California Public Utilities Commission Unanimously Votes to Require San Diego Gas & Electric to Adjust Forecasted Rates after Challenge from Community Choice Aggregation Programs (A.20-04-014)

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By Tristan Stidham

At its January 14, 2021 voting meeting (Agenda Item 37, 37A), the California Public Utilities Commission (CPUC) voted 4–0 to issue a decision (D.21-01-017), adopting Commissioner Martha Guzman-Aceves’ December 28, 2020, Alternate Proposed Decision regarding 2021 electric procurement revenue requirement forecasts and greenhouse gas (GHG)-related forecasts for San Diego Gas & Electric (SDG&E).

The proceeding is part of an annual process involving the Commission’s Energy Resource Recovery Account (ERRA), a balancing account, established pursuant to section 454.5(d)(3) of the Public Utilities Code, where the utilities record and track energy procurement costs (fuel and purchased power). The Commission tracks the difference between the utilities’ authorized revenue recovered in customer rates and the actual cost of power. In ERRA proceedings, California’s three investor-owned utilities, including SDG&E, are able to recover 100 percent of their fuel, purchased power, and other related costs as long as they are consistent with the utility’s approved procurement plan. At the end of the year, any under or over-collection are charged or credited to customers’ bills. According to the Commission’s Public Advocates Office, the ERRA process is comprised of two types of annual proceedings: “compliance,” in which the Commission reviews a utility’s compliance with its procurement plan from the preceding year, and “forecast,” in which the Commission approves a utility’s revenue requirement for the upcoming year based on its anticipated accrual of electric procurement costs and sales. This decision pertains to SDG&E’s forecast proceedings for 2021.

SDG&E filed its customary application for approval of electric procurement revenue requirement forecasts and GHG-related forecasts for 2021 on April 15, 2020, and an amended application on April 20, 2021.  On May 18, 2020, the California Public Advocates Office and San Diego Community Power (SDCP) filed protests against the application.  After the Commission determined that this was a ratesetting matter, proceedings ensued over the summer.  On November 6, 2020, SDG&E filed an update to its application to reflect changes in its forecasts and Commission decisions. Of note, the utility projected a combined total rate decrease of $334.173 million compared to the currently effective rates, a decrease of 12.35 percent or 2.964 cents/kWh from the current system average bundled rate.

SDCP is a Community Choice Aggregation (CCA) program that will offer power to residents in San Diego, Chula Vista, La Mesa, Encinitas and Imperial Beach later this year. Another CCA, the Clean Energy Alliance (CEA) will also be launching this year, and will be the new default power provider for the cities of Carlsbad, Del Mar and Solana Beach in San Diego County. Pursuant to section 331.1 of the Public Utilities Code, a CCA is any city, county, city and county, and any group of cities, counties, or cities and counties that elect to combine the loads of their residents, businesses, and municipal facilities in a communitywide electricity buyers’ program, and any California public agency possessing statutory authority to generate and deliver electricity at retail within its designated jurisdiction. SDCP’s rollout plan began with 1,000 municipal accounts in March 2021 and culminates with 700,000 residential accounts by January 2022. CEA will begin servicing an additional 58,000 customers in May and June of 2021.

On November 18, 2020, SDCP, the CEA, and the California Community Choice Association (collectively, “the CCAs”) submitted joint comments on SDG&E’s November update.  The CCAs contended that SDG&E’s calculation of its 2021 commodity rate forecast for bundled customers relied on an inaccurate and outdated sales forecast that did not account for the departure of about 24 percent of SDG&E’s 2021 bundled load sales that will occur in 2021 with the launch of SDCP and CEA. More specifically, they claimed that SDG&E’s 2021 commodity rate forecast was based upon an outdated 2019 sales forecast rather than its 2021 energy requirements forecast that SDG&E used to derive the ERRA revenue requirement in this proceeding.  According to the CCAs, the artificially low 2021 commodity rates will mislead customers by creating a false price signal that bundled rates are lower than they should be. They also noted in their comments that adopting SDG&E’s proposed rates could “threaten the viability of CCA service itself” and “CCAs would be unfairly forced to compete against artificially low commodity rates—and to do so right when they are launching and customers are making decisions regarding their generation service providers.”  They further argued that a 12% decrease in rates for SDG&E, coinciding with SDCP’s rollout, would discourage a large number of customers from transferring over.

In its November 25, 2020 reply, SDG&E countered that the data used for the alternate forecast could result in rates that were 40% higher for medium and large industrial and commercial customers. SDG&E also claimed that the Commission directed it to seek approval of future sales forecasts in its next phase of a different proceeding, A.19-03-002, and that SDG&E is not authorized to update its 2021 sales forecast outside of that proceeding.

In an open letter to the CPUC separate from its official filings, SDCP’s board accused SDG&E of a “willful manipulation of data” and noted that if SDG&E were allowed to roll out the artificially lower rates, it would cause a temporary rate drop that would later need to be corrected, causing market volatility and harming ratepayers. According to SDCP, this would constitute predatory, temporarily low prices simply to eliminate a competitor with a smaller carbon footprint.

On December 2, 2020, Administrative Law Judge Peter Wercinski issued a proposed decision, which among other things, agreed with SDG&E’s argument that the calculation of commodity rates is not within the scope of this proceeding but is within the scope of SDG&E’s current General Rate Case proceeding, A.19-03-002. At the voting meeting (item 37), Commissioner Guzman-Aceves reported that she and her team worked together with stakeholders following the issuance of the proposed decision, and developed an Alternate Proposed Decision (APD), which directs SDG&E to implement rates based upon its 2021 energy requirements sales forecast used to derive the ERRA revenue requirement in this proceeding.  In advocating for the Commission to adopt the ADP, Commissioner Guzman-Aceves pointed out that to utilize the rates SDG&E was proposing would result in an under-collection of $150-$260 million dollars in 2021.  During discussion, the other commissioners agreed that the ADP would be more accurate, prevent under collection, and also prevent artificially low rates for SDGE&E that may discourage customers from utilizing the CCAs.  Ultimately the Commissioners voted unanimously to adopt the ADP, and the matter is now closed.

 

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