimously on May 20, days before SB 612 was approved by the Senate 33 to 6 and sent to the Assembly, where it was referred to Holden’s Committee on Utilities and Energy. Bardacke wouldn’t say the CPUC acted in bad faith but observed the agency “is a political animal.” Moreover, he said the commission’s decision “didn’t follow the law and wasn’t fair” because the CCA customers “are still paying the PCIA and getting no benefits.”
In particular, the CCAs want the PCIA to afford them a share of the benefits of the resources, such as the credits some offer toward greenhouse gas (GHG)-free and mandatory state renewable resource targets, and especially their value in meeting state requirements for “resource adequacy” (RA) — backup resources that can be called on as needed to ensure consumer energy needs and grid reliability. An ongoing shortage of RA has significantly pushed up prices for RA capacity.
But the CPUC ruling rejected most of the working group’s recommendations. It gave CCAs an allocation of the IOUs’ renewable resources and the right to resell them, but put off decisions on GHG-free resources that could take years to resolve. Most important, it rejected the working group’s proposal to allocate RA resources to the CCAs. It did so, the CPA’s Song told the Board, because it didn’t want the IOUs to have to face the pricey RA market for their own customers, who also pay a share of the PCIA.
Bardacke had already prepared his testimony when word of the Committee hearing’s cancellation emerged. He conceded there was a general sense the bill would be voted down, though three of the Committee’s 16 members were co-sponsors. But he said he’d spoken to Holden before the hearing. “He didn’t say to us at the time that he had any fundamental issues.”
“Maybe a majority of the committee agrees with the opposition,” Bardacke said. “That’s fine. But it doesn’t explain why we didn’t get a hearing.” If the measure had failed, “we’d have licked our wounds and gone off and run our business.” But the issue is about ratepayer fairness and the Committee’s failure to hear out the supporters was both confusing and disappointing, he said.
Holden defended cancellation, telling the South Pasadenan News it was due to the need to analyze the impact of some proposed amendments that came in at the last minute. But the “threshold issue” was that Committee members were wary of voting on a bill concerning a matter on which the CPUC had acted on only a month earlier.
In connection with hearing, CalCCA undertook a full court press to get support for the bill.
But Holden is unmoved. He said under the CPUC ruling, both the IOUs and CCAs took a “haircut. That was their way to find balance.” CCA customers left the IOUs and the resources they signed for to serve them. Therefore, the CCAs “must give something back. I have always said to the CCAs that I won’t support legislation that seemingly keeps them from being competitive. But they will have to compete.”
In May, one of the state’s 20 CCAs, Western Community Energy, declared bankruptcy after only a year of operations. Credit analysts said that wasn’t due to increases or uneven benefit allocations in the PCIA, but problems in the CCA business model.
“When you’re forming, you have to recognize your business model has to accommodate what these departing charges are going to be,” Holden said. Initially, the CCAs “didn’t want to pay anything.” The CCA’s simply “didn’t like the outcome” of the OPUC ruling. But there must be equity for the IOU customers who did not leave, he insisted.
This point was emphasized by one of the bill’s opponents, the Coalition of California Utility Employees, who in a June 23 letter said the legislation would force IOU customers to pay more for RA and non renewable GHG-free resources. Holden received over $45,000 from SCE, Edison International and its officers during the 2020 election cycle — a fourfold increase from 2018, during which he also served as Utilities and Energy Chair.
Advocates still hope a new hearing on SB 612 will be scheduled, though prospects are dim as a critical legislative deadline has already passed, forcing the legislation into a “two-year” status. “The legislature has ways to address issues through the last day of the session,” said CalCCA’s Broydo Vestel. The group “is still hopeful that the ratepayer equity concerns targeted by SB 612 can be resolved legislatively this year.”
“There’s still time to do the right thing,” Mayor Mahmud added. “We just need the bill to be heard by January 31, 2022.”
Holden said he wants the CPUC and other parties to get together to figure out a way forward. He said the bill could be heard again as soon as in January, and that he is trying to organize the parties to meet in next month or two.