REPLY TESTIMONY OF JODY LONDON
ON BEHALF OF THE COUNTY OF LOS ANGELES, THE CITY OF CHULA VISTA, AND THE LOCAL GOVERNMENT COMMISSION COALITION
R.03-10-003
I.INTRODUCTION
Q:Please provide an overview of your reply testimony.
A:In this reply testimony, I review the policy goals and considerations that I recommend the California Public Utilities Commission (“Commission”) adopt in this Phase 2 proceeding on community choice aggregation (“CCA”). I then discuss how the testimony of some other parties would exceed statutory requirements, expand the scope and duration of Commission regulation, and frustrate efforts to streamline the process of establishing a CCA program. Finally, I discuss whether the utilities have adequately justified the fees proposed in their tariffs. Many of the proposals presented in opening testimony exceed what is required under Assembly Bill 117 (“AB 117”), creating additional hurdles to allowing potential community aggregators the ability to offer customers the choice established by legislation. These proposals should not be adopted.[1]
II.POLICY GOALS
Q:Please review the policy goals that underlie your testimony.
A:As described in my opening testimony, thereare two key principles that the Commission should work to achieve as it considers the CCA tariffs:
- The tariffs govern the business relationship between a community choice aggregator and an investor-owned utility (“utility”), and should only apply to services provided by the utility to the community choice aggregator.
- Tariffs and charges should be as consistent as possible between utilities.
Additionally, a key difference between community aggregation and direct access, on which the proposed tariff should be modeled, is that the community choice aggregator is not a private party but a government entity, uniquely established to represent and be responsible directly to its residents and businesses.
Being mindful of these goals will help the Commission create a regulatory environment that will foster community aggregation, and allow the Commission to issue a report to the Legislature on January 1, 2006 that provides a positive outlook for the future of community aggregation.
Q:What are the Commission’s responsibilities under statute?
A:As described in my opening testimony, the Commission has two primary responsibilities under AB 117.[2] First, the Commission must determine the cost recovery and exit fees that customers must pay. Second, the Commission must adopt rules for implementing community choice aggregation, which it is doing through the adoption of the tariffs under consideration here. The Commission has very little discretion beyond the specific tasks it is assigned under the Public Utilities Code. The Commission is responsible for establishing rules that meet the intent and spirit of AB 117 by providing ratepayers with prompt, fair and reasonable “choice,” for their electricity, as established by the legislature almost three years ago.
Q:What is the relationship between utilities and community aggregators?
A:Under community choice aggregation, the utilities have a business relationship with community aggregators. The utilities provide metering, billing, and collection services to community aggregators. Community aggregators are utility customers, as was recognized by the Commission in the Phase 1 decision in this case: “To the extent the utilities provide services to CCAs, CCAs would be customers of the utilities…”[3] Nowhere in AB 117 is there a provision for the utilities to dictate the content of items that are between the Commission and community aggregators, such as the Implementation Plan, CCA registration, or customer notifications.
III.PROPOSED NEW IMPLEMENTATION PLAN REQUIREMENTS EXCEED STATUTORY REQUIREMENTS
Q: Do any parties propose new requirements for the Implementation Plan?
A:On pages 17-22 of their opening testimony, the utilities recommend a process for filing and content of the Implementation Plan that far exceeds what is required under Public Utilities Code Section 366.2(c)(14).[4] As discussed in my opening testimony on page 10, the utility CCA tariff should not include any direction on the Implementation Plan, because that document is between the community aggregator and the Commission.
Some of the utilities’ proposal for Implementation Plan content is similar to what I recommend in Attachment B to my opening testimony. But, the utilities also would require community aggregators to provide information that exceeds what is called for by statute. The utilities phrase these extra requirements as “additional guidance,”[5] but all it really amounts to is information not required under statute. In particular, the utilities would require information on “the level and sophistication of the operations, and whether the program is adequately funded,” “how costs will be charged among customers,” “whether…other city services will be stopped by the CCA Provider for nonpayment of the electricity bill,” and information on the portfolio mix of the community aggregation program, including length of contracts.[6]
None of these items are required under AB 117. Some of them exceed what is required of the utilities. For example, the length of contracts is not provided by the utilities in the disclosures they make to their customers in regards to their own portfolios. The utilities are trying to create additional hurdles for community aggregators with the Implementation Plan filing, which the Commission should reject.
Q:Are there proposals for Commission certification of the Implementation Plan that exceed statutory requirements?
A:The Commission must certify receipt of the Implementation Plan within 90 days, as required under Section 366.2(c)(7). This certification can be accomplished through a letter from the Executive Director; it does not need to be a bureaucratic event. The utilities propose that the Implementation Plan be filed via the Advice Letter process, then be subject to comment and reply comment by parties, then be certified through a Commission resolution.[7] The utilities state their concern for “consumer protection” as the need for this cumbersome regulatory process, which is not specified anywhere in statute.
The utilities overlook that the Implementation Plan will be the subject of a duly noticed public hearing process by the governing board of the community aggregator. This process likely will occur over several years, as is occurring in both San Francisco and Chula Vista. It will be the subject of coverage in the local media, as has occurred in San Francisco and Chula Vista. Customers of the community aggregator will have ample opportunity to participate and help structure the Implementation Plan, again as is occurring in San Francisco and Chula Vista.
The local agency public hearing process is much more accessible and familiar to customers than the processes at the Commission (with all due respect to the Commission). The party most likely to protest the Implementation Plan at the Commission is the utility. It is understandable that the utility would want to move the discussion of CCA programs from City Hall to the Commission, a venue with which the utilities are very familiar and where the utilities bring resources to bear far in excess of those a community aggregator might have. The utilities’ greater ability to sustain a fight at this Commission is evident in this very docket, where we are approaching the third anniversary of the legislation and are not close to any implementation. This is due, in great part, to concern from potential community aggregators about what new obligations and charges the utilities may be able to get the Commission to establish that are not specified in statute.
IV.PROPOSED EXPANSION AND DURATION OF COMMISSION REGULATION
Q:How would the utilities’ proposed registration process expand and prolong Commission regulation of community choice aggregators?
A:The utilities propose new requirements for the registration process that are not in statute and would expand and prolong Commission regulation of community aggregators. The utilities, while claiming to be working from the energy service provider registration form, have added six new categories of information, and deleted only one.[8] The utilities would require the submittal to the Commission of all Specialized Service Agreements with the utility, a demonstration of resource adequacy,and an indication of the number of customers and average kWh community aggregator expects to serve.[9] The load forecasts, as noted in my opening testimony and the opening testimony of others, cannot be provided with any level of accuracy until after the opt-out process.[10] It makes much more sense to indicate those classes of customers the community aggregator will serve and any phase-in schedule, as TURN has proposed. There is no need for the Commission to review Specialized Service Agreements between the utility and the community aggregator unless there is a dispute about those documents. As I discussed in my Opening Testimony, resource adequacy demonstrations will be incumbent upon the community aggregator as a load-serving entity, and those requirements are being developed in other dockets before this Commission, the Energy Commission, and the Independent System Operator.[11]
The utilities then go on to require the community aggregator to submit annual updates to its registration, with threat of revocation and suspension of the registration for non-compliance. Annual update is not specified in the statute. Putting aside that the community aggregator is a public entity that cannot flee the state, and that the utilities have no jurisdictional relationship in terms of the aggregator’s registration with the Commission, the utilities again are trying to create additional hurdles and requirements for community aggregators to jump through.
Q:Does the utilities’ proposed customer notification form create additional regulation?
A:The utilities have included as Appendix C to their opening testimony the text of a proposed standard notice to be used during the customer notification period. The content of this notice is very similar to the notices of pending rate change the utilities include in their bills, notices that very few customers read because they are written at a technical level that only someone very familiar with utility rates would understand. The only items that AB 117 requires be included in the customer notification are (1) that customers are to be automatically enrolled in the CCA program and that the customer has the right to opt out without penalty, and (2) the terms and conditions of the services offered.[12] The proposed utility notification far exceeds these requirements.
The notice should include the information required under statute and any other information that the community aggregator finds it appropriate to include. The Commission ruled in D.04-12-046 that there is no role for the utilities in developing the customer notification: “Although Section 366(2)(13)(B) [sic] gives the CCAs the option to request utility assistance with the notifications, each CCA must assume ultimate responsibility for the notices.”[13] Community aggregators will be working hard to come up with straightforward ways to communicate to their constituents about this new program, and should not be constrained by an artificial format and language for the customer notice designed by the utilities.
The length of the proposed format increases cost for community aggregator in terms of printing, envelope space, and postage. This creates an additional financial hurdle for community aggregators.
Finally, as a matter of policy, this type of notice should not be ordered by a Commission decision, which would mean returning to the Commission for approval to make minor modifications to the content.
V.OPEN SEASON AND START-UP PROPOSALS WOULD NOT STREAMLINE REGULATION
Q:Are there proposals from other parties that run counter to the policy goals you recommend to the Commission?
A:Yes, the Office of Ratepayer Advocates (“ORA”) has presented two proposals that would create additional hurdles and expense for community aggregators. First, ORA suggests that if for some reason a CCA program fails to materialize, the community aggregator should be responsible for any incremental cost that might accrue to bundled utility customers.[14] I do not disagree that after the Implementation Plan has been filed, or the community aggregator adopts an ordinance, there will be costs to the aggregator associated with not proceeding. However, ORA then suggests that community aggregators should buy options for adequate power supply in the event of CCA program non-formation. It is unclear whether this is proposed as a requirement, or merely a suggestion. To the extent it is proposed as a requirement, it should be rejected. What ORA is proposing is basically a form of insurance. If there is a market for this type of insurance, it will develop just as other types of insurance develop.
Second, ORA suggests there needs to be protection against changes in utility power portfolio costs for the time period after the implementation plan is filed but before the CCA program commences.[15] ORA calls this the “pre-launch CRS.” This is yet another charge with no basis in statute, derived in a complicated manner, requiring more time and resources on the part of the Commission, community aggregators, utilities, and the California Department of Water Resources. This idea also should be rejected.
Q:How Can “Open Season” Proposals Function in a Streamlined Regulatory Structure For Community Aggregators?
A:Many parties make suggestions for the Open Season in their opening testimony, particularly the utilities, the City and County of San Francisco, and TURN. I stand by my opening testimony: cooperation and planning between the utilities and community aggregators will obviate the need for an open season.[16] To the extent that the Commission adopts an Open Season proposal anyhow, it should ensure that it also adopts a simultaneous requirement that utility procurement be reasonable, and that future reasonableness reviews will apply to utility procurement under a CCA open season. Furthermore, the Commission should restate its expectation here, as elsewhere, that all parties will behave reasonably and cooperatively, as required under Sections 366.2(c)(9) and 366.2(c)(13)(B).
The Open Season proposal is driven in part by the interest of the utilities in having absolute certainty about the amount of power they should purchase. However, in the Phase 1 decision, the Commission recognized that utility resource planning will always require some degree of uncertainty: “Utility resource plans will need to balance supply security with enough flexibility to accommodate many market contingencies in addition to those associated with the CCA program, as we have recognized. Because it would ideally recognize and anticipate changing markets and supply sources, resource planning will necessarily be an ongoing, interactive exercise.”[17] The best way to have good information about CCA plans is to maintain open communication between the utility and the community aggregator.
VI.THE UTILITY PROPOSED TARIFFS INCLUDE UNVERIFIED CHARGES
Q:Do the utilities’ proposed tariffs provide a basis for the fees included therein?
A:The utilities’ testimony goes further than any document we have seen to date to try to explain the activities involved in the various fees included in the tariff. However, the testimony and tariffs still do not provide the underlying cost structure of the various activities, so one still cannot determine if the proposed fees are reasonable. The utilities were chastised in the Phase 1 decision for failure to fully provide a basis for proposed fees,[18] and the situation has not been rectified in this current Phase. As discussed in my opening testimony[19] and the opening testimony of other parties,[20] there continues to be significant variation between the fees of each utility.
Q: Does this conclude your reply testimony?
A:Yes, it does.
1
[1] Silence on any particular topic should not be assumed to indicate my agreement with the position put forth by other parties on that topic.
[2] “Testimony of Jody London on Behalf of the County of Los Angeles, the City of Chula Vista, and the Local Government Commission Coalition,” April 28, 1005, p. 7.
[3] D.04-12-046, p. 22, mimeo.
[4] Unless otherwise stated, all references are to the Public Utilities Code.
[5] “Joint Opening Testimony of Pacific Gas and Electric Company, San Diego Gas & Electric Company, and Southern California Edison Company,” April 2005, pp. 20-21.
[6]Id.
[7] Utility Opening Testimony, pp. 21-22.
[8] Utility Testimony, p. 26.
[9]Ibid.
[10] See, LGCC Opening Testimony, p. 14; TURN Opening Testimony, pp. 6-7.
[11] LGCC Opening Testimony, pp. 11-12.
[12] Section 366.2(c)(13)(A).
[13] D.04-12-046, p. 50, mimeo.
[14] Office of Ratepayer Advocates, “Testimony on the Community Choice Aggregation Open Season and Implementation Process,” April 28, 2005, p. 2.
[15]Id., p. 3.
[16] LGCC Opening Testimony, p. 13.
[17] D.04-12-046, p. 29.
[18]Ibid.. pp. 14-15.
[19] LGCC Opening Testimony, pp. 17-18.
[20] “Testimony of Michael Burke on Behalf of Energy Choice, Inc.,” April 28, 2005, pp. 10-12.